The effects of welfare time limits on access to financial resources: Evidence from the 2010s

Abstract

AbstractThe Personal Responsibility and Work Opportunity Reconciliation Act of 1996 established the Temporary Assistance for Needy Families (TANF) program within the United States. TANF mandated 60‐month lifetime time limits for federal cash assistance dollars. Because states reserve the right to set their own stricter or more generous time limits, the 60‐month lifetime limit did not bind in all cases. In recent years, however, several states imposed TANF time limits for the first time or made existing time limits more stringent. Using administrative and survey data, I find that stricter time limits decrease TANF participation within the past 12 months by 26%. Unlike previous research, I find heterogeneous effects of time limits on labor supply. I show that expected effects on employment and earnings decrease—and eventually become negative—as a state's unemployment rate increases. Evidence suggests that removing welfare recipients from TANF during periods of high unemployment inhibits their access to financial resources.