Who was affected by new welfare reform strategies? Microdata estimates from Canada

Abstract

ABSTRACTA heterogeneous mix of aggressive welfare reforms took effect in different provinces and years starting in the 1990s. Welfare participation rates subsequently declined. Previous investigations of these declines focused on cuts in benefits and stricter eligibility requirements. This article focuses instead on work requirements, diversion, earning exemptions and time limits – referred to jointly as new welfare reform strategies – while controlling for benefit levels, eligibility requirements, province-specific labour market conditions and GDP growth, as well as individual-level socio-economic information. Province-year-specific variation in new reform strategies produce estimates implying that their presence is associated with a large decline in welfare participation of 1.3 percentage points (14% relative to the unconditional mean participation rate of 9.2%). Our coding scheme generates new measures of policy variation that distinguish reductions in benefit levels and tighter eligibility restrictions from new welfare reform strategies, helping identify how different subpopulations responded to different kinds of welfare reforms. Estimates from 46 subpopulations demonstrate that immigrants, native Canadians, single parents and disabled people were substantially more likely to be affected by aggressive new attempts to limit welfare participation than other Canadians receiving social assistance.