No. A-46 in Series, "New Federalism: Issues and Options for States"
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
Note: This report is available in its entirety in the Portable Document Format (PDF).
In many ways, our national experiment with welfare reform has been more successful to date than many analysts had anticipated. Not only have welfare rolls declined by roughly half since the early 1990s, but also employment rates have risen for most former (and many current) welfare recipients (Council of Economic Advisers 1999). Nevertheless, several important questions about the success of welfare reform remain—and one of the most pressing is what will happen when the current national economic boom ends and the next recession begins.
The importance of the strong national economy to the success of welfare reform to date has been considerable. For one thing, we have recently enjoyed the lowest unemployment rates nationally in 30 years. Virtually every recent analysis suggests that the strong economy of the 1990s has contributed significantly to both the declining caseload and the rise in employment rates and earnings among single mothers (e.g., Council of Economic Advisers 1999; Meyer and Rosenbaum 2000). The continuation of extremely tight labor markets since federal reforms were implemented has created an environment in which transitions from welfare to work could proceed more easily than they otherwise would. A serious recession would eliminate these conditions and likely cause some reversal of these trends. Furthermore, we have moved from a social welfare system that was centered around cash assistance to the nonemployed to one that is based on assistance to the "working poor" (e.g., Ellwood 1999). In an era when jobs may not be so plentiful as they currently are, the "safety net" available to those who cannot find jobs may have some significant gaps in it.
Traditionally, the major "safety net" program available to unemployed workers during a recession has been the Unemployment Insurance (UI) system. However, several authors (Kaye 1997; Gustafson and Levine 1998; Vroman 1998) have noted that, in the next recession, eligibility for UI among former welfare recipients will be limited for a variety of reasons, particularly insufficient prior work experience. At the same time, many of these individuals (and their families) will be ineligible for Temporary Assistance for Needy Families (TANF) benefits if they have exhausted their lifetime limits. Neither program may be available to the (often noncustodial) fathers in these families as well, whose contributions to their family's financial well-being are increasingly crucial (Sorensen 1999).
On the other hand, little is known currently about how significant these problems are likely to be. Estimates in the sources cited above are based almost exclusively on data from the 1980s and early 1990s, during which time employment among welfare recipients was much lower than it is today. More recent data on the employment experiences of current and former welfare recipients are now available and might lead to new estimates of future UI eligibility.
This brief reviews evidence on these issues and considers their implications for policy. In particular, the following questions are addressed:
- By how much is employment likely to decline among welfare recipients and other vulnerable groups of workers during a recession?
- How many former welfare recipients and other vulnerable workers will be eligible for UI?
- If UI is not likely to serve a large fraction of this population during a down-turn, what should state and federal policymakers do to address these issues?
Note: This report is available in its entirety in the Portable Document Format (PDF).
Usage, posting and reprint of materials on the UI web site:
Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@ui.urban.org.
If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.
Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
