Indicators of Welfare Dependence: Annual Report to Congress, 2004. Measuring Welfare Dependence

04/27/2005

As suggested by its title, this report focuses on welfare “dependence” as well as welfare “recipiency.” While recipiency can be defined fairly easily, based on the presence of benefits from AFDC/TANF, SSI or food stamps, dependence is a more complex concept.

Welfare dependence, like poverty, is a continuum, with variations in degree and in duration. Families may be more or less dependent if larger or smaller shares of their total resources are derived from welfare programs. The amount of time over which a family depends on welfare might also be considered in assessing its degree of dependence. Nevertheless, a summary measure of dependence to be used as an indicator for policy purposes must have some fixed parameters that allow one to determine which families should be counted as dependent, just as the poverty line defines who is poor under the official standard. The definition of dependence proposed by the Advisory Board for this purpose is as follows:

A family is dependent on welfare if more than 50 percent of its total income in a one-year period comes from AFDC, food stamps and/or SSI, and this welfare income is not associated with work activities. Welfare dependence is the proportion of all families who are dependent on welfare.

This measure is not without its limitations. The Advisory Board recognized that no single measure could capture fully all aspects of dependence and that the proposed measure should be examined in concert with other indicators of well-being. In addition, while the proposed definition would count unsubsidized and subsidized employment and work required to obtain benefits as work activities, existing data sources do not permit distinguishing between welfare income associated with work activities and non-work-related welfare benefits. As a result, the data shown in this report overstate the incidence of dependence (as defined above) because welfare income associated with work required to obtain benefits is classified as welfare and not as income from work. This issue may be growing in importance under the increased work requirements of the TANF program. In 2002, over 33 percent of welfare recipients were working (including employment, work experience, and community service), compared to only 7 percent in 1992.2

This proposed definition also represents an essentially arbitrary choice of a percentage (50 percent) of income from welfare beyond which families will be considered dependent. However, it is relatively easy to measure and to track over time, and is likely to be associated with any very large changes in total dependence, however defined. For example, dependence under this definition declined as policy changes under welfare reform moved more recipients into employment.

As shown in Figure SUM 1, 3.1 percent of the population would be considered “dependent” on welfare in 2001 under the above definition. This is about one-quarter of the percentage (12.6 percent) that lived in a family receiving at least some TANF, food stamp or SSI benefits during the year. Preliminary data from 2002 suggest that the dependency rate may increase slightly between 2001 and 2002.3

Figure SUM 1. Recipiency and Dependency Rates: 1996-2002

Figure SUM 1. Recipiency and Dependency Rates: 1996-2002

Note: Recipiency is defined as living in a family with receipt of any amount of AFDC/TANF, SSI, or food stamps during year. Dependency is defined as having more than 50 percent of annual income from AFDC/TANF, SSI and/or food stamps. Dependency rates would be lower if adjusted to exclude welfare assistance associated with working. The estimate for 2002 is preliminary

Source: March CPS data, analyzed using the TRIM3 microsimulation model.


While dependency and recipiency rates increased slightly to 3.1 and 12.6 percent, respectively, the 2001 dependency and recipiency rates remain significantly lower than the 1996 rates of 5.2 and 16.0, respectively. The drop in recipiency rates is consistent with administrative data showing declining TANF caseloads from 1996 to 2001. What is not apparent from administrative records, but is shown in these national survey data, is that the dependency rate also declined sharply after 1996. While 13.74 million individuals were dependent in 1996, only 8.86 million were dependent in 2001 – representing a decline of 4.88 million people.

Recipiency and dependency rates are higher for non-Hispanic blacks and Hispanics than for nonHispanic whites, as shown in Table SUM 1. Recipiency and dependence also are higher for young children than for adults, and for individuals in female-headed families than for those in married-couple families. However, both recipiency and dependency rates are much lower for non-Hispanic blacks, Hispanics, children and individuals in female-headed families in 2001 compared to 1996.

Measures of welfare dependency also vary based upon which programs are counted as “welfare programs.” Dependency would be much lower – 1.4 percent – if only AFDC/TANF and food stamp benefits were counted (as shown in Appendix B and as is done in some measures in this report). Whereas the inclusion or exclusion of individuals receiving only SSI benefits had a relatively small effect on dependence indicators several years ago, in 2001 over two-fifths of dependent individuals are dependent on SSI income only.

Another factor affecting dependence is the time period observed. The summary measures shown in Figure and Table SUM 1 focus on recipiency and dependency rates measured on an annual basis. Note that this report no longer provides ten-year measures of long-term dependency (as distinct from long-term recipiency) due to a cutback in PSID data collection that precludes further update of these measures. Longitudinal measures of program receipt, however, show that program spells are typically short and long-term recipiency is more rare (see Chapter II). Indicator 9, for example, shows that among individuals receiving AFDC/TANF at some point over a ten-year period ending in 2000, 18 percent received some welfare during six or more years. Another 31 percent were recipients in three to five years, and more than half (51 percent) received welfare in only one or two years.


2 The earnings of those in unsubsidized employment would be correctly captured as income from work in national surveys. Any welfare benefits associated with work experience, community service programs or other work activities, however, would be counted as income from welfare in most national surveys, a classification incompatible with the proposed definition.

3 While TRIM-adjusted CPS data for 2002 are not yet available, non-adjusted estimates from the Annual March Demographic Supplement to the CPS indicate a slight increase in the level of dependence between 2001 and 2002.

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