Studies of Welfare Populations: Data Collection and Research Issues. Experienced-Based Measures of Heterogeneity in the Welfare Caseload

06/01/2002

The author would like to thank Irwin Garfinkel, Karl Scholz, and the other members of the Panel for comments, and Eva Sierminska for research assistance.

It has long been understood by welfare researchers that the welfare caseload is quite diverse. Many studies of the now-defunct Aid to Families with Dependent Children (AFDC) program demonstrated that some women on the welfare rolls were much worse off than women not on the rolls in terms of family background, educational attainment, labor market experience and skill, health problems, and many other indicators, and that different women might need different types of special assistance. This heterogeneity has assumed even greater importance in the welfare reform environment of the 1990s. The new reforms are, generally speaking, aimed at raising employment levels and promoting work, particularly off the welfare rolls. It is naturally to be expected that women with greater capabilities to respond to these policies will fare better than women with lesser capabilities.(1) In addition, from the program operator's viewpoint, heterogeneity is important because it implies that policies might be differentially targeted, or tailored, to different types of welfare recipients who have different needs and capabilities.

Heterogeneity is also important in current discussions of so-called welfare leavers--women who have left the welfare rolls subsequent to welfare reform. The employment and other outcomes of welfare leavers are likely to differ according to their labor market skill and background. Women with greater labor market skills may be expected to fare better off the rolls than women with weaker labor market skills, for example. The existing studies on welfare leavers typically report only average outcomes for all leavers and hence do not attempt to detect differences arising from heterogeneity, but such heterogeneity is certain to be present.(2) Heterogeneity among leavers is also important because it may lead to differences in average outcomes of leavers across states, for different states have different mixes of recipient types. Hence surveys of how leaver outcomes vary in different states may be reporting differences that arise from differences in the types of women on the rolls in different states rather than the effects of different state welfare policies. The types of women who are on welfare also vary over time as the caseload shrinks and expands, as well for cyclical reasons, and this will cause the average outcomes of leavers to vary over time as well, depending on what types of women exit the rolls at different points in the cycle. Thus, for example, leaver outcomes before and after 1996 may differ because of the business cycle rather than because of welfare reform.(3)

Heterogeneity in the caseload can be characterized in many ways. A straightforward approach is simply to examine the distributions of characteristics thought to be related to labor market skill, income-generating potential, and general coping capabilities. Examining the distribution of recipients by education, work experience, health status, drug use and illegal activity, and similar variables, are typical for such an exercise. Many studies have examined these differentials. Another approach is simply to examine the labor market outcomes of those who have left the rolls, but this is not appropriate if the object of the analysis is to develop measures of heterogeneity that might be correlated with, or possibly determine or predict, those labor market outcomes.

The approach taken in this chapter instead examines heterogeneity as measured by the recipient's own welfare experience (hence "experienced-based" measures of heterogeneity). The most important aspect of that experience is the amount of time the recipient has received welfare benefits, which is also a measure of the individual's degree of welfare "dependence." The most common measure of this type is the "total-time-on" measure, which denotes the total amount of time within a fixed calendar time interval that the individual has received welfare. Such total-time-on measures are, arguably, the best single measure of welfare dependence and have been assessed many times.(4)

However, the concept of total-time-on does not distinguish between short spells and long spells, or between larger and smaller numbers of spells within a given total. Most analyses of the dynamics of welfare participation treat the length of spells as the most important building block for an understanding of welfare participation, and treat the exit rate from a spell--which is an indirect indication of its length--as a key variable to be affected by welfare reform. The issue that this view raises is whether it is important or useful to know how a given total-time-on divides up into a number of spells and lengths of those spells. It might be hypothesized, for example, that women with long spells might be more disadvantaged than women with short spells, even though the latter has a higher rate of movement on and off the rolls and hence ends up with the same total length of time on welfare.

A related concept introduced by Ellwood and Bane (1994:40-41) consists of a three-fold classification of welfare recipients, dividing them into long-termers, short-termers, and cyclers. The first group is composed of recipients with long spells of receipt and hence heavy dependence on welfare; the second group is composed of recipients who have short spells and are on welfare infrequently, leading to relatively mild dependence; and the third group consists of women who frequently move on and off the rolls and may, in the end, accumulate enough total time on welfare that they should be classified as welfare dependent even though their spells are fairly short on average.(5) This view, again, suggests that the types of women who have high turnover and short spells are different than those who have low turnover and long spells, even though they might have the same total-time-on.

The reason that one might expect differences among recipients with different turnover rates will be discussed in the text of this paper. Perhaps the simplest economic model is one that presumes that the rate of going off the rolls is positively related to the level of an individual's labor market skill and experience. In this view, long-termers have the weakest labor market skills, short-termers have the strongest, and cyclers are somewhere in between, with stronger labor market skills than long-termers but not strong enough to stay off the rolls for long periods.

This chapter examines data on women on the welfare rolls and tests whether their labor market skills differ in these ways. Tests for whether total-time-on is correlated with labor market skill are conducted, as well as whether the number of spells and their length is related to labor market skill on top of the total-time-on. The characteristics of long-termers, short-termers, and cyclers are examined to determine if their labor market skills are ordered in the ranking suggested by the simple theory just described, or not. Data from the National Longitudinal Survey over the 1979-96 period, covering monthly AFDC participation experiences, are used for the analysis.

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