From the 1996 Welfare Law to the Great Recession: Essays on the Effect of Safety Net Changes on Employment and Income Trends

Abstract

The United States safety net has undergone significant changes over the last three decades. In the early 1990s the Earned Income Tax Credit was expanded. The 1996 welfare law dramatically reduced access to cash assistance. SNAP (formerly food stamps) declined in the aftermath of the 1996 welfare law but rebounded during the 2000s. This dissertation analyzes how these safety net changes have affected the employment trends of single mothers and the income trends of families with children. The first essay examines different ways of measuring how cash assistance changed after the 1996 law. It reviews previous approaches and introduces two measures that meet the objectives of capturing the benefit level and accessibility of a safety net program independent of economic conditions and allowing for variation by year, state, and family size. The essay concludes by discussing how this methodology can be adapted to measure changes in SNAP and EITC policies. The second essay examines the employment trends of single mothers. The descriptive analysis shows how single mothers with the least educational attainment and those with the youngest children increased their employment the most between 1992 and 1999. The econometric analysis uses the safety net measures developed in the first essay to analyze the effect of safety net changes on the employment of single mothers. It finds that the EITC accounted for 36 percent of the employment increase among single mothers with a high school education or less between 1992 and 1999. The economy accounted for 20 percent, changes in cash assistance for 10 percent, and SNAP changes for 4 percent. The third essay examines how the level and composition of incomes of families with children changed between 1993 and 2012. These data show how the safety net has become more focused on supporting families with earnings and less helpful to families during periods of joblessness. Changes in the safety net drove a 16 percent decline in post-tax post-transfer family income of the poorest five percent of children between 1995 and 2005. The paper concludes by looking at the characteristics of children at different points in the income distribution.