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2008 Indicators of Welfare Dependence
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The Welfare Indicators Act of 1994 (Public Law 103-432) directed the Secretary of Health and Human Services (HHS) to publish an annual report on welfare dependency. This 2008 report, the eleventh annual indicators report, gives updated data on the measures of welfare recipiency, dependency, and predictors of welfare dependence developed for previous reports. Much of this report reflects changes that have taken place since enactment of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in August 1996.
The purpose of this report is to address questions concerning the extent to which American families depend on income from welfare programs. Under the Welfare Indicators Act, HHS was directed to address the rate of welfare dependency, the degree and duration of welfare recipiency and dependence, and predictors of welfare dependence. The Act further specified that analyses of means-tested assistance should include benefits under the Temporary Assistance for Needy Families (TANF) program (formerly the Aid to Families with Dependent Children (AFDC) program), the Food Stamp Program, and the Supplemental Security Income (SSI) program. Throughout the report we use AFDC/TANF to refer to cash assistance benefits received under these two programs because the AFDC program preceded the TANF program.
This 2008 report provides updated measures through 2005 for dependency measures based on the Current Population Survey (CPS), Annual Social and Economic Supplement. Although more recent administrative data provide some information on recipiency through 2006, the survey data needed to examine overall welfare recipiency are not available past 2005 for the CPS-based measures, 2003 for the SIPP-based measures, and 2004 for the Panel Study of Income Dynamics measures. As in the 2007 report, measures updated annually are presented at the front of each chapter, followed by the figures that are derived from data sources that are updated less frequently.
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This introductory chapter provides an overview of the specific summary measure of welfare dependence proposed by a bipartisan Advisory Board[1] and how this measure was adopted for use in this annual report series. Also it discusses summary measures of poverty, following the Advisory Boards recommendation that dependence measures not be assessed in isolation from other measures of economic well-being. The introduction concludes with a discussion of data sources used for the report.
Chapter II of the report, Indicators of Dependence, presents ten indicators of welfare dependence and recipiency. These indicators include dependence measures based on total income from all three programs AFDC/TANF, SSI, and food stamps as well as measures of recipiency for each of the three programs considered separately. Labor force participation among families receiving welfare and benefit receipt across multiple programs also are shown. The second half of the chapter includes longitudinal data on transitions on and off welfare programs and spells of program recipiency, including spells of TANF receipt among persons in families that have no attachment to the labor market. Also, this section includes a measure of long-term program receipt of up to 10 years, and a measure of events associated with the beginning and ending of program spells.
Chapter III, Predictors and Risk Factors Associated with Welfare Receipt, focuses on predictors of welfare dependence risk factors believed to be associated with welfare receipt. These predictors are shown in three different groups:
Additional data and technical notes are presented in four appendices. Appendix A provides basic program data on each of the main welfare programs and their recipients; Appendix B shows how dependence is affected by the inclusion of benefits from the SSI program; Appendix C includes additional data on nonmarital childbearing; and Appendix D provides background information on several data and technical issues. The main welfare programs in Appendix A include the following.
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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/TANF, food stamps and/or SSI, and this welfare income is not associated with work activities. In following the Boards proposal, we adopt the following definition of welfare dependence among individuals in families[2] for use in this report:
Welfare dependence is the proportion of all individuals in families that receive more than half of their total family income in one year from TANF, food stamps, and/or SSI.
Any definition of welfare dependence is not without its limitations. The Advisory Board recognized that no single measure could capture fully all aspects of dependence and that their proposed measure should be examined in concert with other indicators of well-being. While the Boards proposal 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 may overstate the incidence of dependence 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 FY 2006, 30.1 percent of welfare recipients were working (including employment, work experience and community service), compared to 7 percent in 1992.[3]
Any definition also represents an arbitrary choice of a percentage of income from welfare beyond which families will be considered dependent. But using a single point in this case 50 percent yields a relatively straightforward measure that can be tracked easily over time, and is likely to be associated with any large changes in total dependence, however defined. For example, dependence under the definition used in this report declined as policy changes under welfare reform moved more recipients into employment.
As shown in Figure SUM 1, 3.8 percent of the population would be considered dependent on welfare in 2005 in that they received more than half of their family income in 2005 from TANF, food stamps and/or SSI. This is one-quarter of the percentage that lived in a family receiving at least some TANF, food stamps, or SSI benefits during the year.
Figure SUM 1.
Recipiency and Dependency Rates: 1993-2005
Note: Recipiency is defined as living in a family with receipt of any amount of AFDC/TANF, SSI or food stamps during the 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.Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1994-2006, analyzed using the TRIM3 microsimulation model.
Dependency and recipiency rates follow fairly similar trends, falling fairly dramatically during the 1990s to lows of 3.0 percent for dependency and 12.5 percent for recipiency in 2000. While rates have increased somewhat between 2000 and 2005, the 2005 dependency and recipiency rates remain substantially lower than the peak rates of 5.9 and 17.2 percent, occurring in 1993 and 1994, respectively. The overall drop in recipiency rates since the early 1990s is consistent with TANF administrative data showing declining TANF caseloads, especially after enactment of welfare reform in 1996. What is not apparent from administrative records, but is shown in national survey data, is that dependency also declined after 1993, with the sharpest decline occurring after enactment of the 1996 welfare reform legislation. While 13.74 million individuals were dependent in 1996, only 11.15 million were dependent in 2005 representing a decline of 2.59 million people.
1993 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
---|---|---|---|---|---|---|---|---|---|---|---|
Recipiency Rates (Rates of Any Amount of AFDC/TANF, Food Stamps, or SSI) | |||||||||||
All Persons | 16.6 | 16.0 | 14.8 | 13.5 | 13.3 | 12.5 | 12.6 | 13.2 | 14.1 | 15.0 | 15.3 |
Racial/Ethnic Categories | |||||||||||
Non-Hispanic White | 10.3 | 9.9 | 9.7 | 8.6 | 8.4 | 8.2 | 8.2 | 8.8 | 9.2 | 10.1 | 10.1 |
Non-Hispanic Black | 38.0 | 35.6 | 30.2 | 29.6 | 29.8 | 27.0 | 26.3 | 27.7 | 31.3 | 32.4 | 32.9 |
Hispanic | 34.6 | 32.0 | 28.0 | 24.5 | 23.4 | 21.0 | 21.6 | 21.7 | 22.5 | 22.6 | 24.0 |
Age Categories | |||||||||||
Children ages 0-5 | 30.5 | 28.2 | 25.1 | 22.4 | 21.5 | 19.8 | 20.8 | 21.4 | 24.2 | 24.6 | 25.6 |
Children ages 6-10 | 24.9 | 24.2 | 21.2 | 20.0 | 19.8 | 18.0 | 18.4 | 18.8 | 20.5 | 22.2 | 22.6 |
Children ages 11-15 | 22.1 | 21.1 | 19.4 | 17.0 | 17.3 | 16.3 | 16.1 | 16.8 | 19.7 | 20.4 | 20.9 |
Women ages 16-64 | 16.4 | 16.0 | 14.7 | 13.6 | 13.6 | 12.5 | 12.5 | 13.4 | 14.0 | 15.0 | 15.4 |
Men ages 16-64 | 11.5 | 11.7 | 11.1 | 10.0 | 9.6 | 9.2 | 9.6 | 10.3 | 10.6 | 11.6 | 11.7 |
Adults ages 65 and over | 11.2 | 10.3 | 10.2 | 9.9 | 10.0 | 10.4 | 9.6 | 9.7 | 9.9 | 10.0 | 10.3 |
Family Categories | |||||||||||
Persons in: | |||||||||||
Married-couple families | 10.5 | 9.6 | 8.7 | 8.3 | 7.9 | 7.2 | 7.4 | 7.5 | 8.2 | 8.6 | 8.8 |
Female-headed families | 47.8 | 46.0 | 41.6 | 37.5 | 39.9 | 37.1 | 36.4 | 37.7 | 39.9 | 42.6 | 44.5 |
Male-headed families | 27.6 | 25.3 | 24.3 | 19.7 | 19.3 | 21.8 | 21.2 | 21.2 | 22.2 | 21.9 | 22.1 |
Unrelated persons | 9.7 | 11.5 | 11.9 | 10.9 | 10.0 | 10.1 | 10.0 | 11.5 | 11.6 | 12.7 | 12.2 |
Dependency Rates (More than 50 Percent of Income from AFDC/TANF, Food Stamps, or SSI) | |||||||||||
All Persons | 5.9 | 5.2 | 4.5 | 3.8 | 3.3 | 3.0 | 3.1 | 3.2 | 3.6 | 3.7 | 3.8 |
Racial/Ethnic Categories | |||||||||||
Non-Hispanic White | 3.0 | 2.6 | 2.5 | 2.1 | 1.8 | 1.9 | 1.8 | 1.8 | 2.1 | 2.2 | 2.2 |
Non-Hispanic Black | 17.8 | 13.8 | 11.4 | 10.5 | 9.1 | 7.7 | 8.8 | 8.7 | 10.1 | 10.0 | 10.2 |
Hispanic | 11.8 | 10.9 | 9.1 | 6.6 | 5.4 | 4.5 | 4.5 | 4.9 | 5.2 | 5.2 | 5.7 |
Age Categories | |||||||||||
Children ages 0-5 | 13.9 | 11.2 | 9.3 | 7.8 | 6.2 | 6.0 | 5.9 | 6.0 | 7.5 | 7.1 | 7.4 |
Children ages 6-10 | 11.2 | 9.5 | 8.4 | 6.7 | 6.1 | 5.1 | 5.4 | 5.1 | 5.8 | 6.0 | 6.1 |
Children ages 11-15 | 9.3 | 8.1 | 7.4 | 5.7 | 4.5 | 4.0 | 4.4 | 4.0 | 5.0 | 5.1 | 5.5 |
Women ages 16-64 | 5.9 | 5.2 | 4.6 | 3.9 | 3.5 | 3.0 | 3.3 | 3.4 | 3.6 | 3.7 | 4.0 |
Men ages 16-64 | 2.7 | 2.7 | 2.5 | 2.1 | 1.9 | 1.8 | 2.0 | 2.0 | 2.3 | 2.4 | 2.4 |
Adults ages 65 and over | 2.4 | 2.4 | 2.1 | 2.1 | 2.0 | 2.1 | 1.9 | 2.0 | 2.2 | 2.2 | 2.2 |
Family Categories | |||||||||||
Persons in: | |||||||||||
Married-couple families | 1.8 | 1.7 | 1.4 | 1.1 | 1.0 | 0.9 | 1.0 | 1.0 | 1.1 | 1.0 | 1.1 |
Female-headed families | 25.7 | 21.1 | 18.4 | 15.0 | 13.6 | 11.4 | 11.9 | 11.7 | 13.2 | 13.8 | 14.0 |
Male-headed families | 6.8 | 5.4 | 5.6 | 4.2 | 3.0 | 4.4 | 4.0 | 3.8 | 4.9 | 4.0 | 4.3 |
Unrelated persons | 3.8 | 4.2 | 4.2 | 4.2 | 3.4 | 3.8 | 3.8 | 4.1 | 4.4 | 4.5 | 4.7 |
Note: Recipiency is defined as living
in a family with receipt of any amount of AFDC/TANF, SSI or food stamps during
the year. Dependency is defined as having more than 50 percent of annual
family income from AFDC/TANF, SSI and/or food stamps. Dependency rates
would be lower if adjusted to exclude welfare assistance associated with
working. Spouses are not present in the male-headed and female-headed
family categories. Persons of Hispanic ethnicity may be of any race.
Beginning in 2002, estimates for Whites and Blacks are for persons reporting
a single race only. Persons who reported more than one race are included
in the total for all persons but are not shown under any race category.
Due to small sample size, American Indians/Alaska Natives, Asians and Native
Hawaiians/Other Pacific Islanders are included in the total for all persons
but are not shown separately. Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1994-2006, analyzed using the TRIM3 microsimulation model. |
Recipiency and dependency rates are higher for Non-Hispanic Blacks and Hispanics than for Non-Hispanic 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 2005 compared to 1993.
Measures of welfare dependency also vary based upon which programs are counted as welfare programs. Dependency would be much lower 2.1 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). Moreover, the drop in dependency is even larger under this alternative definition of dependence than usually reported. For example, between 1995 and 2005, dependency declined from 3.6 percent to 2.1 percent under the alternative definition.
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, cross-sectional basis. Longitudinal measures of program receipt (both annual and monthly) 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 2004, 10.0 percent received some welfare during six or more years. Another quarter (24.7 percent) were recipients in three to five years, and nearly two-thirds (65.3 percent) received welfare in only one or two years during this period.
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To assess the social impacts of any change in dependence, changes in the level of poverty should be considered. This chapter focuses on the official poverty rate, the most common poverty measure. Additional measures of poverty and need also are included under the Economic Risk Factors found in Chapter III.
The poverty rate in 2006 remains much lower than in 1993, when poverty reached its highest peak since the early 1980s. The official poverty rate for 2006 was 12.3 percent, compared to 15.1 percent in 1993. This difference in the poverty rate indicates that 2.8 million fewer people are in poverty and 2.9 million fewer children are in poverty in 2006 than in 1993.
Figure SUM 2.
Percentage of Total Population in Poverty with Various Means-Tested Transfers
Counted as Income: 1979-2006
Note: The three measures of income are as follows: (1) Before means-tested cash transfers is earnings and other pre-transfer (private or market) cash income, plus social security, workers compensation, and other social insurance cash transfers. It does not include means-tested cash transfers; (2) The Official poverty measure uses the official Census Bureau income definition, which includes means-tested cash transfers, primarily AFDC/TANF and SSI; (3) After means-tested non-cash benefits and taxes counts the cash value of means-tested food and housing benefits, adds the refundable Earned Income Tax Credit (EITC), and subtracts federal payroll and income taxes. The fungible value of Medicare and Medicaid is not included in any of the income measures.Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1980 2007, analyzed by the Congressional Budget Office. See ECON 4 in Chapter III for underlying table and further notes.
Figure SUM 2 shows poverty estimates under the official poverty rate and two other measures that adjust income by adding or subtracting means-tested cash transfers, means-tested non-cash benefits, and federal taxes. While each of the three poverty measures in the graph uses a different definition of income, all three poverty measures use the Census Bureaus official poverty thresholds.
The Official poverty measure trend line shows the official poverty rate based on total cash income, including means-tested cash transfers. The official poverty rate was 12.3 percent in 2006.
The Before means-tested cash transfers trend line shows what the poverty rate would be if means-tested cash transfers (primarily AFDC/TANF and SSI) were excluded from income. Income in this measure includes earnings and other pre-transfer cash income, plus social security, workers compensation, and other social insurance cash transfers. The poverty rate under this measure would be higher than under the official measure, or 13.0 percent in 2006.
The After means-tested non-cash benefits and taxes trend line shows that the poverty rate would be lower if the cash value of means-tested food and housing transfers and the effect of federal taxes were counted as income.[4] Under this definition, the poverty rate in 2006 would be more than two percentage points lower than the official measure, or 10.0 percent.
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The primary data sources for this report are the Current Population Survey (CPS), the Survey of Income and Program Participation (SIPP), the Panel Study of Income Dynamics (PSID) and administrative data for the AFDC/TANF, Food Stamp and SSI programs. Beginning with the 2001 report, there was a shift to using CPS rather than SIPP data for several indicators and predictors of welfare recipiency and dependence. This change was necessary because CPS data are updated annually, while SIPP updates are available much less frequently.
If it were not for the lags in data availability, the SIPP would be considered the most useful national survey for measuring welfare dependency. It was used most extensively in the first three annual dependence reports. Its longitudinal design, system of monthly accounting and detail concerning employment, income and participation in federal income-support and related programs, make the SIPP particularly effective for capturing the complexities of program dynamics. It continues to be an important source of data in this report, particularly for measures related to AFDC/TANF and poverty spell duration, transitions in and out of program dependency and reasons for entering or leaving the AFDC/TANF program.
For measures of receipt, dependency and poverty at a single point in time, the report primarily uses the Annual Social and Economic Supplement to the CPS, which measures income and poverty over an annual accounting period. As stated above, the CPS data are available on a timelier basis than the SIPP, and have been widely used to measure trends since the welfare reform legislation of 1996. However, because the CPS does not collect income in the same detail as the SIPP, it has been subject to criticism for underreporting of income, particularly welfare income. To address this concern, some of the indicators in this report are based on CPS data that have been analyzed by the Transfer Income Model (TRIM3), a microsimulation model developed by the Urban Institute under contract to the Office of the Assistant Secretary for Planning and Evaluation. Although its primary purpose is to simulate program eligibility and the impact of policy proposals, the TRIM model also has been used to correct for underreporting of welfare receipt and benefits. Welfare caseloads in TRIM3 are based on CPS data, adjusted upward to ensure that total estimates of recipients equal the total counts from administrative data. To maintain consistency in data trends, we present estimates based on CPS data analyzed by TRIM3 beginning in 1993, the first year the TRIM3 microsimulation model became available.
As shown in Figure SUM 3, the overall measures of dependency and recipiency have not been greatly affected by the change in data sources. Both data sources show a decline in dependence between 1996 and 1999 and a small increase in dependence during the early 2000s. Still, readers are cautioned against comparing measures for 1987-1995 from the SIPP data in the first three annual reports with the measures for 1993-2005 from the TRIM-adjusted CPS data.
Figure SUM 3.
Recipiency and Dependency Rates from Two Data Sources: 1987
2005.
Note: Recipiency is defined as receipt of any amount of AFDC/TANF, SSI or food stamps during the year. Dependency is defined as having more than 50 percent of annual family income from AFDC/TANF, SSI and/or food stamps. Dependency rates would be lower if adjusted to exclude welfare assistance associated with working. While only affecting a small number of cases, General Assistance income is included within AFDC/TANF income and veterans pension benefits are included in means-tested assistance income for SIPP-based receipt and dependency estimates prior to 2001.Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1994-2006, analyzed using the TRIM3 microsimulation model, and unpublished tabulations from the Survey of Income and Program Participation, 1987, 1990, 1992, 1993, 1996, 2001, and 2004 panels.
The Panel Study of Income Dynamics (PSID) is another source of data used in this report. Like the SIPP it provides longitudinal data, but over a much longer time period than the three- to four-year time period of the SIPP. With annual data on program receipt since 1968, the PSID provides vital data for measuring longer-term welfare use over periods of up to 10 years. Because the PSID indicators cover time spans as long as a decade, they are updated less frequently than the CPS-based and SIPP-based measures. In this 2008 annual report, the key PSID indicator for long-term welfare receipt, Indicator 9, has been updated. Indicator 9 still includes estimates of welfare receipt over 10-year periods, but the years covered by each time period have shifted. Thus, readers are cautioned against comparisons with estimates from prior reports.
The report also draws upon administrative data for the AFDC/TANF, Food Stamp and SSI programs. These data are largely reported in Appendix A. Like the CPS data, administrative data are generally available with little time lags; these data are generally available through fiscal year (FY) 2006. To the extent possible, TANF administrative data are reported in a consistent manner with data from the earlier AFDC program, as noted in the footnotes to the tables in Appendix A. The fact remains that assistance under locally designed TANF programs encompasses a diverse set of cash and non-cash benefits designed to support families in making a transition to work, and so direct comparisons between AFDC receipt and TANF receipt should be made with caution. This issue also affects reported data on AFDC and TANF receipt in national data sets such as the CPS and SIPP.
For further technical information about the data presented in the report, specifically for information on race and ethnicity, unit of analysis and annual versus monthly measures, please see Appendix D.
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[1] The first annual report was produced under the oversight of a bipartisan Advisory Board on Welfare Indicators, which assisted the Secretary in defining welfare dependence, developing indicators of welfare dependence, and choosing appropriate data. Under the terms of the original authorizing legislation, the Advisory Board was terminated in October 1997, prior to the submission of the first annual report.
[2] Appendix D provides more information on the use of individuals, rather than families or households, as the unit of analysis for most of the statistics in this report.
[3] This 30.1 percent includes 21.7 percent in unsubsidized employment and 8.5 percent in work preparation activities (including subsidized jobs, on-the-job training, work experience or community services). 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 Advisory Boards proposed definition.
[4] The effects of food and housing benefits are shown separately from the effect of federal taxes in Figure ECON 4 in Chapter III. Prior to 1993, including the effect of federal taxes increased poverty. Since 1993, federal taxes and tax credits (including refunds through the Earned Income Tax Credit) have had the net effect of reducing poverty rates.
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