EMPLOYMENT AND WELFARE PARTICIPATION AMONG WOMEN

LAURIE J. BASSI The model makes a distinction between voluntary" and "involuntary" welfare receipt. The findings suggest that among female heads of households, the increase in welfare receipt that occurred between 1967 and 1979 was almost completely attributable to an increase in involuntary unemployment and an increase in the proportion of the population that was eligible for welfare (due to changes in program parameters). The passage of time, used as a proxy for changes in the stigma associated with receiving welfare, appears to be of secondary importance. The labor supply response to welfare programs is small, and possibly diminishing over time. I. INTRODUCTION During the last thirty years the Aid to Families with Dependent Children (AFDC) and Food Stamp programs experienced phenomenal increases in outlays. Between 1965 and 1975 the AFDC population grew 162 percent and real government spending on benefits more than tripled. By 1980, the probability that a family was receiving AFDC was four times the probability in 1950 value. The Food Stamp program, after its introduction in the late 1960s, experienced equally dramatic increases in recipiency rates and outlays. These striking increases in welfare costs and participation brought an emerging consensus that the AFDC and Food Stamp programs had failed. As Charles Murray writes in Losing Ground [1984, 146], "the popular wisdom is characterized by hostility toward welfare (it makes people lazy)." Historian James Patterson [1981, 179] provides an alternative, though not inconsistent explanation of the skyrocketing caseloads: "Despite the hostility of the middle classes to increases in welfare, poor Americans refused at last to be cowed from applying for aid .... Compared to the past, when poor people-harassed and stigmatized by public authorities-were slow to claim their rights, this was a fundamental change." Both of these explanations of the increase in welfare participation assert changes in people's response to the programs. Murray claims that program changes in the 1960s induced negative labor supply responses-increasing numbers of individuals voluntarily reduced their earned income in order to become eligible for welfare. Patterson claims that a reduction in the stigma associated with welfare led a greater percentage of those eligible to apply for welfare. A theoretical model for evaluating the validity of these two views as descriptions of reality is presented here. The model is tested using data on women who headed households at some time between 1967 to 1979. The analysis attempts to identify changes in behavior among female heads of households, but does not model the decision to head a family-a decision which embodies both marital status and fertility choices. The implications of this limitation are discussed at the end of the paper. The focus is on developing a tractable theoretical structure that allows for a distinction between voluntary" and "involuntary" welfare participation. The model also provides a simple test for whether reported unemployment is a constraint on choice, or rather a result of it (i.e., whether unemployment, too, is involuntary or voluntary). The empirical results enable us to dis-aggregate the changes in welfare participation into their component parts. The findings suggest that the increase in welfare participation rates among female heads of households during the late 1960s and 1970s is attributable to both an increase in involuntary unemployment and to an increase in those eligible for welfare as a result of changes in program parameters. The passage of time, used as a proxy for a lessening of stigma, appears to be of minor importance. The labor supply response to welfare programs appears to be small, and possibly diminishing over time. In section II a model for determining the effect of redistribution schemes on labor supply and welfare participation decisions is developed. …