THE POVERTY REDUCTION SUCCESS OF PUBLIC TRANSFERS FOR WORKING AGE IMMIGRANTS AND REFUGEES IN THE UNITED STATES

I. INTRODUCTION The welfare reform bill of 1996 spurred significant research on immigrant use of public assistance in the United States (Borjas 2002; Lofstrom and Bean 2002; Haider et al. 2004). Provisions in the bill that limited the access of certain immigrants to federal benefits drove researchers to study the impact of the reform on immigrant participation. We extend this work by focusing on the consequences the reforms had on the economic welfare of immigrants relative to natives. Since the reforms exempt refugees from the participation restrictions, we isolate the reform impacts on refugees relative to both other immigrants and natives. The foreign born comprise an increasing share of the U.S. population and account for more than 40% of the net population growth with roughly 10% of all new immigrants arriving with refugee status (U.S. Census Bureau and INS World Book). Refugees are admitted to the United States through an entirely different process than economic immigrants. Although most immigrants must demonstrate an ability to support themselves or have a permanent resident or sponsor who will provide support, refugees are largely exempt from this requirement. On average, refugees arrive with less preparation, weaker English language skills, weaker informal networks, and few if any assets. Since the Personal Responsibility Work Opportunity Reconciliation Act (PRWORA) of 1996, immigrants in general have had diminished access to the welfare system. This paper investigates the impact of recent policy changes on poverty measures for families headed by working age immigrants and refugees relative to the native born. This sample is of particular interest to policy makers because it includes a higher proportion of families who have children and who use programs affected by PRWORA. Although a number of authors examine program participation rates of immigrants, little work to date has examined the impact of such programs on actual poverty rates. The official poverty rate provides an important gauge of the degree of economic hardship facing families and individuals. From 1993 to 2001, the years surrounding the 1996 reforms, the official poverty rate in the United States decreased from 15.1% to 12.5%. Over the same time period, immigrant poverty fell from 23.0% to 17.2%. Poverty rates among new immigrants, and particularly among new refugee immigrants, are well above the national average. In the year 2000, 15.1% of refugees were poor compared with 13% for non-refugee immigrants and 10.5% for natives (Author's calculations, Current Population Survey [CPS]). The economic status of refugees has largely been overlooked in the economics literature. Several authors have recognized that refugees have significantly higher program participation than non-refugee immigrants (Borjas and Hilton 1996; Fix and Passel 1999). Efforts to study refugees, however, have been limited because measures of refugee status are typically not available in large cross-sectional datasets. Although ad hoc rules have been used by Borjas (2001) and Passel and Clark (1998), such rules lead to substantial misclassification. We address this problem through a two-sample approach, similar to two-sample instrumental variables, which allows us to statistically identify refugee poverty separate from that of other immigrants. Given the differential treatment of refugees under PRWORA, and the different circumstances under which most refugees emigrate, it is vital that policy makers understand the impact of policy on these increasingly important subpopulations. We find that although immigrants and refugees in particular had much higher poverty rates in the early 1990s, the strong economic growth throughout the decade led to a convergence of those poverty rates by 2000. All three groups (native born, refugees, and immigrants) saw declining poverty rates throughout the 1990s. Among those of working age, we find evidence that welfare reform had different impacts on non-refugee immigrants, refugees, and the native born. …