| Over the past 20 years, the U.S. economy has experienced
remarkable growth. The combination of rising incomes, low
and declining rates of unemployment, low interest rates and
rapid GDP growth have led to a booming stock market. Since
new firms are being created and old firms are often expanding,
new job creation has been rapid. While the strong economy
makes it easier for individuals to move off welfare, problems
remain. First, not all areas of the US are sharing equally
in the growing economy. Second, certain welfare recipients,
primarily younger and less-educated workers, face a different
and often more limited labor market than that available to
most workers. Third, past welfare recipients still face a
variety of barriers to employment that are beyond their control.
In this study we examine the relationship between recipients'
characteristics, local economic conditions and participation
in welfare programs at the level of Kentucky counties. A
statistical model allows us to quantify the effect of an
economic downturn on welfare caseloads, and to separate
the effects of welfare recipients' characteristics from
the effect of local economic conditions on changes in welfare
caseloads.
County economic conditions affecting caseload reductions
include the unemployment rate, recent job growth, and the
number of retail sector jobs per adult welfare recipient.
Other factors that may affect transitions into the workforce-and
that are beyond the control of individuals-include availability
of daycare for children, and presence of Family Resource
Youth Service Centers. Adjacency to metro areas of the county
in which the welfare recipient resides should also affect
transitions. We use five distinct variables to capture individual
characteristics of adult welfare recipients that affect
transitions into the workforce, independently of local county
conditions. These variables include the age of the recipients;
the average number of children per recipient; previous amount
of time on assistance; educational attainment; and previous
work experience.
Results of the analysis show that a higher unemployment
rate, lower availability of retail sector jobs, and rural
status of a county each reduce the rate at which caseloads
decline. The directions of these effects are as expected,
and they are statistically significant. Also, counties with
proportionally more young recipients, more recipients who
have been on welfare rolls for longer periods or have less
prior work experience, and counties with a larger share
of recipients who have less education, had smaller declines
in welfare caseloads, everything else being equal. The statistically
strongest independent effects on caseload reductions were
exerted by recipients' average educational attainment and
the unemployment rate, respectively. Thus, a combination
of policies targeted at raising the educational attainment
of former recipients and stimulating job growth would be
more effective than other policies in maintaining caseload
reductions during a recession. Overall, the individual recipient's
characteristics "explained" 33% more of the variation in
caseload reductions than did county-level economic conditions,
even though more variables were included for economic conditions
than for individuals' characteristics.
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