Welfare Reform in the United States: A Descriptive Policy Analysis

Department of Economics Research Memorandum 2009.03

36 Pages Posted: 18 Feb 2010

See all articles by Megan Martin

Megan Martin

Leiden University - Department of Economics

Koen Caminada

Leiden Law School - Department of Economics

Date Written: 2009

Abstract

Poverty alleviation is an important objective of European countries and of the United States. If these ‘rich’ states offer elaborate systems of income maintenance, why is there still a considerable amount of poverty? And why are anti-poverty outcomes so different in the United States compared to European countries?

This paper completes a trilogy of cross-country research papers on anti-poverty policy. Two former papers analyzed the effects of social transfers on both poverty levels and poverty alleviation through tax and social transfer systems. These papers marked the United States as an outlier: high poverty rates, low public social spending but high private social expenditures, a rather strong belief that people are poor because of laziness or lack of will, and remarkable differences across the Federal States caused by state discretion. Therefore, this paper analyzes U.S. welfare in more detail; we focus on part of the major welfare reform in 1996.

The 1996 welfare reform emphasizes an American preference for work. Indeed, the welfare reform increased work, although the earnings of most individuals who left welfare were still below the poverty line, even many years after their exit. A drawback of this work-first approach is the termination of cash assistance after 5 years, especially for vulnerable groups with low skills. Recent economic recession can cause severe troubles; one could - for example – argue that recipients who reach time limits without meeting work requirements should be offered a chance to work in community service jobs in return for cash assistance. We found huge variation of welfare eligibility rights across states, depending on ability to pay and preferences to meet a certain level of social standard and other (social) objectives such as child care, work support and employment programs.

Keywords: welfare reform, poverty

JEL Classification: H53, H55, I32

Suggested Citation

Martin, Megan and Caminada, Koen, Welfare Reform in the United States: A Descriptive Policy Analysis (2009). Department of Economics Research Memorandum 2009.03, Available at SSRN: https://ssrn.com/abstract=1553811

Megan Martin

Leiden University - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/martin.html

Koen Caminada (Contact Author)

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands
++31715277858 (Phone)

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/caminada.html

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