Examining the Effect of Industry Trends and Structure on Welfare Caseloads

Welfare caseloads have dropped dramatically in recent years, prompting many policy makers to declare an end to welfare as we have known it. The recent decline in caseloads has occurred concurrently with two distinct events. First, most states have restructured their welfare programs to place greater emphasis on getting welfare recipients into jobs. Second, the economy has exhibited strong employment growth with historically low unemployment rates throughout this period, providing unprecedented opportunities for welfare recipients to find employment. Several studies have addressed the effect of business cycles on welfare caseloads. The approaches taken by these studies range from national-level time series analyses to state-level pooled cross section, time series studies. Some micro-level studies of individual welfare recipients, while not necessarily directly addressing the effect of business cycles on caseloads, are pertinent to this issue as well. Our proposed study relates most closely to four recent analyses that estimate the effect of economic conditions on welfare caseloads. The purpose of this paper is to extend the current models to include additional measures of labor market conditions that may affect the variation in welfare caseloads.