As Congress considers reauthorization of the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996,
a primary focus remains on moving public assistance recipients who
are not working into jobs. During 1996-2000, a period of strong
economic growth, an estimated 2.4 million new workers moved from
public assistance to primarily low-skill jobs, representing 18 percent
of employment growth during that time. Temporary Assistance for
Needy Families (TANF) caseloads fell by 50 percent, from 12.6 million
recipients to 5.9 million. Food stamp caseloads fell by 30 percent
from 25.5 million recipients to 17.2 million. Since the recession
in 2001, hiring has been slow to recover, with substantial job growth
starting in 2004. Food stamp caseloads began increasing in 2001
and have continued to increase through 2004 in response to economic
conditions and expanded efforts to enroll eligible nonparticipants
into the program. However, TANF caseloads have continued to fall,
although at a slower rate in 2003 and into 2004. Looking back at
labor market changes during the years following the 1996 welfare
reform may inform current policy discussions. ERS research examined
the effects of the movement of public assistance recipients into
the labor force in the late 1990s, when the growing U.S. economy
generated many new jobs—particularly jobs in low-skill occupations.
New workers from public assistance programs accounted
for 1 percentage point of real gross domestic product (GDP) growth
during 1996-2000. Simultaneously, the large influx of former welfare
recipients into the labor force affected the wages and employment
opportunities of other low-skill workers. The reduction in wage
growth was estimated to be 2.5 percentage points for low-skill workers.
Wage growth was estimated to be 4.4 percent versus 6.9 percent without
the influx of former welfare recipients. So, the actual wages of
low-skill workers already in the workforce increased, but the increase
was not as much as it would have been without the influx of new
workers.
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