Economic Snapshot | Inequality and Poverty

Welfare rolls still declining as unemployment rises

A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.

Snapshot for January 9, 2002.

Welfare rolls still declining as unemployment rises
During the recession of the early 1990s, welfare and food stamp caseloads grew as unemployment rose. Even after unemployment peaked in June 1992, caseloads continued to increase, as there was still considerable slack in the labor market. By injecting money into the economy during periods of high unemployment, these safety net programs also stimulate the economy when it needs it most.

As the economy and job opportunities improve, families are able to make ends meet through employment rather than government aid. Beginning in early 1994, as the labor market tightened and unemployment fell below 6.5%, the number of welfare and food stamp recipients began to decline precipitously. Welfare reform undoubtedly aided in the reduction of caseloads, but the strong economy, as in previous recoveries, pulled many workers into the labor market.

As unemployment has ticked upwards over the past year, caseloads have again begun to rise. Food stamp caseloads jumped by nearly 600,000 from September to October 2001-a 3% increase-and the majority of states saw increases in welfare caseloads during the latter part of 2001. Unfortunately, due to the restrictive rules implemented as a part of welfare reform in 1996, welfare caseloads might not be able to rise enough to assist all needy families. As the chart below shows, as of November 2001, welfare caseloads have continued to decline despite a steady increase in the unemployment rate. The focus of welfare reform on keeping caseloads low not only leaves families without the means to make ends meet, but it also hinders the economy’s growth.

Unemployment rate and the number of welfare and Food Stamp recipients

Sources: Health and Human Services (Administration for Children and Families), USDA Food and Nutrition Service (Quality Control Data), and the Bureau of Labor Statistics (Current Population Survey).

This week’s Snapshot by EPI economist Heather Boushey and research assistant Brendan Hill.

Check out the archive for past Economic Snapshots.

See related work on Wages, Incomes, and Wealth | Inequality and Poverty

See more work by Heather Boushey