The Case Of The Climbing Welfare RollsAaron Bernstein
Every recession has distinctive characteristics. And one feature of this one is leaving a painful imprint on millions of Americans and a host of state and local budgets.
Starting in 1989--a full year before unemployment started to rise last summer--the welfare and food stamp rolls jumped sharply. The recession then drove up the welfare figure in February to a record 12.4 million people, a million more than the previous peak in 1976. Food-stamp recipients have jumped by 10%, to 21.7 million, in a year. And despite the Administration's prediction of an early recovery, it expects 500,000 more in each program in 1992.
ROGUE RATE. The numbers point to more pain at the bottom of the labor market than is indicated by the jobless rate, which has risen by a modest 1.5 percentage points since July. Bigger public-assistance rolls also are bad news for the states, which pay 45% of the nation's $20 billion welfare tab. Already strapped, they must cough up more than $5 billion in extra, unanticipated spending. "Our caseload has risen 15% since July, 1989, and most states are seeing the same thing," says Joe Raymond, Maryland's welfare director.
Officials are surprised. Just last year, the Health & Human Services Dept. projected that 100,000 new applicants would go on welfare in fiscal 1990. Instead, 530,000 did. "We're not confident we understand what has caused the rise, so we're not sure why we underestimated it," says Howard Rolston, an HHS official in charge of the projections.
The central puzzle is why welfare and food stamp rolls no longer seem linked to unemployment. This time, public-assistance levels rose before unemployment did--and by bigger margins than in past recessions.
Part of the explanation may be that unemployment insurance covers fewer people today. In the past, more than 40% of those laid off collected jobless pay. The proportion fell to around 30% in the late 1980s, in part because of the growing ranks of part-time workers, who often are ineligible for unemployment insurance. Many part-timers are low-wage women workers, and more of them may be going on welfare after they lose a job and can't collect unemployment.
Another factor may be the programs many states initiated in the 1980s to inform the poor about expansions of medicaid. Caseworkers may have made some people realize that they could get welfare, too. In addition, the current baby boomlet has led to a rise in single mothers, the largest welfare group. And the 1986 immigration law legalized more than 2 million immigrants, who have a greater need of public assistance.
ON THE LINE. The recession, too, is taking a toll. Just ask Cecilia Y. Ratliff, a 36-year-old mother of two from Capitol Heights, Md., who lost her job as a legal secretary last year. She applied for food stamps last month after her unemployment ran out and now may go on welfare. "I don't want public assistance," says Ratliff. "All I want is a job."
State politicians are debating whether to slash welfare benefits, which have already fallen 40% behind inflation since 1970. In California, where benefits actually match inflation, Governor Pete Wilson has proposed an 8.8% cut to help close a $12 billion-plus budget gap.
People like Ratliff are sweating it out while people like Wilson crunch the numbers. Their common worry: There's no telling when the economy will create more jobs.