The Working Poor and Welfare Recipiency: Participation, Evidence, and Policy Directions

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Current welfare debates assume that the poor are taking unfair advantage of the government's largess by shunning work for welfare benefits. Yet many studies indicate that many of those who qualify for welfare benefits fail to receive assistance. This study adds to this growing body of research by finding that a substantial number of the working poor do not receive the Aid to Families with Dependent Children (AFDC) and Food Stamp benefits for which they qualify. Thus, it does not appear that the working poor (nor the general population of the poor) are taking advantage of the welfare system. In addition, we examine the argument that the working poor are poor because they are somewhat unusual - that they are either very young or old, do not work many hours, drop out of high school, or are in unusual family arrangements. We find that the working poor do not share these characteristics to the extent previously claimed. Many of the working poor are in married-couple families, most are in their prime working years, most have at least a high school education, and the majority work many hours. We conclude that rather than being poor because of their own bad choices or behavior, the working poor are destitute because of the particular jobs they hold, which tend to be in low-paid service occupations and industries.

Research on Welfare Participation

A small body of research has examined the curious fact that many of those who qualify for welfare programs fail to receive benefits(1) [see Bendick 1980, who surveyed this phenomenon during the 1970s]. For example, among those eligible for benefits, 25 percent fail to receive AFDC [Willis 1981; Ruggles and Michel 1987; Giannarelli and Clark 1992], and 50 percent fail to receive Food Stamps [Doyle and Beebout 1988; Trippe and Beebout 1988; Trippe et al. 1992]. Survey research, which directly asks participants why they do not participate in welfare programs, suggests that the main reason is lack of information: most simply do not know that they are eligible [Coe 1983; 1979]. Other factors include desires to avoid the increased administrative hassles, feelings that they do not need the income, accessibility problems (inadequate transportation or child care, limited staffing hours in welfare offices, or problems filling out the forms), and stigma [Bendick 1980; Coe 1983, 1979; Allin and Beebout 1989].

Those who are less likely to participate in welfare programs tend to share the following characteristics: they are older, male, and able-bodied; they have higher incomes, more education, and fewer children; and they live in rural areas or in states with low unemployment rates. Those who work, who qualify for smaller welfare benefits and for a shorter duration of time, who live in families with at least two adults, and who live in households in which other members do not participate in welfare programs are also less likely to receive benefits [Blank and Ruggles 1993; Coe 1979, 1983; Willis 1981; Doyle and Beebout 1988; Allin and Beebout 1989; Fraker and Moffit 1988].

None of the welfare participation research has examined the participation of the working poor, however. Yet the working poor may act quite differently from the non-working poor. With generally higher incomes, more education, and more continuous work experience than the general population of the poor, the working poor are probably less likely to receive welfare assistance. This essay examines the participation rates of the working poor in Food Stamps and AFDC and whether those who do not participate in these programs do so because of a lack of need. It also comments on the debate regarding why workers are so destitute that they qualify for either of these programs.

Data and Methodology

Data for this study are from the U.S. Census' Survey of Income and Program Participation (SIPP), a multi-panel longitudinal data set. Those followed in each panel of this survey are a representative sample of the civilian U.S. population. The first panel began in October 1983, with subsequent panels surveyed beginning February of each calendar year. Those who are selected for the sample are interviewed every four months over approximately two and one-half years. Data from each interview period, which include information on the four previous months, constitute a "wave." There are approximately seven waves for each person surveyed.

SIPP includes two types of survey questions: Those that are asked at every interview period are part of the "core" of the survey. Core questions include demographic characteristics, labor force participation, income, earnings, and welfare participation. These variables are usually measured on a monthly basis. Because this information is gathered during every interview about each of the previous four months, these variables are available for each of the 28 months one is included in the sample. Other questions included in the "topical" module of the survey produce detailed information on particular subjects and are asked at only one or two interviews (waves). Topical modules include information on welfare history, work history, assets and liabilities, marital history, and migration. Most of these questions inquire about events in the past (like previous residence or welfare history) or that change slowly; thus, they are not asked at every interview. Each wave in SIPP contains one topical module and the core module.

SIPP is the primary data source for poverty research because it contains detailed information on welfare participation, earnings, income, assets, and work behavior. We used wave seven of the 1987 panel for our analysis. The 30,000 persons included in the sample were surveyed about their experiences between October 1988 and April 1989. This wave (and thus time period) was used because the data include detailed information on assets, which is critical in determining welfare eligibility. Data regarding work and welfare history were extracted from all previous waves (see Appendix 1).

We defined the working poor as anyone age 18 or older who worked at least one week during the four-month time period and who qualified for either Food Stamps or AFDC.(2) This definition is more conservative than that most commonly used. Most research defines the poor as those who have incomes below a certain percentage - 100 percent and up to 200 percent - of the official poverty line [Schwartz and Volgy 1992]. Our definition of poverty includes asset limits as well. Although ours is thus a conservative estimate of the working poor, we wanted to be certain that those whom we counted as poor were unquestionably so. Certainly, most would consider those who are eligible for either AFDC or Food Stamps to be poor.(3) Limiting our sample further to those who worked at least one week follows the most commonly used method of defining the working population of the poor(4) [Blank 1993; Levitan et al. 1993].

To determine eligibility for Food Stamps and AFDC, we followed as closely as possible the federal and states' requirements regarding income and asset restrictions during the time period examined. This process is described in Appendix 1. For AFDC, we included those who qualified for either the "regular" program in which single-parent families with children are poor, as well as the "unemployed parent" (AFDC-UP) program, in which the primary earner in a two-parent family with children is either unemployed or underemployed. When information was missing to determine eligibility, we used the most conservative assumption possible. For example, since data on vehicle equity were missing, we assumed the book value, rather than estimating car equity. Since child care and medical costs were missing, we assumed zero costs, rather than estimating possible costs using forecasting models. These assumptions are likely to understate the number of the working poor who qualify for welfare. Yet because of these conservative assumptions, we were certain that those we deemed eligible for receiving welfare were indeed eligible. Thus, the absolute numbers of the working poor who qualify for welfare are underestimated and should be examined with this caution. But the proportion of those who qualify for welfare and either receive or do not receive benefits is highly accurate.(5) We have great confidence in these latter numbers, since they include virtually no guesswork regarding those who were eligible for benefits.

Welfare Recipiency Results

Population of the Working Poor

As Table 1 illustrates, those who worked but were poor enough to qualify for Food Stamps or for AFDC were educated, …