Project:
Food Stamp Program Exits During the Implementation of Welfare Reform Measures

Year: 2000

Investigator: Mills, Bradford, Everett Peterson, Jeffrey Alwang, and Sundar Dorai-Raj

Institution: Virginia Tech

Project Contact:

The Food Stamp Program (FSP) is the remaining major entitlement program in the U.S. social safety net. Thus, caseload declines, such as those experienced during the latter half of the 1990s, generate concern when they arise from decreasing program participation among still-eligible and needy families. Recent research suggests that caseload declines can be linked to changing eligibility restrictions, to economic gains among poor and near-poor families otherwise unaffected by new eligibility restrictions, and to declining program participation among still-eligible and needy families. Historically, fewer families have participated in the FSP than are eligible. Low participation rates are commonly attributed to stigma and transaction costs associated with program participation. Because there may be a less-than-proportionate increase in stigma and transaction costs associated with participation in both the FSP and Temporary Aid to Needy Families (TANF) compared with each program individually, reform measures that induce a family to leave TANF may also induce it to leave the FSP. A recent survey of families initially in the FSP finds that families leaving Aid to Families with Dependent Children (AFDC)/TANF have higher rates of exit from the FSP than families not initially receiving cash assistance. However, TANF exits and FSP exits may both be responses to changes in earnings.

In this paper, the authors first examine the changing roles of pubic assistance and earnings in the total incomes of poor and near-poor single female-headed families with children. They then examine the effects that changes in family earnings, economic conditions, State TANF caseload declines, and family exits from TANF have had on the decision to terminate FSP participation. They focus their study on single female-headed families because these families contain a majority of the Nation’s children living in poverty and are the largest single recipient group of TANF funds. Further, while these families have been affected by changes in eligibility for public cash assistance, they have been relatively unaffected by concurrent changes in FSP eligibility.

Data from the 1993 and 1999 March annual demographic files of the Current Population Survey (CPS) reveal that total per capita incomes of poor and near-poor single female-headed families in the Nation as a whole showed only a modest 1.3-percent increase from 1992 to 1998. However, per capita earnings of these poor and near-poor families increased by 41.7 percent over the period. These earnings increases were offset by a decrease in average AFDC/TANF payments of 53.5 percent. As a result, AFDC/TANF payments as a share of total income for these families declined from 22.4 percent to 10.3 percent between 1992 and 1998. FSP benefits showed a smaller decline, from 14.0 to 9.9 percent of total income. In the nonmetropolitan South, total per capita incomes were $338 lower than the national average in 1992. However, this gap was virtually eliminated by 1998, with only a $60 difference in per capita incomes. Interestingly, the reduction in the total income gap was not due to more rapid growth in earned income in the nonmetropolitan South, but to smaller reductions in initially low AFDC/TANF benefits. Average per capita AFDC/TANF benefits declined by only $113 in the nonmetropolitan South compared with $323 for the Nation. However, the declines in average per capita FSP benefits between 1992 and 1998 were virtually the same for poor and near-poor single female-headed families in the nonmetropolitan South and the Nation.

The authors estimated a probit model of FSP exits using the rotating panel component of the 1997 to 1999 Current Population Surveys. Their results suggest that FSP departures are, in part, a response to the strengthening of family economic conditions. Specifically, changes in earnings are, on average, positive in the sample, and these positive changes strongly influence exits from the FSP. The results also indicate that after controlling for earnings shocks, area economic conditions, and other factors, a departure from TANF increases the likelihood of leaving the FSP by almost half. This finding supports suspicions that TANF reform measures may have indirectly fostered FSP exits among families that remain below 130 percent of the poverty line and are still eligible for food assistance. However, FSP participation has not been disproportionately affected in States that have aggressively cut TANF caseloads. The authors find that high rates of State TANF caseload declines actually mitigate the influence that leaving TANF has on family FSP exits.

The authors suggest that further research is needed to identify specific constraints to continued participation in the FSP by families leaving TANF. For example, if families do not receive complete information on FSP eligibility when leaving TANF, additional resources to support local caseworker counseling may be needed. If, on the other hand, FSP exit is in response to cumbersome procedures to retain certification for FSP benefits when TANF benefits are lost, efforts to further streamline procedures for continued program participation may be warranted.

[Additional funding received from the National Research Initiative Competitive Grants Program.]