Pre-1997 Trends in Welfare and Food Assistance in a National Sample of Families

Both the Food Stamp Program (FSP) and Aid to Families with Dependent Children (AFDC) saw unprecedented caseload growth from the late 1980s until 1994, followed by caseload declines in the following years. These rapid caseload declines are attributed to changing macroeconomic conditions and to substantial changes in program design. First, in the early 1990s, states applied for waivers from federal welfare program regulations, which allowed them more freedom to experiment with welfare reforms. Then, in 1996, Congress redesigned the federal safety net for low-income Americans through the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). These real-world developments suggest some research questions. Do macroeconomic conditions affect FSP caseloads and cash welfare program caseloads in the same way? Do policy changes in cash programs affect participation in the FSP, which serves a partly overlapping population? Because caseload changes depend directly on the rates at which people enter and exit each program, it is useful in answering these questions to investigate participation transitions at the individual level. This paper uses data from the Panel Study of Income Dynamics (PSID) to investigate participation transitions from year to year during the “waiver period,” from 1989 to 1996. The distinctive feature of the approach here is that it considers all possible transitions at the individual level among three participation states—AFDC (with or without FSP), FSP Only, and Neither— rather than treating each program separately.