The Economy's Impact on Welfare Reform Participants' Employment Opportunities In Ramsey County, Minnesota: A Mixed Effects Regression Analysis

Abstract

Like its predecessor Aid to Families with Dependent Children (AFDC), Temporary Assistance for Needy Families (TANF), the most recent program for means-tested public assistance at the federal level, emphasizes work over welfare as a means to decrease dependency on government assistance. TANF began at a time when the United States was experiencing a robust economy; caseloads decreased and welfare participants seemed to be moving from welfare into employment. Now that two decades and one Great Recession have passed since TANF’s inception, it is time to examine the economy’s role in facilitating welfare participants’ employment prospects. This research poses the following question: to what extent do economic conditions (particularly during economic recessions), and person-level differences (race, Latino ethnicity, gender, age, and education) influence welfare participants’ employment opportunities in terms of earnings and work hours? It utilizes secondary data from the Minnesota Family Investment Program (MFIP) in Ramsey County, Minnesota, and provides an example of one county’s experiences with welfare reform and fluctuating economic conditions. A two-level, mixed effects linear regression analysis was done, with time nested in individuals, to examine the effects of local and national economic indicators on MFIP participants’ employment opportunities. Results indicate that the condition of the local economy plays a much greater role in providing such opportunities, than does a national recession. Economic indicators used to measure local economic conditions (real GDP for the metropolitan area of Minneapolis-St.Paul-Bloomington, MN-WI, and county-level data for median income, unemployment rate, and poverty rate) lag behind indicators used to measure national recessions; this indicates a need for proactive programming at the state and local levels as the United States enters recessions such that highly economically vulnerable members of the community experience the effects of a shrinking economy to a much lesser extent.