Explaining welfare reform: Public choice and the labor market

This paper seeks to identify factors which could plausibly have led to the contractionary welfare reform initiatives begun at the state and federal le vels in the U.S. in the 1990s, initiatives concentrated on the AFDC program . A review of aggregate time series evidence, cross-section regression rese arch, and studies of attitudes toward welfare spending and toward welfare r ecipients suggests a role for three types of factors. First, a major expans ion of the U.S. welfare system in the late 1980s in terms of expenditures a nd caseloads may have led voters to desire to retrench by cutting back on t he AFDC program, even though that program was not primarily responsible for the expansion. Second, declines in the relative and absolute levels of hou sehold income, wages, and employment rates among the disadvantaged populati on may have driven up caseloads and costs, increased the social distance of voters from the poor, heightened concern with work incentives, and may hav e led, more generally, to a decrease in the perceived deservingness of the poor. Third, a surge of births to unmarried mothers in the 1980s is suggest ed, by cross-sectional and attitudinal evidence, to have led to a reduction in voter support for the AFDC program.