The impacts of welfare reform on federal assistance to persistently poor children

During the late twentieth century, the US social safety net was transformed to incentivize work by providing generous wage subsidies for low-income workers and reducing federal assistance to able-bodied unemployed adults. Following the transformation and during the economic boom of the 1990s, welfare rolls and annual poverty rates plummeted, especially for children. Despite the economic boom, there were still many persistently poor children living with parents who did not work, and little is known about how the reforms impacted these children's finances. In this paper we compare rates of persistent child poverty before and after the welfare reforms and examine how federal assistance received by persistently poor children changed as a result of the reforms. We find that federal assistance to persistently poor children declined following the reforms, but with divergent results depending on parental employment. While persistently poor children with employed parents benefited from increased income via the Earned Income Tax Credit, those with chronically unemployed parents did not and also experienced substantial reductions in cash welfare and food stamps. These findings demonstrate how persistently poor children fared financially in the years following the reforms and suggest possible implications for the current period of high unemployment.