Immigrants, welfare reform, and the economyhaider/Research/2004-jpam-hsbd.pdf · Kaestner and Kaushal (in press) include economic con-ditions in their study of the impact of welfare

Steven J. HaiderRobert F. Schoeni

Yuhua Bao Caroline Danielson

Immigrants, Welfare Reform,and the Economy

Journal of Policy Analysis and Management, Vol. 23, No. 4, 745–764 (2004)© 2004 by the Association for Public Policy Analysis and Management Published by Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com)DOI: 10.1002/pam.20045

Received October 2001; review complete April 2002; revision complete July 2003; revision review complete April 2004;accepted April 2004

Abstract

The welfare reform bill adopted in the United States in 1996 limited the eligibility ofimmigrants for several government assistance programs, and early projections esti-mated that nearly half of the savings associated with the reforms would come fromthese immigrant restrictions. Several studies have found that subsequent programparticipation declined more for immigrants relative to natives, seemingly verifyingthe early projections. However, many of these restrictions were either rescinded bythe federal government or superceded by state and local policies. In this paper, wefirst reproduce earlier findings that show the relative declines in program use amongimmigrants. We then show that much, but not all, of the relative decline in programuse among immigrants can be explained by changing macroeconomic conditions.© 2004 by the Association for Public Policy Analysis and Management.

INTRODUCTION

The welfare reform package that was adopted in 1996 restricted immigrant eligibil-ity for some government transfer programs.1 In fact, it was estimated that 44 per-cent of the savings that would be generated by the reforms would come fromreduced assistance to immigrants (Congressional Budget Office, 1995). Several sub-sequent studies find that program participation fell faster for immigrants whencompared to natives after 1996, leading many to conclude that welfare reform mayhave placed a substantial burden on immigrants.2

Despite these findings, it is unclear whether the welfare reforms should havecaused a significant reduction in government assistance for immigrants. Some ofthe policies that were adopted in 1996 were subsequently reversed at the federal

1 We define an immigrant to be a person who was born outside of the United States to non–U.S. citizen parents.2 Zimmerman and Fix (1998, p. 1) examine whether “the complex reforms introduced by the welfare law as wellas related policy changes and practices may be having a chilling effect on immigrants’ use of benefits for whichthey remain eligible.” They report substantially larger reductions among immigrants than among natives. Fixand Passel (1999) report larger declines among non-citizens relying on the CPS. Ellwood and Ku (1998) concludethat Medicaid participation will decline much more for immigrants. Ku and Blaney (2000) and Park et al. (2000)suggest that welfare reform impacted insurance coverage for immigrant children and families.

746 / Immigrants, Welfare Reform, and the Economy

level and others were superceded by changes in state policy (MaCurdy and O’Brien-Strain, 1998; Zimmerman and Tumlin, 1999). In addition, some have argued thatthe 1996 reforms prompted non-citizen immigrants to become U.S. citizens, allow-ing them to avoid being cut off from government assistance (Borjas, 2000).

Another potential explanation for why immigrants and natives may experiencedifferent trends in program participation is the macro economy.3 In a literature thatdeveloped separately from the immigrant participation literature, many studieshave examined the decline in program participation in the 1990s for the generalpopulation.4 These studies conclude that the overall decline in program participa-tion is related to both policy changes and the robust economic expansion of the1990s. The economic expansion could explain the differential trends in programparticipation between immigrants and natives for at least two reasons. First, immi-grants tend to locate in specific areas of the United States, and these areas couldhave experienced different economic conditions as compared to the rest of thenation. For example, 70 percent of immigrants live in just six states (California,Florida, Illinois, New Jersey, New York, and Texas), while only 36 percent of thenative population lives in these same states.5 The unemployment rate peaked higherthan the national average in four of these states, yet partly or fully converged to thenational average by 2001. Second, it is well documented that employment and earn-ings of low-skilled workers are more sensitive to the business cycle than theemployment and earnings of high-skilled workers (Solon, Barsky, and Parker, 1994)and that immigrants, on average, are less skilled than natives (Betts and Lofstrom,1998; Smith and Edmonston, 1997). Therefore, the effect of local economic condi-tions on program participation may differ between immigrants and natives.

In this paper, we examine the potential impact of welfare reform on governmentprogram participation among immigrants, explicitly taking into account changingeconomic conditions. Relying on national survey data, we provide evidence thatparticipation in many different government programs declined more for the broadpopulation of immigrants than for natives. However, once economic conditions aretaken into account, much of these initial differences disappear. Despite these reduc-tions, we still find that welfare reform is associated with a statistically significantdecline in Food Stamp participation among the population of all immigrants and astatistically significant decline in AFDC/TANF, Food Stamps, and SSI among thepopulation of non-citizen immigrants.

GOVERNMENT TRANSFER PROGRAMS AND IMMIGRANTS

We examine program participation in several of the major means-tested programsin the United States, where means-tested refers to programs for which eligibility isdetermined by the financial status of the household. These programs are summa-rized in Table 1. Two programs provide the vast majority of cash assistance to thepoor: Supplementary Security Income (SSI) and TANF, formerly AFDC.

3 Lofstrom and Bean (2002) independently examined the same questions that we examine here. Our con-clusions are consistent with their conclusions. Kaestner and Kaushal (in press) include economic con-ditions in their study of the impact of welfare reform on immigrants, but they assume that the economyaffects immigrants and natives similarly.4 Blank (2003) provides a useful review of the studies that examine the AFDC/TANF caseload decline.Currie and Grogger (2001), Figlio, Gunderson, and Ziliak (2000), and Wallace and Blank (1999) exam-ine the food stamp caseload decline. 5 Estimate calculated by the authors using the 2000 March CPS.

Immigrants, Welfare Reform, and the Economy / 747

Tab

le 1

. F

eder

al t

ran

sfer

pro

gram

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mm

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Pro

gram

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tion

1998

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ges

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ally

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tin

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lion

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ent

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end

ent

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ssis

tan

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rim

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bar

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ent

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ild

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ary

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nce

fo

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ngl

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oth

ers

wit

h c

hil

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n;

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igra

nts

fro

m r

ecei

vin

g TA

NF

for

to N

eed

y F

amil

ies

AF

DC

rep

lace

d b

y TA

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in

199

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ve y

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ls.


AFDC/TANF is targeted largely at low-income single mothers, and SSI is targeted atthe disabled and low-income elderly.

There are several in-kind transfer programs that supplement a family’s basicneeds of medical care, food, and housing. Medicaid is the largest in-kind transferprogram, accounting for nearly half of all expenditures on social programs. Medic-aid provides medical care to low-income individuals who are blind, disabled, oraged, and to poor families with children. The Food Stamp Program and the SchoolLunch Program provide direct food assistance to low-income families. The FoodStamp Program provides low-income families coupons or debit cards that can beused to purchase food. The School Lunch Program provides children free orreduced-price lunches at school. While the cost of the School Lunch Program issmall relative to most means-tested programs, 25.9 million students participated inthe program on any given day in 1996, which represented 52 percent of all school-aged children (ages 5 to 17) in the United States (Committee on Ways and Means,1998). Assistance with housing is provided primarily through rental subsidies andpublic housing.

Some of these assistance programs were changed fundamentally during the1990s. The most notable legislation was the Personal Responsibility and WorkOpportunity Reconciliation Act (PRWORA) of 1996, which changed the nation’smajor welfare programs along three key dimensions. First, PRWORA replaced afederal guarantee of income support for the poor with a program funded throughblock grants that provided states significantly more flexibility in the design of pro-grams. Second, the legislation strengthened work requirements, particularly forTANF. Third, benefits were made subject to lifetime time limits.

In addition to these broad changes, a number of legislative changes at the federal,state, and even local level restricted immigrants’ access to means-tested benefits.Determining immigrant eligibility at any specific place and time is difficult becauseof the variation in policies across states and time. We sketch the major policychanges here and provide a summary in the final column of Table 1.6

PRWORA altered policy toward immigrants in several important ways. First, thelegislation drew a distinction between the eligibility of citizens and non-citizens andbetween “pre-enactment immigrants” (those arriving before August 22, 1996) and“post-enactment immigrants.” Post-enactment immigrants were largely barred fromreceiving federal assistance for their first 5 years in the country. Second, the legisla-tion strengthened the requirement for various programs to attribute the income of animmigrant’s U.S. sponsor to the immigrant for purposes of determining program eli-gibility. Third, PRWORA instructed states to choose whether to cover pre-enactmentimmigrants (and post-enactment immigrants who have been in the country for morethan 5 years) under Medicaid and TANF. When given the option, nearly all stateschose to cover immigrants under federally funded programs (Fix and Zimmerman,1999; Zimmerman and Tumlin, 1999; Zimmerman, Tumlin, and Ost, 1999).7

While they have the option of providing state-funded programs for immigrantsineligible under federal law (generally post-enactment immigrants who have beenin the country for less than five years), few states offer a comprehensive set of pro-

6 For more detail, see Zimmerman and Tumlin (1999) and Zimmerman, Tumlin, and Ost (1999).7 In addition, military personnel, regardless of citizenship status, and refugees are categorically eligiblefor TANF and Medicaid only for the first seven years; after that period, states have the option of cover-ing them. Pre-enactment immigrants with more than 40 quarters of work are categorically eligible forfederal means-tested programs.


grams. Of the four major types of assistance—Food Stamps, SSI, TANF, and Med-icaid—28 states have committed to providing at least one substitute program, 15have created at least two, 10 provide at least three, and two have all four (Zimmer-man and Tumlin, 1999). Of the six largest immigrant-receiving states, four provideno substitute programs, and only California provides all four.

Two subsequent laws restored eligibility to some immigrants. The Balanced Bud-get Act (BBA) of 1997 mandated the continuation of SSI and Medicaid to all legalimmigrants who were receiving SSI on August 22, 1996. BBA of 1997 also restoredeligibility to all pre-enactment needy and disabled immigrants. The AgricultureResearch, Extension, and Education Reform Act (AREERA) of 1998 restored FoodStamp eligibility to pre-enactment immigrants receiving payments or assistance forblindness or disability, those who were 65 years or older on August 22, 1996, andpre-enactment immigrants who were minors. Close to one-third of immigrants whohad lost Food Stamp benefits under the 1996 law had their benefits restored in 1998(Carmody and Dean, 1998). Most post-enactment immigrants remain ineligible forFood Stamps during the period we examine.8

Public housing, rental subsidies, and school lunch programs were not directlyaffected by the PRWORA legislation. However, participation in these programs couldbe affected by welfare reform through at least two channels. First, it was claimedthat the reforms had a “chilling effect” on participation among immigrants, even forprograms for which they retained eligibility. Fearful of deportation and perhaps mis-informed about the reforms, immigrants may have refrained from enrolling in anygovernment assistance programs. Second, there could be indirect effects ofPRWORA on participation in these other programs. For example, immigrants mayreduce their use of the unaffected programs if the decision to participate in one pro-gram facilitates the participation in another. Alternatively, immigrants may increasetheir participation in programs for which they are still eligible if the exclusion fromAFDC/TANF, SSI, and Food Stamps increases their need for assistance.

In sum, there were significant restrictions placed on immigrants by the 1996reforms. However, some of these restrictions were overturned at the federal leveland others were effectively undone by state policy. Whether policy changes acrossthe nation may have differentially affected immigrants’ and natives’ program use isthe question to which we now turn.

THE DATA

We use the March Current Population Survey (CPS) for our analysis. The CPS is asurvey of approximately 57,000 households across the United States in each yearand is used by the U.S. Census Bureau to calculate the official statistics on incomeand poverty. The data contain detailed questions about demographic characteristics(age, sex, marital status, and nativity), labor force status (employment status, earn-ings last year), household income, and most importantly for this study, participa-tion in government assistance programs. The first year that the March CPS beganasking respondents their nativity was 1994; therefore, we use the 1994 to 2002 sur-veys.9 The March survey asks about income and program participation in the pre-

8 The 2002 Farm Bill reinstated food stamp eligibility for immigrants who have resided in the UnitedStates for at least five years, and for all immigrant children and disabled individuals.9 Passel (1996) describes potential problems with the immigrant sample in the 1994 CPS. We re-esti-mated our tabulations excluding the data from 1994 and none of the substantive results changed.


vious calendar year, implying that our sample contains participation informationfor the period 1993 to 2001.

The household is our unit of analysis. A household is considered to be participat-ing in a particular government transfer program if anyone in the household receivesassistance from that program, and a household is identified as “immigrant” if thehouseholder was born outside of the United States or its territories and not bornabroad of American parents. In total, our sample includes 443,754 households forthe 9 sample years. Our central conclusions are unchanged when we instead use theindividual as the unit of analysis.10

Despite the fact that the CPS collects information on citizenship status and thereform policies differentiate between citizens and non-citizens, we do not considerthis distinction for our main analysis for three reasons. First, the citizenship statusdata may be of questionable accuracy. Specifically, the U.S. Census Bureau under-took an evaluation of the exact questions used in this study by completing in-depthinterviews. This evaluation concludes that many non-citizens show some reluctanceto answering the citizenship question (Wellens, 2001). Moreover, it has been shownthat CPS estimates of the number of naturalized citizens are approximately 40 per-cent too high, and important for our purposes, this percentage has changed overtime (Schmidley and Robinson, 1998).11 Second, it has been argued that thereforms had a much broader “chilling” effect than on those immigrants on whom itwas focused (Fix and Passel, 1999). Third, previous authors have argued thatPRWORA could cause some non-citizen immigrants to naturalize so that they couldretain their benefits. To the extent that welfare reform caused immigrants tobecome naturalized citizens, we would overstate the impact of the reforms byfocusing on non-citizens. However, given the potential importance of thecitizen/non-citizen distinction for immigrants, we present results that differentiateimmigrants by citizenship status as a sensitivity check on our main results.

More generally, distinguishing between citizen and non-citizen immigrants maynot be sufficient if we were examining whether welfare reform differentiallyimpacted any immigrants. For example, the restrictions imply that pre-enactmentimmigrants should not be excluded from certain programs, and the restrictions arelikely to be irrelevant to highly educated non-citizen immigrants who obtained awork visa through a U.S. employer. Grouping such unaffected immigrants togetherwith potentially affected immigrants dilutes any impact of welfare reform, makingthe impact more difficult to detect statistically. However, the primary purpose ofour study is to examine whether ignoring economic conditions matters in theassessment of differential declines. We choose to examine the impact of welfarereform on the broad population of immigrants because it provides a well-defined

10 To test the robustness of the results we re-estimated the models reported in Table 3 for AFDC/TANFusing the individual as the unit of analyses. The coefficient on “post-reform*immigrant” is –0.8462(0.0727 standard error) when economic conditions are not adjusted (model [1]). But when economic con-ditions are in fact accounted for, the coefficient estimate becomes very small and insignificant: –0.0786(standard error of 0.0989). Therefore, using the individual as opposed to the household as the unit ofanalysis does not alter the conclusions. One program where the distinction could be important is the Med-icaid program because there was an expansion of benefits for children during the same time period.11 Other researchers have also been concerned about the quality of the self-reported data on immigrationstatus. Specifically, Van Hook and Bean (1998) state, “Data obtained from survey items about legal statusmay be highly questionable if not worthless because unauthorized immigrants wishing to escape detec-tion may be less willing to reveal their status in interviews and/or questionnaires (page 511).” Althoughtheir comment addresses reports of legal status and not citizenship, it seems highly likely that someundocumented immigrants might claim to be citizens for the same reasons.


population on which to study the role of the economy and it will indicate whetherthere were broad impacts of welfare reform.

EMPIRICAL ANALYSIS

Many of the papers that examine the impact of welfare reform attempt to identifythe causal impact of various component policies (e.g., Grogger, 2003; Schoeni andBlank, 2000), and the difficulties with such studies are well known (Moffitt and VerPloeg, 2001). The focus of our study is different. We examine whether there existdifferential declines in program participation between U.S.-born and immigranthouseholds, above and beyond the differences that can be explained by the econ-omy. If economic conditions can account for the fact that program participationhas fallen faster for immigrants than natives, then perhaps welfare reform did notaffect immigrants any more than natives.

We begin by estimating participation in each of seven major government transferprograms. These participation rates are computed for all households. Estimates arereported separately for immigrants and natives during the period prior to reform(1993 to 1995) and the period after reform (1997 to 2001). Data for the year thatreform was adopted (1996) is dropped from all analyses in order to make a cleanerbefore-and-after comparison. We then turn to a multivariate analysis to examinethe extent to which economic conditions can explain the different pattern of pro-gram participation for immigrants and natives.

Did Program Participation Fall Faster for Immigrants?

Turning to the participation rates in Table 2, Medicaid was the most common pro-gram for immigrants before reform, with a participation rate of 20.7 percent.School Lunch (17.4 percent) and Food Stamps (12.3 percent) had the next highestparticipation rates. The two programs that provide direct cash assistance,AFDC/TANF and SSI, and the housing assistance program had the lowest partici-pation rates. Just over 33 percent of all immigrant households participated in atleast one of the seven government assistance programs we analyze. For each of theseven programs, participation was higher for immigrants than natives prior toreform.

Immigrant participation declined for all programs following reform. This findingis notable given that immigrant provisions for two of the programs, public housingand rental subsidies, were not changed as part of the 1996 reforms (see Table 1).12

The largest declines for immigrants in percentage terms (see column 4 of Table 2)were for AFDC/TANF and Food Stamps, arguably the two programs for which themost stringent immigrant provisions were adopted. Across all programs combined,immigrant participation dropped by 1.98 percentage points or 6.0 percent.

Participation among natives also declined following reform. The largest declineswere in AFDC/TANF (2.28 percentage points or 48.8 percent) and Food Stamps(2.88 percentage points or 33.5 percent). Participation in any of the seven programsdeclined from 19.8 percent to 18.6 percent following the 1996 reforms.

The focus of the study is the decline in participation among immigrants relativeto natives. There is some ambiguity whether these comparisons should be made

12 New reporting requirements were introduced by the 1996 reforms for post-enactment immigrants whoare barred from other federally funded means-tested programs living in publicly subsidized housing.


Tab

le 2

. P

rogr

am p

arti

cip

atio

n f

or i

mm

igra

nts

an

d n

ativ

es b

efor

e an

d a

fter

ref

orm

.

“Bef

ore

refo

rm”

refe

rs t

o th

e p

erio

d 1

993–

1995

an

d “

afte

r re

form

” re

fere

s to

199

7–20

01.

Th

e C

PS

per

son

wei

ghts

are

use

d t

o ca

lcu

late

all

est

imat

es.


with respect to percentage point changes (columns 3 and 7) or percent changes(columns 4 and 8), so we present both comparisons (columns 9 and 10). Becausethe results are similar for both comparisons, we focus on the percentage pointcomparisons in column 9.

Immigrants experienced larger declines than natives for the programs in whichsignificant restrictions were imposed on immigrants. The decline in AFDC/TANFparticipation was more than one full percentage point larger for immigrants thannatives (3.62 versus 2.28). In addition, Food Stamp participation declined by 2.88percentage points among natives, while the decline was 5.33 percentage points forimmigrants. SSI participation increased slightly among natives (by 0.13 percentagepoints), but fell by 0.53 percentage points among immigrants. These results are con-sistent with the hypothesis that welfare reform and/or changes in the political envi-ronment caused immigrants to participate less in assistance programs.13

As an initial investigation into the potential role of labor market factors, Table 2reports information on employment, earnings, and local labor market conditionsfor immigrants and natives. We measure local labor market conditions with theunemployment rate in the state in which the person lives. Employment rates weresimilar for immigrants and natives prior to reform, although immigrants had lowerearnings and higher poverty. Importantly, employment and earnings improvedmore for immigrants than for natives during this period. For example, while thepercent working was 71.3 among both natives and immigrants prior to reform, therate fell to 71.1 percent among natives and increased to 74.0 percent among immi-grants (a statistically significant increase at the 0.01 level). In addition, local labormarket conditions improved more in the labor markets in which immigrants livedthan in the labor markets where natives live—whereas the state unemployment ratefacing immigrants improved by 2.19 percentage points between the two periods, therate facing natives improved by 1.67 percentage points. This evidence, combinedwith the literature on the use of means-tested programs, indicates that any inter-pretation of a differential decline in program participation must take into accountthe role of economic conditions.

Can Economic Conditions Explain the Differential Decline?

We now move to a regression framework to directly consider the relationshipbetween program participation and the economy. To do this, we regress programparticipation on a measure of the policy regime and economic conditions, allowingthe impact to differ between immigrants and natives.

Formally, let Pits be an indicator variable for whether the family participates in aparticular program, Iits be an indicator variable for whether the household head isan immigrant, and Rits be an indicator variable for whether the observation is fromthe period after welfare reform was adopted. That is, RRits equals 1 during the

13 It has been documented that the CPS respondents under-report welfare participation, and that under-reporting increased between the mid- and late 1990s (Bavier, 2000). If under-reporting increased morefor immigrants, it could explain the fact that the decline in reported participation was smaller fornatives. We are aware of no empirical evidence suggesting that under-reporting increased more forimmigrants than natives. However, given the heightened concern about immigrants’ use of governmenttransfer programs, our priors would suggest that under-reporting may have increased more for immi-grants than natives because immigrants would be reluctant to report that they used these services afterreforms were adopted. If this were the case, it would imply that the difference in true program partici-pation is smaller than reported differences.


1997–2001 period and 0 during the 1993–95 period. All variables refer to the ithhousehold in the tth year in the sth state. We estimate a linear probability model tomimic the difference-in-difference approach in Table 2,

Pits � RitsβR � IitsβI � (Iits * Rits)βIR � Xits βX � δs � εits (Eq. 1)

where Xits is a vector of other household characteristics (age, sex, marital status,race, and education) and δ s is a state fixed effect.14 The main coefficient of interestis βIR, which measures the decline in program participation from before to afterwelfare reform for immigrants as compared to natives; a negative coefficient indi-cates that immigrants experienced a larger decline.

To determine the role of local labor market factors, we augment model 1 in twoways. First, we include a direct measure of local economic conditions (model 2). Tothe extent that immigrants lived in labor markets that experienced larger improve-ments, we would expect the magnitude of βIR to increase (i.e., become less nega-tive). Second, we interact the local area economic conditions with the immigrantindicator, Iits (model 3). To the extent that immigrants are more responsive tochanges in economic conditions, then we would expect the magnitude of βIR toincrease further. Following the existing literature on program participation, we usethe state unemployment rate as the measure of economic conditions.

In Table 3, we present the results for all three models for each of the seven pro-grams. The post-reform coefficient (βR) in model 1 is negative for all programsexcept SSI and Medicaid, verifying that program participation for nativesdeclined with the reforms even after controlling for state fixed effects and socio-demographic factors. For example, the baseline model for AFDC/TANF impliesthat welfare participation declined by 2.218 percentage points from before to afterreform. In addition, the immigrant coefficient (β I) is positive and significant forall programs except public housing and rental subsidies, implying that immi-grants have higher participation rates than natives even after adjusting for demo-graphic factors.

The focus of our paper is the decline in participation for immigrants relative tonatives, measured by βIR. In the baseline models where we control only for demo-graphic characteristics and state fixed effects, immigrants experience statisticallysignificant larger declines in four of seven programs (AFDC/TANF, SSI, FoodStamps, and Medicaid).

Moving from model 1 to model 2, we add a control for the unemployment rate.For every program except Medicaid and public housing, the unemployment rateenters positively and significantly, consistent with virtually all of the prior researchon program participation (e.g., CEA, 1997, 1999; Ziliak et al., 2000). Moreover, sim-ply adding the unemployment rate reduces the change in participation substantiallyacross most programs. For example, the decline in AFDC/TANF participation thatis associated with reform (βR) falls from –2.218 to –1.498. That is, about one-thirdof the fall in welfare participation following reform can be accounted for by eco-nomic conditions. The results suggest that economic conditions similarly accountfor about one third of the fall in Food Stamps participation. These findings are con-

14 Age is included in linear form, with the sample mean of the heads’ age (48.6) subtracted from thehead’s age. Marital status is represented by an indicator for whether the person is married, sex is repre-sented by an indicator for being female, race is represented by an indicator for being black, and educa-tion is represented by two indicator variables, one for having less than 12 years of school and one forhaving exactly 12 years of schooling.


Tab

le 3

. L

inea

r p

rob

abil

ity

mod

els

of p

rogr

am p

arti

cip

atio

n.

Coe

ffic

ien

ts a

nd

sta

nd

ard

err

ors

are

mu

ltip

lied

by

100.

“P

ost-

refo

rm”

refe

rs t

o th

e p

erio

d 1

997–

2001

. A

ll r

egre

ssio

ns

incl

ud

e ag

e, a

gen

der

in

dic

ator

,a

mar

riag

e in

dic

ator

, an

in

dic

ator

for

bei

ng

bla

ck,

ind

icat

ors

for

edu

cati

on l

ess

than

12

year

s an

d 1

2 ye

ars,

an

d s

tate

fix

ed e

ffec

ts.

Sta

nd

ard

err

ors

are

rep

orte

d i

n p

aren

thes

es.

* an

d *

* in

dic

ate

stat

isti

cal

sign

ific

ance

at

the

0.05

an

d 0

.01

leve

ls,

resp

ecti

vely

.


sistent with other studies that attempt to account for the decline in welfare case-loads in the 1990s (e.g., CEA, 1999).

The estimates in model 2 also demonstrate that a modest share of the differencein participation between immigrants and natives can be explained by immigrantsliving in areas with less favorable labor markets. That is, the gap in AFDC/TANFparticipation between immigrants and natives of 0.821 percentage points declinesto 0.684 percentage points once we control for economic conditions.

Turning to our focus on the relative decline of immigrants versus natives, includ-ing the state unemployment rate in the model reduces the relative decline of pro-gram participation for immigrants in almost every case. For example, considerAFDC/TANF. Without controlling for the unemployment rate, the estimate impliesthat program participation declined by 1.714 more for immigrants than for natives.However, after including the unemployment rate in the model, the additionaldecline for immigrants shrinks by 13 percent (to –1.495). For Food Stamps and SSI,the immigrant differential was reduced by 9 and 11 percent, respectively.

In model 3, we interact the unemployment rate with immigrant status. In everycase, the coefficient on the interaction is positive and significant. That is, partici-pation in government assistance programs by immigrants is more sensitive to fluc-tuations in the economy. This finding is consistent with the fact that immigrants aredisproportionately concentrated among individuals with low education.

The addition of the interaction has a substantial impact on the measured relativedecline for immigrants. In fact, β IR is not negative and statistically significant forsix of the seven programs in model 3, implying that immigrant participation did notdecline relative to natives once differential sensitivity between immigrants andnatives to economic fluctuations is accounted for. For example, β IR is –1.714 forAFDC/TANF in model 1, drops to –1.495 when the direct effect of economic condi-tions is included, and then to –0.297 (and statistically insignificant) when the inter-action is included. The only exception to this finding is Food Stamps, where theresults indicate that immigrant participation declined faster than native participa-tion. However, accounting for economic conditions still reduced the estimated dif-ferential from 3.289 to 1.867 percentage points.

Sensitivity Analysis

In Table 4, we present a similar set of results as those in Table 3, but now we dis-tinguish between citizens and non-citizens immigrants. Again, the benefit of distin-guishing between the two groups is that the 1996 immigrant programmatic changeswere targeted at non-citizens, but the drawback is that citizenship is often misre-ported and the focus on non-citizens could overlook important impacts because ofnaturalization and spillovers to the citizen immigrant population.

For most programs, participation is higher for non-citizens than for citizens.Moreover, the especially large declines among immigrants documented in Table 3are experienced exclusively by non-citizens, and the declines for citizen immigrantsrelative to natives are not larger for any of the programs. This latter finding isinconsistent with there being a “chilling effect” of the restrictions on citizen immi-grants. Despite these differences, the economy still explains a large portion of thedifferential decline among non-citizens for most programs. For Medicaid, rentalsubsidies, and School Lunch, the significant larger decline for non-citizens inmodel 1 is eliminated in model 3. For AFDC/TANF, 75 percent of the differential iseliminated moving from model 1 to model 3 (i.e., from –3.213 to –0.744). The onlyexception is SSI, where the decline between model 1 and model 3 is a modest 5 per-


Tab

le 4

. S

ensi

tivi

ty a

nal

ysis

for

cit

izen

ship

sta

tus.

Coe

ffic

ien

ts a

nd

sta

nd

ard

err

ors

are

mu

ltip

lied

by

100.

“P

ost-

refo

rm”

refe

rs t

o th

e p

erio

d 1

997–

2001

. A

ll r

egre

ssio

ns

incl

ud

e ag

e, a

gen

der

in

dic

ator

,a

mar

riag

e in

dic

ator

, an

in

dic

ator

for

bei

ng

bla

ck,

ind

icat

ors

for

edu

cati

on l

ess

than

12

year

s, a

nd

sta

te f

ixed

eff

ects

. S

tan

dar

d e

rror

s ar

e re

por

ted

in

par

enth

eses

. *

and

**

ind

icat

e st

atis

tica

l si

gnif

ican

ce a

t th

e 0.

05 a

nd

0.0

1 le

vels

, re

spec

tive

ly.


cent (–2.358 to –2.242). However, even though economic conditions can account fora large share of the uniquely large decline for non-citizens across most programs,the decline continues to be statistically significantly greater for non-citizens thannatives in model 3 for AFDC/TANF, Food Stamps, and SSI.

In Table 5, we examine the sensitivity of our results to alternative specificationsfor economic conditions (Haider, Klerman, and Roth, 2003; Klerman and Haider, inpress). We present results similar to those reported in Table 3, but we also includethe state employment growth rate and lags in the state unemployment rate. We onlyshow results for AFDC/TANF, although the substantive findings are similar for otherprograms. All of these alternative specifications lead to similar conclusions: includ-ing richer measures of the economy serves to further reduce the differential declinebetween immigrants and natives, but the further reductions are modest in size.

The specification in model 1 in Table 3 does not examine dynamic adjustmentsthat may have taken place following the 1996 reforms. For example, was there alarge one-time change in immigrants’ participation (relative to natives) in 1997? Or,was there a gradual change over the 1997 to 2001 period?15 Table 5 examines thisissue by presenting models that include individual-year effects for 1997, 1998, 1999,2000, and 2001, and these year effects are allowed to vary between immigrants andnatives. The results suggest that the impact of the policy reforms on the participa-tion differential increases over time. Once again, controlling for economic condi-tions reduces the differential declines.

As a final sensitivity analysis, we examine the extent to which the differentialdecline is due to California, as was shown by Borjas (2000). California is home toalmost one-third of all immigrants, and thus, any change in California will heavilyinfluence national trends. We examine whether the trends in California are distinctfrom the trends in the rest of the nation by expanding the models reported in Table3. Specifically, we allow βR, β I, and β IR to be different in California by interactingthe three respective variables with an indicator for whether the CPS sample mem-ber lives in California. Table 6 shows the estimates from these models for the fourprograms most affected by welfare reform.

Turning straight to the results on the differential decline, we continue to find thatlocal economic conditions account for much of the large decline for immigrants rel-ative to natives. For example, outside of California, AFDC/TANF participation fellby 1.187 percentage points more for immigrants than natives (model 1 in Table 6).But after controlling for economic conditions this gap is reduced by one-third (to0.824 percentage points). Similarly, the relative decline in Food Stamps outside Cal-ifornia falls by one-third once economic conditions are fully accounted for (i.e.,from –3.303 in model 1 to –2.299 in model 3). The one program for which thedecline was especially large for immigrants in California was AFDC/TANF (estimateof –1.862 in model 1). Although this estimate is reduced once economic conditionsare adjusted in model 3, the gap is still large and statistically significant.

SUMMARY AND INTERPRETATION

Tensions over immigration policy typically intensify when unemployment is highand wages are stagnant. These conditions existed in the United States in the early1990s and likely contributed to the federal government adopting restrictions on the

15 Another reason why the effects might change over time is that the proportion of immigrants whoarrived after enactment is increasing over time.


Tab

le 5

. S

ensi

tivi

ty a

nal

ysis

for

AF

DC

/TA

NF

pro

gram

par

tici

pat

ion

.

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nd

ard

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ors

are

mu

ltip

lied

by

100.

“P

ost-

refo

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erio

d 1

997–

2001

. B

ase

A r

efer

s to

th

e A

FD

C/T

AN

F r

esu

lts

from

Tab

le 3

, co

lum

n 2

; B

ase

B r

efer

s to

th

e re

sult

s fr

om T

able

3,

colu

mn

3.

All

reg

ress

ion

s in

clu

de

age,

a g

end

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icat

or,

a m

arri

age

ind

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or,

an i

nd

i-ca

tor

for

bei

ng

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ck,

ind

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ors

for

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cati

on l

ess

than

12

year

s, a

nd

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te f

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eff

ects

. “Y

es”

ind

icat

es t

hat

th

e gi

ven

var

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s in

clu

ded

in

th

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odel

. S

tan

dar

d e

rror

s ar

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. *

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t th

e .0

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01 l

evel

s, r

esp

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vely

.


Tab

le 6

. S

ensi

tivi

ty a

nal

ysis

for

Cal

ifor

nia

.

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ffic

ien

ts a

nd

sta

nd

ard

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ors

are

mu

ltip

lied

by

100.

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d 1

997–

2001

. B

ase

A r

efer

s to

th

e A

FD

C/T

AN

F r

esu

lts

from

Tab

le 3

, C

olu

mn

2;

Bas

e B

ref

ers

to t

he

resu

lts

from

Tab

le 3

, co

lum

n 3

. A

ll r

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ssio

ns

incl

ud

e ag

e, a

gen

der

in

dic

ator

, a

mar

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e in

dic

ator

, an

in

di-

cato

r fo

r b

ein

g b

lack

, in

dic

ator

s fo

r ed

uca

tion

les

s th

an 1

2 ye

ars,

an

d s

tate

fix

ed e

ffec

ts.

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nd

ard

err

ors

are

rep

orte

d i

n p

aren

thes

es.

* an

d *

* in

di-

cate

sta

tist

ical

sig

nif

ican

ce a

t th

e 0.

05 a

nd

0.0

1 le

vels

, re

spec

tive

ly.


eligibility of immigrants for government social services. The goal of this paper wasto examine whether welfare reform may have had a differential impact on immi-grants, explicitly taking into account the changing economic conditions over the1990s. We find that immigrants’ participation in some transfer programs declined,and more importantly, declined more sharply than for natives. However, we findthat much of the greater decline among immigrants can be explained by changingmacroeconomic conditions. Specifically, for several programs, there is no evidencethat participation by immigrants declined faster than for natives once we accountfor economic conditions. These conclusions are strengthened by the fact that otherresearch has reached similar conclusions (Lofstrom and Bean, 2002).

Given the severity of the restrictions placed on immigrants in 1996, the naturalquestion to ask is why immigrants did not experience even larger relative declines.There are several possibilities. First, subsequent federal legislation (BBA of 1997and the AREERA of 1998) reversed some of the restrictions. In addition, manystates adopted policies to continue benefits to non-citizen immigrants. Second, nat-uralization was an option for some immigrants. Citizens are less limited in theiraccess to services, providing an incentive for non-citizens to become citizens. Infact, the share of foreign-born adults 18 and over who were naturalized rose from40 to 45 percent between March 1996 and March 1997, months that straddled thepassage of PRWORA (Johnson et al., 1999). Third, eligibility restrictions may nothave affected whether households received any payment, but rather the amount ofthe payment. That is, even if adults lost eligibility, the majority of children in immi-grant-headed households are themselves citizens (Fix and Zimmerman, 1999).Fourth, and provocatively, some of the empirical evidence is consistent with theshifting, rather than the bundling, hypothesis. In particular, having lost—or thoughtthey lost—eligibility for Food Stamps, immigrants may have been more likely tohave their children enroll in the School Lunch Program.

Finally, eligibility restrictions may not have affected whether households receivedany payment but rather the amount of the payment. That is, even if adults lost eli-gibility, children in the household could remain eligible.16

A final potential explanation for why we do not find differential declines amongimmigrants is that we have focused on a population that is too broad. In particular,we focused on the impact of the reforms on all immigrant households, despite thefact that some immigrant households were not differentially affected by thereforms. When we instead examine the impact on non-citizen immigrants, we findthat participation in AFDC/TANF, SSI, and Food Stamps fell faster than natives fol-lowing reform even after accounting for economic factors. These results suggestthat certain sub-groups of immigrants may have been substantially affected by thereforms, and thus, the experiences of the relevant subgroups should be evaluatedfurther.

The conclusions of the study are in part driven by the fact that immigrants’employment and program participation fluctuates more closely with the businesscycle. When the economy expanded by record levels in the mid- to late 1990s, immi-grants reaped large gains. While this heightened sensitivity is beneficial during

16 U.S. Department of Health and Human Services and U.S. Department of Agriculture guidelines forTANF, Food Stamps, Medicaid, and SCHIP eligibility determination make clear that asking about the cit-izenship and immigration status of designated “non-applicant” members of a household is not required,and that doing so may violate applicants’ civil rights under Title VI of the 1964 Civil Rights Act. Theseguidelines were issued in September 2000.


expansions, it also implies that during the recent economic downturn participationmay have increased more among immigrants than among natives. Thus, theseresults also suggest that further evaluation of program participation using data dur-ing the recent recessionary period is also needed.

Haider gratefully acknowledges the U.S. Department of Health and Human Services forgrant support under which part of this work was completed (#00ASPE353A). The opinionsand conclusions expressed herein are solely those of the authors and should not be construedas representing the opinions or policy of any of the sponsors or related agencies.

STEVEN J. HAIDER is an Assistant Professor at Michigan State University.

ROBERT F. SCHOENI is a Research Associate Professor at the Institute for SocialResearch and an Associate Professor of Economics and Public Policy at the Universityof Michigan.

YUHUA BAO is a Health Economist at the University of California, Los Angeles.

CAROLINE DANIELSON is a Research Analyst at the University of California, Officeof the President.

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Betts, J., & Lofstrom, M. (1998). The educational attainment of immigrants: Trends and impli-cations, Working Paper No. W6757. Cambridge, MA: National Bureau of EconomicResearch.

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Documents

Immigrants, welfare reform, and the economyhaider/Research/2004-jpam-hsbd.pdf · Kaestner and Kaushal (in press) include economic con-ditions in their study of the impact of welfare