Welfare Reform and the Decline of Work

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A recent paper suggests that over the past two decades there’s been a decline in the desire of people outside the labor force to ever get jobs. Why?

We conjecture that two mechanisms could explain these results. First, the EITC expansion raised family income and reduced secondary earners’s (typically women) incentives to work. Second, the strong work requirements introduced by the AFDC/TANF reform would have, through a kind of “sink or swim” experience, left the “weaker” welfare recipients without welfare and pushed them away from the labor force and possibly into disability insurance.

This comes via Tyler Cowen, who attended an NBER session this morning conducted by the authors of this study. He came away thinking they probably hadn’t made a strong case. Still, an interesting hypothesis that probably deserves followup.

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