Association for Public Policy Analysis & Management

Panel: How Do Public Safety Net Reductions Affect Well-Being? Examining the Impact of Benefit Cuts on Health, Earnings, and Private Transfers from Family

(Poverty and Income Policy)

This panel examines the effects of reductions in the public safety net on recipient and household outcomes and the ability of families to compensate for these reductions with private transfers. The first two papers take advantage of lesser-known provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) to provide causal evidence of the effects of the modern Supplemental Security Income and Supplemental Nutrition Assistance Program on recipient outcomes. These two programs were, respectively, the 3rd and 5th largest means-tested programs during the Great Recession, yet evidence of their impact is limited. PRWORA put new restrictions on the Supplemental Security Income children's program, a rapidly expanding program for low-income children with disabilities. The first paper in this panel, “Does Welfare Inhibit Success? The Long-Term Effects of Removing Low-Income Youth from Disability Insurance” uses the PRWORA-induced change in eligibility requirements to estimate the long-term effects of removing SSI youth at the age of 18 on the level and variance of their earnings and income in adulthood. The author finds that SSI youth who are removed from the program have poor labor market outcomes---earning just $4,000 per year in adulthood with minimal earnings growth over time---and experience a large increase in the volatility of their income. PRWORA also reduced eligibility for the Supplemental Nutrition Assistance Program (formerly "Food Stamps") for immigrant families. In the second paper, "The Effect of Food Stamps on Children's Health: Evidence from Immigrants' Changing Eligibility", the author demonstrates that children who experienced these reductions during early-life suffer worse health outcomes in childhood and adolescence. Although the effects of such public safety net cuts may be mitigated by private transfers, the extent to which private resources can substitute for the role of public ones remains an open question. The final paper, “The response of the private safety net to job separation,” offers perspective on how families differ in their ability to draw on private resources. Looking at unemployment income shocks, the author shows that cash assistance to unemployed individuals from family members varies greatly depending on the demographic characteristics of the unemployed individual and their parents. These differences suggest an informal private insurance network that is heterogeneous across race and education, and puts in context the role of public insurance in providing a minimum level of insurance which informal, private networks cannot guarantee.