The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was signed into law in 1996 and fully implemented in 1997. PRWORA, which replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance to Needy Families (TANF), dramatically altered the welfare program in this country in several important ways. First, low-income levels no longer guarantee access to welfare benefits. Second, there is now a 60-month limit on the receipt of federal benefits. Third, most adult recipients must now engage in work-related activities to maintain their welfare eligibility. Finally, states now receive a grant of fixed size to fund their welfare programs, and federal funding levels are tied to their success in moving welfare recipients into work. This dramatic overhaul of the welfare system occurred during a time of economic prosperity and was followed by unprecedented caseload declines and increased work participation among TANF recipients.²

However, post-2000, caseload decline slowed and work participation rates among TANF recipients fell.³ Nonetheless, after a series of extensions, the U.S. Congress reauthorized the TANF program in February 2006 with the passage of the Deficit Reduction Act of 2005. This legislation placed more pressure on states to move TANF recipients into employment and extended the TANF block grant through 2010 with fixed funding levels.

This report examines whether participation in TANF increased and whether employment decreased as a result of the economic recession. It also compares participation in other assistance programs across families based on welfare and poverty status before and during the economic recession. Finally, this report assesses whether there were different reasons for a reduction or cut in welfare benefits before and after the start of the economic recession.

The data in this report were collected from October 2005 to September 2006 in Waves 6–8 of the 2004 Survey of Income and Program Participation (SIPP) and from September 2008 to August 2009 in Waves 1–3 of the 2008 SIPP. The population represented (population universe) is the civilian noninstitutionalized population living in the United States. This longitudinal survey follows the same individuals over time.⁴ The SIPP is conducted in waves of 4 months duration, with one-quarter of sample members interviewed in each month of a wave. Sample members are asked about activities during the 4 months prior to the interview, which is known as the “reference period.”⁵

This report uses data collected from the core questionnaire in Waves 6–8 of the 2004 SIPP Panel and Waves 1–3 of the 2008 SIPP Panel. The core questionnaire collects labor force, income, and program participation data and is repeated at each interview wave. Additionally, this report makes use of data from the Welfare Reform topical module, which was administered in Wave 8 of the 2004 SIPP Panel and Wave 3 of the 2008 SIPP Panel. The Welfare Reform topical module questionnaire, asked during a single wave in each of the SIPP panels, provides more detailed information on topics such as benefits, assistance that supports seeking work or acquiring training, requirements for receiving benefits, previous receipt of welfare benefits, reasons for a reduction in benefits, and reasons for no longer receiving benefits.⁶

Table 1 shows the interview months and corresponding reference periods for each of the four rotation groups for Waves 6–8 in the 2004 SIPP Panel and for Waves 1–3 of the 2008 SIPP Panel. This report examines respondents’ activities across the 12 months prior to their Wave 8 (2004 SIPP) or Wave 3 (2008 SIPP) interview. The 12-month observation period for each rotation group is highlighted in Table 1. While the observation period includes months from 2005 and 2006 (2004 SIPP) or from 2008 and 2009 (2008 SIPP), results are labeled as “2006” and “2009,” respectively, corresponding to the year in which the Welfare Reform topical module questionnaire was administered.

In addition to comparing the economic circumstances of families before and after the impact of the economic recession (2006 and 2009, respectively), this report examines differences across several family types based on TANF and poverty status—looking exclusively at families with children under the age of 18. “TANF families” are defined, for this report, as those that received TANF in one or more of the past 12 months. “Poor non-TANF families” are those that did not receive TANF in any of the past 12 months and whose average income-to-poverty ratio over the past 12 months was less than 1.0.⁷ “Other non-TANF families” are those that did not receive TANF in any of the past 12 months and whose average income-to-poverty ratio over the past 12 months was greater than or equal to 1.0.

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¹ Any views expressed are those of the author and not necessarily those of the U.S. Census Bureau.

² See U.S. Department of Health and Human Services. 2009. Temporary Assistance for Needy Families Program (TANF), Eighth Annual Report to Congress. Washington, DC.

³ See Acs, Gregory and Pamela Loprest. 2007. TANF Caseload Composition and Leavers Synthesis Report. The Urban Institute: Washington, DC. Also, see The Urban Institute: Washington, DC. A Decade of Welfare Reform: Facts and Figures—Assessing the New Federalism, 2006.

⁴ The 2004 SIPP Panel followed the same individuals over a period of 48 months from October 2003 to December 2007. The 2008 SIPP Panel is currently scheduled to follow the same individuals over a period of 68 months from May 2008 to March 2014.

⁵ For more details on the interview procedures, interview waves, and rotation groups, see Chapter 2 of the SIPP User’s Guide at <www.census.gov/sipp/usrguide/ch2_nov20.pdf>.

⁶ For more information on SIPP survey content, see Chapter 3 of the SIPP User’s Guide at <www.census.gov/sipp/usrguide/ch3may4.pdf>.

⁷ Income-to-poverty ratio is equal to total family income divided by the poverty threshold for their family size. Values less than 1.0 indicate that the family is in poverty, while values greater than or equal to 1.0 indicate that the family is not in poverty. For details of poverty definition and thresholds, visit U.S. Census Bureau’s Poverty Web site at <www.census.gov/hhes/www/poverty/poverty.html>.