Immigrants, Welfare Reform, and the Economy

Transcription

1 Immigrants, Welfare Reform, and the Economy Steven J. Haider Robert F. Schoeni Yuhua Bao Caroline Danielson Abstract The welfare reform bill adopted in the United States in 1996 limited the eligibility of immigrants for several government assistance programs, and early projections estimated that nearly half of the savings associated with the reforms would come from these immigrant restrictions. Several studies have found that subsequent program participation declined more for immigrants relative to natives, seemingly verifying the early projections. However, many of these restrictions were either rescinded by the federal government or superceded by state and local policies. In this paper, we first reproduce earlier findings that show the relative declines in program use among immigrants. We then show that much, but not all, of the relative decline in program use among immigrants can be explained by changing macroeconomic conditions by the Association for Public Policy Analysis and Management. INTRODUCTION The welfare reform package that was adopted in 1996 restricted immigrant eligibility for some government transfer programs. 1 In fact, it was estimated that 44 percent of the savings that would be generated by the reforms would come from reduced assistance to immigrants (Congressional Budget Office, 1995). Several subsequent studies find that program participation fell faster for immigrants when compared to natives after 1996, leading many to conclude that welfare reform may have placed a substantial burden on immigrants. 2 Despite these findings, it is unclear whether the welfare reforms should have caused a significant reduction in government assistance for immigrants. Some of the 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 well as related policy changes and practices may be having a chilling effect on immigrants use of benefits for which they remain eligible. They report substantially larger reductions among immigrants than among natives. Fix and Passel (1999) report larger declines among non-citizens relying on the CPS. Ellwood and Ku (1998) conclude that 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. Received October 2001; review complete April 2002; revision complete July 2003; revision review complete April 2004; accepted April 2004 Journal of Policy Analysis and Management, Vol. 23, No. 4, (2004) 2004 by the Association for Public Policy Analysis and Management Published by Wiley Periodicals, Inc. Published online in Wiley InterScience ( DOI: /pam.20045

2 746 / 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 that the 1996 reforms prompted non-citizen immigrants to become U.S. citizens, allowing them to avoid being cut off from government assistance (Borjas, 2000). Another potential explanation for why immigrants and natives may experience different trends in program participation is the macro economy. 3 In a literature that developed separately from the immigrant participation literature, many studies have examined the decline in program participation in the 1990s for the general population. 4 These studies conclude that the overall decline in program participation is related to both policy changes and the robust economic expansion of the 1990s. The economic expansion could explain the differential trends in program participation between immigrants and natives for at least two reasons. First, immigrants tend to locate in specific areas of the United States, and these areas could have experienced different economic conditions as compared to the rest of the nation. 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 the native population lives in these same states. 5 The unemployment rate peaked higher than the national average in four of these states, yet partly or fully converged to the national average by Second, it is well documented that employment and earnings of low-skilled workers are more sensitive to the business cycle than the employment 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 conditions on program participation may differ between immigrants and natives. In this paper, we examine the potential impact of welfare reform on government program participation among immigrants, explicitly taking into account changing economic conditions. Relying on national survey data, we provide evidence that participation in many different government programs declined more for the broad population of immigrants than for natives. However, once economic conditions are taken into account, much of these initial differences disappear. Despite these reductions, we still find that welfare reform is associated with a statistically significant decline in Food Stamp participation among the population of all immigrants and a statistically significant decline in AFDC/TANF, Food Stamps, and SSI among the population of non-citizen immigrants. GOVERNMENT TRANSFER PROGRAMS AND IMMIGRANTS We examine program participation in several of the major means-tested programs in the United States, where means-tested refers to programs for which eligibility is determined by the financial status of the household. These programs are summarized in Table 1. Two programs provide the vast majority of cash assistance to the poor: Supplementary Security Income (SSI) and TANF, formerly AFDC. 3 Lofstrom and Bean (2002) independently examined the same questions that we examine here. Our conclusions are consistent with their conclusions. Kaestner and Kaushal (in press) include economic conditions in their study of the impact of welfare reform on immigrants, but they assume that the economy affects 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) examine the food stamp caseload decline. 5 Estimate calculated by the authors using the 2000 March CPS.

3 Immigrants, Welfare Reform, and the Economy / 747 Table 1. Federal transfer programs and immigrants. Program Description 1998 Total Policy changes Differentially Expenditures Affecting Immigrants b (billions of current dollars) a Aid to Families with Dependent Cash assistance primarily $21.5 PRWORA bars most post-enactment Children/Temporary Assistance for single mothers with children; immigrants from receiving TANF for to Needy Families AFDC replaced by TANF in the first five years after they arrive. Federal and state funding. Supplemental Security Income Cash assistance to financially $33.6PRWORA originally barred most needy individuals who are aged, immigrants from receiving SSI; blind, or disabled. Federal and eligibility was restored to most elderly state funding. and disabled pre-enactment immigrants. Food Stamps In-kind transfer for the purchase $22.4 PRWORA originally barred most of food to financially needy immigrants from receiving food stamps; individuals and families. Federal eligibility was restored to most minor funding. and disabled pre-enactment immigrants as well pre-enactment many elderly immigrants. Medicaid In-kind transfer of medical care to $177.4 PRWORA denies receipt of Medicaid to low-income individuals who are most post-enactment immigrants for blind, disabled, or aged, and to poor the first five years after they arrive. families with children. Federal and state funding. Public housing Rental units owned and operated by $3.9 None public housing authorities, which are public or quasi-public entities. Federal Funding. Rental subsidy Rental units owned and operated by $16.1 None private parties that are partially financed through mortgage, rental or other subsidies by the federal government. Federal Funding. School Lunch Free and reduced-price lunches $5.2 None provided to children in low-income families at school a Committee on Ways and Means (1998), Appendix K. b See Zimmerman and Tumlin (1999) and Zimmerman, Tumlin, and Ost (1999) for further details.

4 748 / Immigrants, Welfare Reform, and the Economy AFDC/TANF is targeted largely at low-income single mothers, and SSI is targeted at the disabled and low-income elderly. There are several in-kind transfer programs that supplement a family s basic needs of medical care, food, and housing. Medicaid is the largest in-kind transfer program, accounting for nearly half of all expenditures on social programs. Medicaid provides medical care to low-income individuals who are blind, disabled, or aged, and to poor families with children. The Food Stamp Program and the School Lunch Program provide direct food assistance to low-income families. The Food Stamp Program provides low-income families coupons or debit cards that can be used to purchase food. The School Lunch Program provides children free or reduced-price lunches at school. While the cost of the School Lunch Program is small relative to most means-tested programs, 25.9 million students participated in the program on any given day in 1996, which represented 52 percent of all schoolaged children (ages 5 to 17) in the United States (Committee on Ways and Means, 1998). Assistance with housing is provided primarily through rental subsidies and public housing. Some of these assistance programs were changed fundamentally during the 1990s. The most notable legislation was the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which changed the nation s major welfare programs along three key dimensions. First, PRWORA replaced a federal guarantee of income support for the poor with a program funded through block grants that provided states significantly more flexibility in the design of programs. Second, the legislation strengthened work requirements, particularly for TANF. 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 because of the variation in policies across states and time. We sketch the major policy changes here and provide a summary in the final column of Table 1. 6 PRWORA altered policy toward immigrants in several important ways. First, the legislation drew a distinction between the eligibility of citizens and non-citizens and between pre-enactment immigrants (those arriving before August 22, 1996) and post-enactment immigrants. Post-enactment immigrants were largely barred from receiving federal assistance for their first 5 years in the country. Second, the legislation strengthened the requirement for various programs to attribute the income of an immigrant s U.S. sponsor to the immigrant for purposes of determining program eligibility. Third, PRWORA instructed states to choose whether to cover pre-enactment immigrants (and post-enactment immigrants who have been in the country for more than 5 years) under Medicaid and TANF. When given the option, nearly all states chose 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 immigrants ineligible under federal law (generally post-enactment immigrants who have been in 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 eligible for TANF and Medicaid only for the first seven years; after that period, states have the option of covering them. Pre-enactment immigrants with more than 40 quarters of work are categorically eligible for federal means-tested programs.

5 Immigrants, Welfare Reform, and the Economy / 749 grams. Of the four major types of assistance Food Stamps, SSI, TANF, and Medicaid 28 states have committed to providing at least one substitute program, 15 have created at least two, 10 provide at least three, and two have all four (Zimmerman and Tumlin, 1999). Of the six largest immigrant-receiving states, four provide no substitute programs, and only California provides all four. Two subsequent laws restored eligibility to some immigrants. The Balanced Budget Act (BBA) of 1997 mandated the continuation of SSI and Medicaid to all legal immigrants who were receiving SSI on August 22, BBA of 1997 also restored eligibility to all pre-enactment needy and disabled immigrants. The Agriculture Research, Extension, and Education Reform Act (AREERA) of 1998 restored Food Stamp eligibility to pre-enactment immigrants receiving payments or assistance for blindness or disability, those who were 65 years or older on August 22, 1996, and pre-enactment immigrants who were minors. Close to one-third of immigrants who had lost Food Stamp benefits under the 1996 law had their benefits restored in 1998 (Carmody and Dean, 1998). Most post-enactment immigrants remain ineligible for Food Stamps during the period we examine. 8 Public housing, rental subsidies, and school lunch programs were not directly affected by the PRWORA legislation. However, participation in these programs could be affected by welfare reform through at least two channels. First, it was claimed that the reforms had a chilling effect on participation among immigrants, even for programs for which they retained eligibility. Fearful of deportation and perhaps misinformed about the reforms, immigrants may have refrained from enrolling in any government assistance programs. Second, there could be indirect effects of PRWORA on participation in these other programs. For example, immigrants may reduce their use of the unaffected programs if the decision to participate in one program facilitates the participation in another. Alternatively, immigrants may increase their participation in programs for which they are still eligible if the exclusion from AFDC/TANF, SSI, and Food Stamps increases their need for assistance. In sum, there were significant restrictions placed on immigrants by the 1996 reforms. However, some of these restrictions were overturned at the federal level and others were effectively undone by state policy. Whether policy changes across the nation may have differentially affected immigrants and natives program use is the question to which we now turn. THE DATA We use the March Current Population Survey (CPS) for our analysis. The CPS is a survey of approximately 57,000 households across the United States in each year and is used by the U.S. Census Bureau to calculate the official statistics on income and poverty. The data contain detailed questions about demographic characteristics (age, sex, marital status, and nativity), labor force status (employment status, earnings last year), household income, and most importantly for this study, participation in government assistance programs. The first year that the March CPS began asking respondents their nativity was 1994; therefore, we use the 1994 to 2002 surveys. 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 United States 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-estimated our tabulations excluding the data from 1994 and none of the substantive results changed.

6 750 / Immigrants, Welfare Reform, and the Economy vious calendar year, implying that our sample contains participation information for the period 1993 to The household is our unit of analysis. A household is considered to be participating in a particular government transfer program if anyone in the household receives assistance from that program, and a household is identified as immigrant if the householder was born outside of the United States or its territories and not born abroad of American parents. In total, our sample includes 443,754 households for the 9 sample years. Our central conclusions are unchanged when we instead use the individual as the unit of analysis. 10 Despite the fact that the CPS collects information on citizenship status and the reform policies differentiate between citizens and non-citizens, we do not consider this distinction for our main analysis for three reasons. First, the citizenship status data may be of questionable accuracy. Specifically, the U.S. Census Bureau undertook an evaluation of the exact questions used in this study by completing in-depth interviews. This evaluation concludes that many non-citizens show some reluctance to answering the citizenship question (Wellens, 2001). Moreover, it has been shown that CPS estimates of the number of naturalized citizens are approximately 40 percent too high, and important for our purposes, this percentage has changed over time (Schmidley and Robinson, 1998). 11 Second, it has been argued that the reforms had a much broader chilling effect than on those immigrants on whom it was focused (Fix and Passel, 1999). Third, previous authors have argued that PRWORA could cause some non-citizen immigrants to naturalize so that they could retain their benefits. To the extent that welfare reform caused immigrants to become naturalized citizens, we would overstate the impact of the reforms by focusing on non-citizens. However, given the potential importance of the citizen/non-citizen distinction for immigrants, we present results that differentiate immigrants by citizenship status as a sensitivity check on our main results. More generally, distinguishing between citizen and non-citizen immigrants may not be sufficient if we were examining whether welfare reform differentially impacted any immigrants. For example, the restrictions imply that pre-enactment immigrants should not be excluded from certain programs, and the restrictions are likely to be irrelevant to highly educated non-citizen immigrants who obtained a work visa through a U.S. employer. Grouping such unaffected immigrants together with potentially affected immigrants dilutes any impact of welfare reform, making the impact more difficult to detect statistically. However, the primary purpose of our study is to examine whether ignoring economic conditions matters in the assessment of differential declines. We choose to examine the impact of welfare reform 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/TANF using the individual as the unit of analyses. The coefficient on post-reform*immigrant is ( standard error) when economic conditions are not adjusted (model [1]). But when economic conditions are in fact accounted for, the coefficient estimate becomes very small and insignificant: (standard error of ). Therefore, using the individual as opposed to the household as the unit of analysis does not alter the conclusions. One program where the distinction could be important is the Medicaid 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 immigration status. Specifically, Van Hook and Bean (1998) state, Data obtained from survey items about legal status may be highly questionable if not worthless because unauthorized immigrants wishing to escape detection may be less willing to reveal their status in interviews and/or questionnaires (page 511). Although their comment addresses reports of legal status and not citizenship, it seems highly likely that some undocumented immigrants might claim to be citizens for the same reasons.

7 Immigrants, Welfare Reform, and the Economy / 751 population on which to study the role of the economy and it will indicate whether there were broad impacts of welfare reform. EMPIRICAL ANALYSIS Many of the papers that examine the impact of welfare reform attempt to identify the causal impact of various component policies (e.g., Grogger, 2003; Schoeni and Blank, 2000), and the difficulties with such studies are well known (Moffitt and Ver Ploeg, 2001). The focus of our study is different. We examine whether there exist differential declines in program participation between U.S.-born and immigrant households, above and beyond the differences that can be explained by the economy. If economic conditions can account for the fact that program participation has fallen faster for immigrants than natives, then perhaps welfare reform did not affect immigrants any more than natives. We begin by estimating participation in each of seven major government transfer programs. These participation rates are computed for all households. Estimates are reported 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 that reform was adopted (1996) is dropped from all analyses in order to make a cleaner before-and-after comparison. We then turn to a multivariate analysis to examine the extent to which economic conditions can explain the different pattern of program 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 program 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 highest participation rates. The two programs that provide direct cash assistance, AFDC/TANF and SSI, and the housing assistance program had the lowest participation rates. Just over 33 percent of all immigrant households participated in at least one of the seven government assistance programs we analyze. For each of the seven programs, participation was higher for immigrants than natives prior to reform. Immigrant participation declined for all programs following reform. This finding is notable given that immigrant provisions for two of the programs, public housing and 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 the most 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 declines were 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 programs declined from 19.8 percent to 18.6 percent following the 1996 reforms. The focus of the study is the decline in participation among immigrants relative to 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 who are barred from other federally funded means-tested programs living in publicly subsidized housing.

8 752 / Immigrants, Welfare Reform, and the Economy Table 2. Program participation for immigrants and natives before and after reform. Before reform refers to the period and after reform referes to The CPS person weights are used to calculate all estimates.

9 Immigrants, Welfare Reform, and the Economy / 753 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). Because the results are similar for both comparisons, we focus on the percentage point comparisons in column 9. Immigrants experienced larger declines than natives for the programs in which significant restrictions were imposed on immigrants. The decline in AFDC/TANF participation was more than one full percentage point larger for immigrants than natives (3.62 versus 2.28). In addition, Food Stamp participation declined by 2.88 percentage points among natives, while the decline was 5.33 percentage points for immigrants. SSI participation increased slightly among natives (by 0.13 percentage points), but fell by 0.53 percentage points among immigrants. These results are consistent with the hypothesis that welfare reform and/or changes in the political environment caused immigrants to participate less in assistance programs. 13 As an initial investigation into the potential role of labor market factors, Table 2 reports information on employment, earnings, and local labor market conditions for immigrants and natives. We measure local labor market conditions with the unemployment rate in the state in which the person lives. Employment rates were similar for immigrants and natives prior to reform, although immigrants had lower earnings and higher poverty. Importantly, employment and earnings improved more for immigrants than for natives during this period. For example, while the percent working was 71.3 among both natives and immigrants prior to reform, the rate fell to 71.1 percent among natives and increased to 74.0 percent among immigrants (a statistically significant increase at the 0.01 level). In addition, local labor market conditions improved more in the labor markets in which immigrants lived than in the labor markets where natives live whereas the state unemployment rate facing immigrants improved by 2.19 percentage points between the two periods, the rate facing natives improved by 1.67 percentage points. This evidence, combined with the literature on the use of means-tested programs, indicates that any interpretation of a differential decline in program participation must take into account the role of economic conditions. Can Economic Conditions Explain the Differential Decline? We now move to a regression framework to directly consider the relationship between program participation and the economy. To do this, we regress program participation on a measure of the policy regime and economic conditions, allowing the impact to differ between immigrants and natives. Formally, let P its be an indicator variable for whether the family participates in a particular program, I its be an indicator variable for whether the household head is an immigrant, and R its be an indicator variable for whether the observation is from the period after welfare reform was adopted. That is, R its equals 1 during the 13 It has been documented that the CPS respondents under-report welfare participation, and that underreporting increased between the mid- and late 1990s (Bavier, 2000). If under-reporting increased more for immigrants, it could explain the fact that the decline in reported participation was smaller for natives. We are aware of no empirical evidence suggesting that under-reporting increased more for immigrants than natives. However, given the heightened concern about immigrants use of government transfer programs, our priors would suggest that under-reporting may have increased more for immigrants than natives because immigrants would be reluctant to report that they used these services after reforms were adopted. If this were the case, it would imply that the difference in true program participation is smaller than reported differences.

10 754 / Immigrants, Welfare Reform, and the Economy period and 0 during the period. All variables refer to the ith household in the tth year in the sth state. We estimate a linear probability model to mimic the difference-in-difference approach in Table 2, P its R its β R I its β I (I its * R its )β IR X its β X δ s ε its (Eq. 1) where X its 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 interest is β IR, which measures the decline in program participation from before to after welfare reform for immigrants as compared to natives; a negative coefficient indicates that immigrants experienced a larger decline. To determine the role of local labor market factors, we augment model 1 in two ways. First, we include a direct measure of local economic conditions (model 2). To the extent that immigrants lived in labor markets that experienced larger improvements, we would expect the magnitude of β IR to increase (i.e., become less negative). Second, we interact the local area economic conditions with the immigrant indicator, I its (model 3). To the extent that immigrants are more responsive to changes in economic conditions, then we would expect the magnitude of β IR to increase further. Following the existing literature on program participation, we use the 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 programs. The post-reform coefficient (β R ) in model 1 is negative for all programs except SSI and Medicaid, verifying that program participation for natives declined with the reforms even after controlling for state fixed effects and sociodemographic factors. For example, the baseline model for AFDC/TANF implies that welfare participation declined by percentage points from before to after reform. In addition, the immigrant coefficient (β I) is positive and significant for all programs except public housing and rental subsidies, implying that immigrants have higher participation rates than natives even after adjusting for demographic factors. The focus of our paper is the decline in participation for immigrants relative to natives, measured by β IR. In the baseline models where we control only for demographic characteristics and state fixed effects, immigrants experience statistically significant larger declines in four of seven programs (AFDC/TANF, SSI, Food Stamps, 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 rate enters positively and significantly, consistent with virtually all of the prior research on program participation (e.g., CEA, 1997, 1999; Ziliak et al., 2000). Moreover, simply adding the unemployment rate reduces the change in participation substantially across most programs. For example, the decline in AFDC/TANF participation that is associated with reform (β R) falls from to That is, about one-third of the fall in welfare participation following reform can be accounted for by economic conditions. The results suggest that economic conditions similarly account for 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 the head s age. Marital status is represented by an indicator for whether the person is married, sex is represented by an indicator for being female, race is represented by an indicator for being black, and education is represented by two indicator variables, one for having less than 12 years of school and one for having exactly 12 years of schooling.

11 Immigrants, Welfare Reform, and the Economy / 755 Table 3. Linear probability models of program participation. Coefficients and standard errors are multiplied by 100. Post-reform refers to the period All regressions include age, a gender indicator, a marriage indicator, an indicator for being black, indicators for education less than 12 years and 12 years, and state fixed effects. Standard errors are reported in parentheses. * and ** indicate statistical significance at the 0.05 and 0.01 levels, respectively.

12 756 / Immigrants, Welfare Reform, and the Economy sistent with other studies that attempt to account for the decline in welfare caseloads in the 1990s (e.g., CEA, 1999). The estimates in model 2 also demonstrate that a modest share of the difference in participation between immigrants and natives can be explained by immigrants living in areas with less favorable labor markets. That is, the gap in AFDC/TANF participation between immigrants and natives of percentage points declines to percentage points once we control for economic conditions. Turning to our focus on the relative decline of immigrants versus natives, including the state unemployment rate in the model reduces the relative decline of program participation for immigrants in almost every case. For example, consider AFDC/TANF. Without controlling for the unemployment rate, the estimate implies that program participation declined by more for immigrants than for natives. However, after including the unemployment rate in the model, the additional decline 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 every case, the coefficient on the interaction is positive and significant. That is, participation in government assistance programs by immigrants is more sensitive to fluctuations in the economy. This finding is consistent with the fact that immigrants are disproportionately concentrated among individuals with low education. The addition of the interaction has a substantial impact on the measured relative decline for immigrants. In fact, β IR is not negative and statistically significant for six of the seven programs in model 3, implying that immigrant participation did not decline relative to natives once differential sensitivity between immigrants and natives to economic fluctuations is accounted for. For example, β IR is for AFDC/TANF in model 1, drops to when the direct effect of economic conditions is included, and then to (and statistically insignificant) when the interaction is included. The only exception to this finding is Food Stamps, where the results indicate that immigrant participation declined faster than native participation. However, accounting for economic conditions still reduced the estimated differential from to percentage points. Sensitivity Analysis In Table 4, we present a similar set of results as those in Table 3, but now we distinguish between citizens and non-citizens immigrants. Again, the benefit of distinguishing between the two groups is that the 1996 immigrant programmatic changes were targeted at non-citizens, but the drawback is that citizenship is often misreported and the focus on non-citizens could overlook important impacts because of naturalization 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 3 are experienced exclusively by non-citizens, and the declines for citizen immigrants relative to natives are not larger for any of the programs. This latter finding is inconsistent with there being a chilling effect of the restrictions on citizen immigrants. Despite these differences, the economy still explains a large portion of the differential decline among non-citizens for most programs. For Medicaid, rental subsidies, and School Lunch, the significant larger decline for non-citizens in model 1 is eliminated in model 3. For AFDC/TANF, 75 percent of the differential is eliminated moving from model 1 to model 3 (i.e., from to 0.744). The only exception is SSI, where the decline between model 1 and model 3 is a modest 5 per-

13 Immigrants, Welfare Reform, and the Economy / 757 Table 4. Sensitivity analysis for citizenship status. Coefficients and standard errors are multiplied by 100. Post-reform refers to the period All regressions include age, a gender indicator, a marriage indicator, an indicator for being black, indicators for education less than 12 years, and state fixed effects. Standard errors are reported in parentheses. * and ** indicate statistical significance at the 0.05 and 0.01 levels, respectively.

14 758 / Immigrants, Welfare Reform, and the Economy cent ( to 2.242). However, even though economic conditions can account for a large share of the uniquely large decline for non-citizens across most programs, the decline continues to be statistically significantly greater for non-citizens than natives in model 3 for AFDC/TANF, Food Stamps, and SSI. In Table 5, we examine the sensitivity of our results to alternative specifications for economic conditions (Haider, Klerman, and Roth, 2003; Klerman and Haider, in press). We present results similar to those reported in Table 3, but we also include the state employment growth rate and lags in the state unemployment rate. We only show results for AFDC/TANF, although the substantive findings are similar for other programs. All of these alternative specifications lead to similar conclusions: including richer measures of the economy serves to further reduce the differential decline between immigrants and natives, but the further reductions are modest in size. The specification in model 1 in Table 3 does not examine dynamic adjustments that may have taken place following the 1996 reforms. For example, was there a large 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 this issue 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 and natives. The results suggest that the impact of the policy reforms on the participation differential increases over time. Once again, controlling for economic conditions reduces the differential declines. As a final sensitivity analysis, we examine the extent to which the differential decline is due to California, as was shown by Borjas (2000). California is home to almost one-third of all immigrants, and thus, any change in California will heavily influence national trends. We examine whether the trends in California are distinct from the trends in the rest of the nation by expanding the models reported in Table 3. Specifically, we allow β R, β I, and β IR to be different in California by interacting the three respective variables with an indicator for whether the CPS sample member lives in California. Table 6 shows the estimates from these models for the four programs most affected by welfare reform. Turning straight to the results on the differential decline, we continue to find that local economic conditions account for much of the large decline for immigrants relative to natives. For example, outside of California, AFDC/TANF participation fell by 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 (to percentage points). Similarly, the relative decline in Food Stamps outside California falls by one-third once economic conditions are fully accounted for (i.e., from in model 1 to in model 3). The one program for which the decline was especially large for immigrants in California was AFDC/TANF (estimate of in model 1). Although this estimate is reduced once economic conditions are adjusted in model 3, the gap is still large and statistically significant. SUMMARY AND INTERPRETATION Tensions over immigration policy typically intensify when unemployment is high and wages are stagnant. These conditions existed in the United States in the early 1990s 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 who arrived after enactment is increasing over time.

15 Immigrants, Welfare Reform, and the Economy / 759 Table 5. Sensitivity analysis for AFDC/TANF program participation. Coefficients and standard errors are multiplied by 100. Post-reform refers to the period Base A refers to the AFDC/TANF results from Table 3, column 2; Base B refers to the results from Table 3, column 3. All regressions include age, a gender indicator, a marriage indicator, an indicator for being black, indicators for education less than 12 years, and state fixed effects. Yes indicates that the given variable is included in the model. Standard errors are reported in parentheses. * and ** indicate statistical significance at the.05 and.01 levels, respectively.

16 760 / Immigrants, Welfare Reform, and the Economy Table 6. Sensitivity analysis for California. Coefficients and standard errors are multiplied by 100. Post-reform refers to the period Base A refers to the AFDC/TANF results from Table 3, Column 2; Base B refers to the results from Table 3, column 3. All regressions include age, a gender indicator, a marriage indicator, an indicator for being black, indicators for education less than 12 years, and state fixed effects. Standard errors are reported in parentheses. * and ** indicate statistical significance at the 0.05 and 0.01 levels, respectively.

17 Immigrants, Welfare Reform, and the Economy / 761 eligibility of immigrants for government social services. The goal of this paper was to examine whether welfare reform may have had a differential impact on immigrants, explicitly taking into account the changing economic conditions over the 1990s. We find that immigrants participation in some transfer programs declined, and more importantly, declined more sharply than for natives. However, we find that much of the greater decline among immigrants can be explained by changing macroeconomic conditions. Specifically, for several programs, there is no evidence that participation by immigrants declined faster than for natives once we account for economic conditions. These conclusions are strengthened by the fact that other research has reached similar conclusions (Lofstrom and Bean, 2002). Given the severity of the restrictions placed on immigrants in 1996, the natural question to ask is why immigrants did not experience even larger relative declines. There are several possibilities. First, subsequent federal legislation (BBA of 1997 and the AREERA of 1998) reversed some of the restrictions. In addition, many states adopted policies to continue benefits to non-citizen immigrants. Second, naturalization was an option for some immigrants. Citizens are less limited in their access to services, providing an incentive for non-citizens to become citizens. In fact, the share of foreign-born adults 18 and over who were naturalized rose from 40 to 45 percent between March 1996 and March 1997, months that straddled the passage of PRWORA (Johnson et al., 1999). Third, eligibility restrictions may not have affected whether households received any payment, but rather the amount of the payment. That is, even if adults lost eligibility, the majority of children in immigrant-headed households are themselves citizens (Fix and Zimmerman, 1999). Fourth, and provocatively, some of the empirical evidence is consistent with the shifting, rather than the bundling, hypothesis. In particular, having lost or thought they lost eligibility for Food Stamps, immigrants may have been more likely to have their children enroll in the School Lunch Program. Finally, eligibility restrictions may not have affected whether households received any payment but rather the amount of the payment. That is, even if adults lost eligibility, children in the household could remain eligible. 16 A final potential explanation for why we do not find differential declines among immigrants 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 the fact that some immigrant households were not differentially affected by the reforms. When we instead examine the impact on non-citizen immigrants, we find that participation in AFDC/TANF, SSI, and Food Stamps fell faster than natives following reform even after accounting for economic factors. These results suggest that certain sub-groups of immigrants may have been substantially affected by the reforms, and thus, the experiences of the relevant subgroups should be evaluated further. The conclusions of the study are in part driven by the fact that immigrants employment and program participation fluctuates more closely with the business cycle. When the economy expanded by record levels in the mid- to late 1990s, immigrants 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 for TANF, Food Stamps, Medicaid, and SCHIP eligibility determination make clear that asking about the citizenship 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. These guidelines were issued in September 2000.

18 762 / Immigrants, Welfare Reform, and the Economy expansions, it also implies that during the recent economic downturn participation may have increased more among immigrants than among natives. Thus, these results also suggest that further evaluation of program participation using data during the recent recessionary period is also needed. Haider gratefully acknowledges the U.S. Department of Health and Human Services for grant support under which part of this work was completed (#00ASPE353A). The opinions and conclusions expressed herein are solely those of the authors and should not be construed as 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 Social Research and an Associate Professor of Economics and Public Policy at the University of 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, Office of the President. REFERENCES Bavier, R. (2000). Accounting for increases in failure to report AFDC/TANF receipt. Unpublished manuscript. Office of Management and Budget, Washington, DC. Betts, J., & Lofstrom, M. (1998). The educational attainment of immigrants: Trends and implications, Working Paper No. W6757. Cambridge, MA: National Bureau of Economic Research. Blank, R. (2003). Evaluating welfare reform in the U.S. Journal of Economic Literature, 40(4), Borjas, G. (2000). Welfare reform and immigration. Unpublished manuscript. Harvard University, Cambridge, MA. Carmody, K., & Dean, S. (1998). New federal food stamp restoration for legal immigrants: Implications and implementation issues. Washington, DC: Center on Budget and Policy Priorities, July. CEA [Council of Economic Advisers] (1997). Technical report: Explaining the decline in welfare receipt, Washington, DC: Council of Economic Advisors. CEA [Council of Economic Advisers] (1999). Technical report: The effects of welfare policy and the economic expansion on welfare caseloads: An update. Washington, DC: Council of Economic Advisors. Committee on Ways and Means (1998) Green book. Washington, DC: Government Printing Office. Congressional Budget Office (1995). Immigration and welfare reform, CBO Papers. Washington, DC: Congressional Budget Office. Currie, J., & Grogger, J. (2001). Explaining recent declines in the food stamp program participation. Brookings Papers on Urban Affairs, pp Ellwood, M., & Ku, L. (1998). Welfare and immigration reforms: Unintended side effects for Medicaid. Health Affairs, 17(3), Figlio, D., Gundersen, C., & Ziliak, J. (2000). The effects of the macroeconomy and welfare reform on food stamp caseloads. American Journal of Agricultural Economics, 82(3),

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