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The Poor Are Not Better Off

by Linda Ostreicher, Sep 21, 2004
 
 One week before the 2004 Republican National Convention, the Bush Administration announced that the nationwide caseload for federal welfare benefits dropped by three percent during 2003. Several days later, the United States Census Bureau reported that during the same year, 1.3 million Americans slipped into poverty. Now one in eight Americans is officially living in poverty, the third year of increases in a row. Here in New York City, poverty did not increase significantly, but it is not decreasing despite indications that the economy is improving.

What the changes mean for New York City

Between 2001 and 2004, over 140,000 New Yorkers stopped receiving benefits under the city’s Family Assistance program, which supports children and parents living together, generally in households headed by a single mother. Yet the overall count of welfare recipients is rising again, driven by “Safety Net Assistance,” a state program providing income assistance to adults without children, children living apart from relatives, and families who have reached the five-year limit for federal welfare benefits.

Since 2001, over 130,000 children and adults have been transferred into the Safety Net Assistance program because of the federal time limit. The fastest growing group on Safety Net Assistance is children living without adult relatives. Over the past three years, the number of recipients in this category rose from about 1,400 to nearly 13,000.

It’s Not the Economy!

Since the city is officially out of its recent economic recession, an optimist might assume that families are leaving welfare because more adults are working. In August 2004, the city’s unemployment rate hit its lowest point since September 2001. More single mothers are working: over 62 percent in 2003 compared to 59 percent in 2000. Among New Yorkers less than 25 years old, the share of women with jobs is now higher than that of men (and women are the ones who head most families on welfare.)

Despite these improvements, nearly one in three New York City children lives in poverty. Nationwide, only 17 percent of children are poor. (The poverty line is currently $15,670 a year for a mother with two children.) Black and Latino New Yorkers are more than twice as likely to be poor as white New Yorkers.

Meanwhile, local prices have risen by an annual rate of 3.5 precent over the first seven months of 2004. The costs of housing and food, the major expenses for low-income families, are going up even faster. The number of people declaring bankruptcy rose 50 percent more sharply in New York City than in the United States as a whole in 2003.

What Happens To People Who Leave Welfare?

A number of researchers have tried to discover what exactly is happening to people who leave welfare. The Urban Institute found that over 40 percent of former welfare recipients who lived with children had jobs in 2002. Another eight percent had a partner who was working, and seven percent had recently worked. Over one in four recipients were back on welfare, and four percent had begun receiving Supplemental Security Income, a benefit for low-income people with disabilities. That left 14 percent who were considered “disconnected” from the welfare system, defined as not working, nor living with an employed person, nor receiving cash assistance.

Among a sample of New York State families who left welfare in 1999, nearly three-fourths were unemployed when the Rockefeller Institute surveyed them 18 months to two years later. Of these, one in four was back on welfare, one in five was receiving federal disability benefits, one in six had a partner who worked, and a few received veteran’s benefits, unemployment insurance, and/or worker’s compensation. Other income sources were earnings from children aged 16 or more, gifts and loans from families and friends, and child support payments. Most families patched together two or more of these income streams to survive. More than half the members of the sample were getting federal food assistance, and nearly half lived in public or other subsidized housing.

Four percent of welfare leavers without jobs reported having no income, and used none of the in-kind supports used by others. It is possible that the survey undercounted such individuals, who can be hard to reach, if they have begun living on the street; turned to crime as a source of income; gone to jail, a hospital, or a mental institution; or left New York City.

The fragile financial balance of the families surveyed, even those with multiple income supports, led to frequent crises. At least a third were unable to pay gas, electric and/or telephone bills and had their service disconnected. One in five families was evicted or threatened with eviction. Many turned to food pantries and private charities, and one in twenty had to enter a homeless shelter.

Rejections on the Rise

Recently, the city’s Independent Budget Office reported that applications for welfare were more likely to be rejected in 2003, when the job losses were at their worst, than in 2001, when the recession had just begun. During the same period, job placements for welfare recipients dropped by a third, and applications for benefits rose. The Independent Budget Office estimates that if the city had kept its rejection rate down to the 2001 level, an additional 25,000 cases would have been opened in 2003.

When new mothers in 20 United States cities were surveyed, it turned out that nearly half of those who were eligible for welfare benefits did not receive them during their baby’s first year. During the recession year of 2001, less than half of all eligible families received welfare benefits; before welfare reform, about 80 percent of such families were getting assistance.

Food stamp use is widespread and growing

Food stamps are more widely used than welfare, because more people are eligible under their higher income limits. A Cornell University researcher has estimated that 40 percent of all Americans will use food stamps at some point during their working-age years. The risk varies with race and educational level: an African-American woman without a high school diploma has a 90 percent chance of using food stamps, while at the other extreme, a white male college graduate has only a 37 percent chance of using food stamps.

There are over a million people on food stamps in New York City, with another 700,000 believed to be eligible. After years of shrinking the list of food stamp recipients, by making it difficult to apply for assistance, and easy to be cut off by mistake, the city has succeeded in raising enrollment for the past two years. The state is making its own efforts to help qualified residents receive benefits. New York was the first state to automatically continue food stamp benefits to people leaving welfare, for a transitional period that now lasts five months. The state has also announced its intention to automatically mail food stamp benefit cards to all recipients of Supplemental Security Income, whose income is by definition low enough to entitle them to food assistance.

Linda Ostreicher, a former budget analyst for the New York City Council, is a freelance writer and consultant to nonprofits.


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