Immigrants, Welfare Reform, and the Economy in the 1990s

The welfare reform bill adopted in the United States in 1996 limited immigrants' eligibility for government assistance programs. In fact, early estimates projected that nearly half of the savings associated with the 1996 reforms would come from eligibility restrictions placed on immigrants. Moreover, it has been argued that the intense political debate surrounding the eligibility of immigrants for government assistance and a misunderstanding of the so-called "public charge" rule caused immigrants not to apply for assistance, even if eligible, for fear of difficulties with naturalization or even deportation. This study investigates these issues by examining changes in welfare participation following the 1996 reforms. We compare changes in participation for immigrants with natives to gauge the differential impact of the reforms on immigrants. It is found that participation in Aid to Families with Dependent Children (AFDC)/Temporary Assistance for Needy Families (TANF), Food Stamps, Supplemental Security Income, and Medicaid fell faster for immigrants than natives. However, this finding can be explained by the fact that immigrants were located in labor markets that experienced more rapid growth during the post-reform period. After adjusting for differences in local labor market conditions, including the disparities in the responsiveness of immigrants to fluctuations in the economy, evidence that participation declined faster for immigrants is weakened substantially. The one major exception to this conclusion is the pattern of estimates in California, where the relative decline in AFDC/TANF does not appear to be explained by improvements in local economic conditions.