Welfare Dependency under Depressed Labor Market Conditions: Lessons from the 1970S for the 1980S

Abstract

Using panel data collected in 1969 and 1973, comparable path models of welfare dependency are developed and estimated. The models represent specifications of an integrated model of welfare dependency derived from human capital, dual labor market and family coping theories of economic behavior. As compared to 1969, 1973 is a depressed labor market year in terms of unemployment and total female employment. Comparative analysis of the models reveals that the quality of past labor market experience is an important determinant of dependency even in a depressed labor market. It is also found that adult or teenage assistance in low income female-headed households is of great benefit in adapting to poor labor market conditions. Based on these and other findings, recommendations for income maintenance policy in the 1980s are discussed in the final section.