Wolfgang Voges und Götz Rohwer
Receiving Welfare in Gennany: Risk and Duration
ZeS - Arbeitspapier Nr.12/91
Zentrum für Sozialpolitik Universität Bremen Postfach 330 440 2800 Bremen 33
Dr. Wolfgang Vages is senior reseaJCh ofliccr in tbe Department Institutions and History at tbe Centte far SociaI Policy Research. Dr. Götz Rohwer ist SCIIior research ofliccr in the DeparImeDt of SocioJogy at the European University Institute, P1orence.
Abstract
Although welfare uti1izationis adynamie process analyses of such processes tend to be static. 1bls is particularly so in Germany wbere-but for tbe Bremen Longitudinal Social Assistance Sampie (LSA)-there is virtua11y no empirical base for studying tbe dynamic interplay between poverty and welfate. Relying on tbe Gennan Socio-Economic Panel (SOEP) we continue to ana1yze the dynamics of poverty. 1bls study shows how both uti1ization and duration of welfare receipt increase as tbe panel progresses. Tbc unconditiona1 probability of receipt is smalL But if one ormore previous receipts bad a1ready occurred tbe probability is vCty bigh. A logit model estimate shows thst some circumstances increase tbe likelihood to receive welfare: receipt of welfare in the previous year, a siek or dissbled person in tbe household thst needs constant home care, changes in household size, female gender, and non-Gennan nationa1ity.
Transition rstes for tenninating welfare receipt are bigh at first but they decline as tbe length of the episodes increases. In a log-Ingistie model with covariables tbe followlng groups show a lower exit probability: single-person fema1e households, older persons, persons in households thst need eonstant eare, and persons in housebolds with a new-bom ehild
All in all ourana1ysis of welfare receipt in Qennany-based ondata from tbe SOEP-shows thst welfare dependeney is a relatively short-tenn situation in an individual's life eyc1e. Tbc same detenninants wbich increase the probability of welfare receipt -with the exception of nationa1ity -appear to binder its tennination. Tbc resu1ts also show thst the ability to end a welfare episode differs substantially aeross age groups.
1
Contents
1 Introduction 3
2 The German Social Assistance System 4
3 Description 01 the Data 6
4 The Extent 01 Welfare Receipt 8
5 Determinants 01 Welfare Receipt 9
6 Duration olWellare Receipt 12
7 Summary 18
8 Relerences 19
Research presented in this paper was supporte<! by the Gennan National Research Foundation. Petra Buht, Barbara Schmitter-Heisler, and Ulrich Rendtel provided helpful comments on earlier drafts. Stephan Leibfried has helped os substantially in drafting this engIish Ianguage manuscript.
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1 Introduction
Present knowledge about we1fare receipt is main1y statie in nature. lt is drawn from offieial welfare statistics or similar cross-sectional materia1 whieh allows welfare receipt to be described as a state at a point -in-time. tittle is known about dynamie aspects of welf are receipt. Sttietly speaking we neither know if welfare recipieney is a permanent or transitory state for the persons involved, nor do we know the faetors that determine the duration of welfare episodes.
Extensive literature suggests that there are two prime reasons for studying the dynamics of receiving welfare. First, we would 1ike toconsider the assumption that welfare benefits provide bridges out of temporary crises. This is the dornain of granting "help to help yourse1f", the so-ca11ed principle of "Hilfe zur Selbsthi1fe" whieh is centrai to German social assistance law (Bundessozialhilfegesetz). Welfare benefits and other support is to help recipients to become self-suffieient and independent of welfare. Second, we are interested in examining the popular notion that welf are receipt permanently exeludes some mernbers from society.
We believe that these assumptions are one-sided and that they do not allow for any variation in the length of welfare careers. This is supported by ernpirical studies in the United States based on the Miehigan Panel Study on Ineome Dynamies (PSID) (see BuhrfLudwig 1991 for an overview). These studies have shown a a high turnover among welfare recipients (cf. Blank 1989; Bane/Ellwood 1983, 1986; Elwood 1986; Duncan 1984). Further American studies ana1yzing the duration of welfare receipt have had similarresults-theoretieal or methodologica1 differences notwithstanding: Welfare receipt is often-not always-only a transitory state. The risk of becoming a welfare recipient and the duration of welf are receipt seern to diverge strongly in welfare states like the United Stares, Canada, the United Kingdom and Germany, and also among different demographie groups in these eountties (cf. Dunean et al. 1991).
In contrast to the United Kingdom and the USA, Gerrnany after WW II laeked a strong tradition of ernpirieal studies on poverty and we1fare take-up. Only in the 19808 did research develop on a broader seale. Yet, with two exceptionsstudies of the dynamies of welfare receipt based on the Bremen Longitudinal Social Assistance Sample (LSA) (cf. Voges 1991; VogesjBuhr 1991; Leisering/Voges 1990; VogestLeibfried 1990; Buhr et al. 1989) and ana1ysis of the duration of poverty based on the Gerrnan Soeio-Economie Panel (SOEP)-few studies have dealt ernpirically with the dynamics of poverty and of welf are receipt (cf. Rendtel/Wagner 1991). These studies elearly indicate that the importance of ana1yzing the dynamie aspects
of poverty and welfare. In the following we will exarnine the concu1isons of some of these analyses.
We would 1ike to gain some insights into the dynamics of welfare uti1ization using data from the SOEP. After giving an overview on the Gerrnan Social Assistance ("Sozialhilfe") system we describe the data base. Then we ana1yze the extent of welfare receipt and examine which factors determine the like1ihood of becoming a welfare recipient. Finally, with the help of a transition rate-model, we attempt to determine those factors whieh affect the duration of welfare receipt.
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2 The German Social Assistance System
In Gennany the welf are system builds on universal (non-categorial) entitlements for all persons who are able to demonstrate that they are in need and who are incapable of helping themselves or who lack support from third parties. The system is based on comprehensive federallaw though it is administered by local government. From an American perspective the Gennan welfare system looks like a poverty line that has been legally guaranteed and is administered locally. 1 Welfare benefits are paid from local budgets-but in contrast to the USA local budgets are financed through a general revenue sharing scheme linking the federal, state and locallevel systematically. 2
Gennan social assistance provides two types ofbenefits: "Hilfe zum Lebensunterhalt" (general income maintenance) and "Hilfe in besonderen Lebenslagen" (aid for persons with special needs, e.g. aid for the blind, aid for the disabled, medical aid for persons without health insurance). General income maintenance covers expendirures recurring regularly-like food and housing-as weil as extraordinary non-recurring expenditures such as furniture and clothing for which special applications are necessary. General income maintenance has been the major source for the growth of welfare recipients in the last decade. Aid to persons with special needs covers extraordinary, non-recurring needs. Since Gennan social assistance is universal it is not targeted at specific groups in the population.
Yet since the late 1970s welfare receipt has become associated with more restrictive labor markets and with rising unemployment. Indeed, there is strong evidence that labor market criteria increase the risk of becoming dependent on welfare. According to official statistics in 1989 nearly 230.000 households collecting transfers which substituted for lost wages also received welfare. Some 15% of all social assistance households received welf are benefits because their net family income-which already inc1uded income transfers in lieu of lost wages-fell below the social assistance standard of need.
The crisisof the labor market and stable long-tenn unemploymenthas pennanently increased transfers substituting for lost wages. Two types of financial support for the unemployed exist: The first tier of support, called "Arbeitslosengeld" (unemployment benefits), rests on a high wage rep1acement rate and is not means-tested. The second tier of support, "Arbeitslosenhilfe" (unemployment assistance), reHes on a lower replacernent rate for wages and is means-tested, though less strictly so than is social assistance. Unemployment assistance, therefore, is a (higher level) meanstested welfare benefit. Since unemployment assistance, especially when a family is involved. may weil fall below the needs standard of social assistance individuals or households are also entitled to general income maintenance transfers disbursed by the social assistance administration.
I By CODlIast. the U.S. welfare system aims at categories, is fragmented. It is biased .gainst the "working poor" and tbe "able bodied". Naticmal unifonnity only obtains in few programs Such as SSI or Food Siam!"'.
'See for a more exhaustive comparison Leibfried 1979.
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The fedeml share in transfers substituting for wages has grown steadily since the early 1980s. Pressured by rising fiscal costs the German govemment tried to protect German social security by issuing regulations which reduced or reallocated the fisca1 burden. The Consolidation of Employment Promotion Act of 1982 pruned entitlements in unemployment insurance: Special payments-e.g. for overtime, christmas, and vacations-were omitted from net income; this lowered the base line used to calculate ttansfers in Heu of wages lost and reduced the wage replacement rate. Figure 1 shows how a sluggish labor market combined with increasing legal restraints affected welfare receipt over time.
Figure 1: Development of Recipients of Welfare Benefits and Recipients of Unemployrnent Benefits
3500
3000
2500
2000
1500
1000
500
thousand
.--
Recipients of We1fare Benefits
Recipients of Unemployment Benefit
---- ,/'" /'" ---_/ .-,/
... " .......... '" ..... . :.... . .......
... -,,'
.................
./
,/ ,/
,/
,/
'"
/ /
,/
.................... ". ".
0+1-,~,-+-~~r4-,-+-.4-+-+-.-~-+-. 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988
Source: BMAS (ed.), Statistisches Jahrbuch 1990. Table 2.10,8.16.
1n line with recent studies we assume that present predican1eIlts of the German labor market sinlilarly influence all persons of employable age. Bach person is exposed to the same risk of being unemployed and-later-to the same risk of becoming welfare dependent. The risk of becorning a recipient of social assistance increases significantly during unemployment, and it does so for a1l unemployed persons. Therefore we will pay special attention to those personal circumstances associated with entry into and exit from welfare receipt.
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3 Description of the Data
To analyze dynrunics of welfare receipt we use data from the SOEP which are presently available for six years (1984-1989)3. Table 1 presents the ruunber of households on which we have data by year. The table also uncoven; the magnitude of fluctuation in the panel: In each year households enter or leave the panel. All in all 6.752 households have participated in the panel at least onee. Por 3.847 households we have data covering the whole six year period.
Table 1: Number of Households in the SOEP
Panel Year of Year of SampleSize Attrition to Newly fonned Wave Data Receipt 4 Total with WR leave Sampie Househol<1s
Total with WR Total with WR
1 1984 1983 5,921 119 737 19 2 1985 1984 5,322 120 524 13 138 3 3 1986 1985 5,090 116 307 12 292 13 4 1987 1986 5,026 112 404 13 243 5 5 1988 1987 4,814 104 348 11 192 6 6 1989 1988 4,690 114 224 9
Let us now look at welfare reeeipt (WR) in these households. Dur analysis centers on ~Hilfe zum Lebensunterhalt" (general incomemaintenanee).5 The SOEP teils us whether a household has received welfare benefits in a single year and for how many months it has done so. Strictly spealdng the information for each year always refen; to the preceeding year: Data collected in 1984 (year of data) refer to the situation (e.g. welfare reeeipt or no welfare receipt) in 1983 (year ofpossible recipiency). The 1985 data thus refer to the situation in 1984. Saying a household was dependent on welfare in the year of receipt of a panel wave means: The household has indicated it was in receipt of benefits for at least one month in the year before the data were coilected6. Table 1 shows how many households received social assistanee and the magnitude of fluctuation: All in all 301 households received welfare transfers in at least one of the six years. Only 21 households collected social assistance in all of the six years.
We may also conclude from this table that, compared with all households, households which reeeive welfare are characterized by more fluctuation. Welfare
'See Witte 1990 and Hanefeld 1984 who give an overview on the possibilities offered by Ibis dataset for social policy research.
'Quite special circumstancesobtain far recipients who are granted aid far persons with specialneeds. Therefore we only analyzehouseholds which participate in tbe general income ma;ntenance component of soeial assistanoe.
'There are twelve householdsfor which we cannat establishfar how longthey havereceived welfare. We could have excluded thern frorn analyais which would have further reduced the small number of cases available. lnstead we chose to assign a duration of SUt months to them.
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households leave the panel more often than does the average household. We have not yetanalyzed the degree to which thisprocessmightbiasour sample. Oneexplanation fer the higher panel mortality of welfare households could be that such households are more likely to be headed by foreigners or elderly persons.
To reach out from welfare households to an estimate of all peISOIIS in need we suppose that all membets of a household that received welfare are also recipients of social assistance.7 However, we can only estimate how many persons belong to a household. One reason fer that is the impossibility to question all adult peISOIIS
in gathering data for the SOEP (see table 2). The following table shows both how many peISOIIS can be assigned to households (in table 1) and the number of persous as determined by the cross-checked variable "household size". There is also a conceptual problem here: The data set derives from a panel survey and panel members are questioned once a year only; this makes it impossible to capture all changes in household membership.
Table 2: Number of Persons in the SOEP
Panel Year of Year of PeISODS in Year of Data Pemons in Year of Receipt Wave Data Receipt Total according Total Persons with WR
Number HHSize" Number Number Pereent
1 1984 1983 16,205 16,252 16,205 281 1.7 2 1985 1984 14,538 14,644 13,956 273 2.0 3 1986 1985 13,847 13,956 12,912 269 2.1 4 1987 1986 13,564 13,708 12,665 265 2.1 5 1988 1987 12,872 13,069 12,191 260 2.1 6 1989 1988 12,444 12,648 11,656 284 2.4
• Numberof persons calculaled on !he basis of!he cross-cbecked variable HousehoIdSize
An additional problem is that data pertaining to welfare receipt generally refer to the Year preceeding the year of observation. To capture welfare receipiency by person we need to establish household composition in the Year before. Two solutions are possible: We could start with persons in the years of receipt and attempt to find out whether the households to which tlley were assigned reported welfare receipt in the subsequent time period. With this approach we lose all peISOIIS whose households have left the panel in the wave under examination. In addition we would shorten the observation period to five years. A second strategy would be to assume that a person is receiving welfare during the year of a panel wave w-that is in the year before
7 Strict1y speaking Ibis oversimpüfies !hesituation. We cannot be sure that aIl membets of a household also beIong to!he "Bedarlsgemeinscbaft", to!he "commuoi!y ofreceipt" asdellned by social assistsnce law. This community eru:cmpasses an persona to wbom welfare beDefita are paid and whose income and support is considered in setting herefit levela. This community is not necessari1y identical with !he household wbich may be \arger. Since!he data base does not contain peISOIIRl information on welfare receipt we bave to cope with Ibis potential source of error somehow.
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the yearly questioning-should the following conditions obtain: (1) if he or she has participated in panel wave w as well as in the panel wave preceeding it and (2) if the household to which the person belongs in wave w has dec1ared that it received welfare transfers in the year of the panel wave w. To proceed in this way also creates
some problems: FiIst, we assume that all persons who participated in the first panel wave already belonged to a household in the year of receipt, that is in the year before. Second, we lose all persons who leave their household immediatelyafter the year of receipt, Le. the year in which a household stated that it received welfare ttansfers. In spite of these problems we chose the second strategy since it avoids a shortening the observation period.
Table 2 shows the results if we proceed in this way. In toto there were 17.747 persons-(interviewed) adults as weil as children-in at 1east one year of potential recipiency in a panel wave. Only 752 persons actually received welfare at least once. Also, since a person is only acknowledged to exist in a year of receipt if he er she belongs to the same household in the next wave the number of persons in years of receipt is smaller than the tota1 number of persons in the data base. The total number of welfare recipients-but not the proportion-therefore is underestimated. The proportion of welfare recipients, however, accurately shows that welfare recipiency has increased in the observation period
4 The Extent of Welf are Receipt
In this section we describe the extent of welfare receipt using an edited data set of the SOEP. Table 3 shows the duration of receipt by households and by persons (in months per year) fer each panel wave. One third of all households and of all persons received welfare ferlessthan 12 monthsinallsingleyears. To geta betterpicture of duration in welfare receipt it is not sufficient to look at single years. We will turn to this problem in the next section. Two questions, however, may already be answered now:
FiIst, how often have households and persons received welfare during the observation period, that is in how many years did they report receipt of welfare benefits? Table 4 presents results fer all households and persons as weil as fer those who participated in all six waves. If we focus primari1y on persons who participated in all waves of the SOEP we avoid some of the problems created by by censored episodes. (We will exarnine all households and persons in the next section.) Only a few households and persons ha ve recei ved welfare all the time, i.e. they reported welfare receipt in each of the six years. Most households and persons received welfare only in some years of the observation period.
Second, in which extent households and persons become dependent on welfare during the observation period? The total amount of months a household er person has recei ved welfare in the observation period is useful as a rough indicator for the extent of welfare dependency. The indicator is determined as folIows: hi is the number of waves in welf are receipt, and d; is the amount of months in welfare receipt for
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Table 3: Distribution of Duration of Welfare Receipt
Panel Year of Number of Montbs of Welfare 'lbtal Wave Receipt 1 2 3 4 5 6 7 8 9 10 11 12
Households 1 1983 4 3 5 6 2 5 4 4 1 1 0 84 119 2 1984 1 5 4 4 1 8 1 4 2 1 0 89 120 3 1985 1 2 6 3 5 10 4 1 3 2 1 78 116 4 1986 1 3 1 2 5 7 3 3 1 2 1 83 112 5 1987 0 4 6 3 2 6 0 4 2 2 2 73 104 6 1988 2 5 5 4 2 7 1 3 1 2 1 81 114
Persons 1 1983 10 4 15 14 3 14 9 10 3 2 o 197 281 2 1984 2 10 10 14 1 17 o 11 3 2 o 203 273 3 1985 3 2 15 7 9 17 9 3 8 2 3 191 269 4 1986 1 6 4 9 13 12 6 7 1 3 5 198 265 5 1987 o 11 16 4 4 10 o 10 2 5 4 194 260 6 1988 7 15 7 12 7 8 2 7 3 7 5 204 284
the household or person i. It follows that Di = d;/72 fumishes the proportion of months in welfare receipt in relation to the duration of the observation period, and D: = d;/12 . fit denotestheavemgedurationofwelfarereceiptperyear (perwave). The results are also shown in table 4. We can see that the average duration of welfare receipt rises with the frequency of welfare receipt, too.
5 Determinants of Welfare Receipt
Why did households and persons become welfare recipients and how often did that happen? Possibly these determinants are not the same as those which explain the. duration of welfare receipt. In the following we would like to answer the 'simple' question: Which factors determine welfare receipt for households and persons in one or more years of the observation period78
Table 5 shows how probable welfare dependency is for households and persons. P(w,i) denotes the likelihood that a household or person receives welfare in wave w provided that the household or person received welfare in i previous waves. P(w,O) designates the unconditional probability of welfare receipt in wave w. The unconditionallikelihood of welfare receipt is rather small. If, however, a household or aperson has a1ready received welfare in preceeding years, the probability of another welfare episode or of a continuation in receipt is quite high. One should
'Of course it would be bettet to ask wbich factors aud events detemrlne beginnings of welfare episodes. Such an event-histOty approach,however, is rather complicated. Also it is difficult to perform wlth the variables for welfare recelpt available In Ibis data set.
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Table 4: Frequency and Extent of Social Assistance Receipt
alt Houselwlds and Persons
Years of Households Persons Receipt Number Percent D, IY; Number Percent D, IY;
0 6,451 16,995 1 135 44.8 7.7 7.7 362 48.1 8.0 8.0 2 64 21.3 19.9 9.9 159 21.1 21.0 10.5 3 43 14.3 31.4 10.5 100 13.3 31.6 10.5 4 23 7.6 41.3 10.3 51 6.8 41.2 10.3 5 15 5.0 55.8 11.2 32 4.3 55.5 11.1 6 21 7.0 69.3 11.5 48 6.4 69.4 11.6
Total 301 100.0 23.0 9.2 752 100.0 22.1 9.4
Houselwlds and Persons Participating in alt Waves
Years of Households Persons
Receipt Number Percent DI IY; Number Percent D, IY; 0 3,676 9.103 1 64 37.4 7.7 7.7 157 38.8 7.3 7.3 2 32 18.7 19.8 9.9 80 19.7 20.7 10.3 3 24 14.0 29.9 10.0 54 13.3 30.4 10.1 4 17 9.9 41.0 10.3 39 9.6 40.5 10.1 5 13 7.6 55.0 11.0 27 6.7 54.6 10.9 6 21 12.3 69.3 11.5 48 11.9 69.4 11.6
Total 171 100.0 27.5 9.4 405 100.0 26.7 9.3
D, relative proportion of social assistance receipt during tJme of observation; Dl average of soclal assistance reoeipt per year (wave)
especially note that this is only partiy due to the fact that many welfare episodes last more than a year. Table 5 also shows that welfare receipt is a recunent situation for some households or persons.
To ascertain those conditions which determine the probability of welfare receipt we apply a logit model:
exp(E3:jßi) P(y = 1) = 1+ exp(E3:jßi)
y is a dichotomous variable, which has the vaiue 1 if a household or a person repons welfare receipt in one of the years of receipt. The model specifies the assumed relationship between the probability that welfare receipt occurs and the variables 3: i.
Tables 6 presents the results of estimates with some variables assumed to be
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Table 5: Probability of Welfare Receipt
Panel P(w,O) P(w,l) P(w,2) P(w,3) P(w,4) P(w,S) Wave
Households
I 1.8 2 2.0 71.4 3 2.0 66.2 78.0 4 2.0 64.1 74.5 79.5 5 1.9 68.0 72.0 79.0 77.4 6 2.2 77.0 80.4 86.1 86.7 87.5
Person$'
I 1.6 2 1.8 74.5 3 1.9 66.1 792 4 1.9 ·59.9 70.6 73.7 5 1.9 62.2 68.6 77.4 78.6 6 2.3 75.1 82.0 86.4 84.6 87.3
a Members of tbe housebolds, participating in all waves.
Table 6: A Logit-Modell for First Episodes of Welfare Receipt (PeISO!IS)
Variables
Constant Welfare Receipt in Year before Home Care of Siek or Disabled Person Household Sire m~ofHousehcldStte Decrease of Housebold Stte Gender (Women - 1) One-Person-Housebold Warnen One-Person-Housebold Men Age I-S Age6-15 Nationality (Non-German = 1)
Loglikelihood of the model Deviance of the model Deviance of the null-model Pseudo (McFadden's) R1
Number of Persons Of these with WR
* significantat the S%-Ievel.
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Coefficient Std.Error
-5.503* 5.562* 0.952*
0.123 0.081 0.142
0.046 0.028 0.530* 0.139 0.991* 0.127 0.188* 0.080 0.619* 0.166
-0.152 0272 0.406* 0.135 0.330* 0.101 0.290* 0.086
-3,356.76 6,713.52
12,239.25 0.45
60,799 1,257
important for causing welfare dependency9. The model refers to all persons who were tteated as existent in at least one of the years of receipt. Thus, the nwnber of data sets is identical with the nwnber of persons in the years of receipt.
The following results were obtained by applying the logit-model:
- The most important determinant for welf are receipt is earlier 'welfare experience': If a person has already received welfare in previous years the probability of remaining a welfare recipient or of becoming a welfare recipient again increases sharply.
- Another important factor which boosts the probability of welfare receipt is the presence of a person in the household which requires some sort of special home care, be it nursing care or home medical or psychological care.
- 1t should be noted that changes in household size are more important than household size itself. The probability of welfare receipt rises as household size increases and also as it decreases. 'This may be caused by different events which we will investigate in more detail.
- Gender is another important factor. Women are more likely to become welfare recipients than men, this holds especially in one-person-households. 10
- Lastly, nationality exerts strong effects. Persons with non-German nationality today are much more at risk to become welfare recipients than are Germans. But, as the next section will show this variable does notdetermine duration of welfare receipt.
6 Duration 01 Wellare Receipt
One result of section 3 was that only few households and persons receive welfare permanently. Thus, we rnay suppose welfare dependency generally consists of episodes limited in time. To adequately analyze duration we have to distinguish two aspects: duration of episodes and the frequency with which such episodes occur in the life course of individuals and of households. In the following we will focus on the duration of episodes.
1t is not easy to define episodes of welfare receipt in the SOEP. We only know how many months a household has received welfare in a single year. We do not know exactly when welfare receipt began or endedY Episodes of welfare dependency may, therefore, not be placed and computed exactly. The nurnber of months of welfare receipt in the single waves or years of receipt can be regarded as parts of
'Por a discussion of different causes for welfare receipt dui"ing the life course in Gennany cf. Hauser/Bemtsen 1991; Giesecke 1987; Infratest 1986; Klein 1987; Neubaner 1988; Schulz 1989.
IOOther models have shown that age has additional effects. Especially older persons have a bigher ris!< of welfare dependency.
11m the new British Household Panel or PSID !bis problem may not exist for information about welfare receipt but also for other parts of the data sets.
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episodes. However, we do not know if these parts belang together and form a coherent longer episode or represent single episodes. For example, a household which has participated in two panel waves and which reported eight months of welfare receipt in the fust wave and six months in the second wave may be afflicted by two different episodes-up to teu months apart-or there might have been just one episode persisting for 14 months.
More generally the problem may be described as follows: Let 8i; be the number of months with welfare receipt for the household ar pen;on i in the year of receipt of the wave j. If Bi; = 12 and 8i;:l:l = 12, we can suppose that these months are parts of one coherent episode of welfare receipt However, if Bi; < 12, there are several possibilities for positioning: We can either construct one continuous unit of welfare receipt or-at least-two shorter ones.
To define episodes we will have to assume how months of receipt are positioned in a panel wave. We will identify borderline cases whlch mark possible locations of episodes. We will then suppose that an good location of these episodes is somewhere between these extreme cases. This does not salve the problem completely but it does allow us to proceed with a meaningful analysis. There are three methods far defining episodes: 12
Maximum Concept: Months of welfare receipt 8i; are arranged in such a way as to result in as few episodes as possible lasting as long as possible.
Minimum Concept: Months of welfare receipt 8i; are arranged in such a way that there are as many episodes as possible which are as short as possible.
Total Concept: Months of welfare receipt 8i; during the observation period are added and considered as one episode. Strict1y speaking, this is no episode concept Nevertheless, it makes sense to regard this total duration of welfare use, too.
We suppose a episode to be right-censored if a household or pen;on reports 12 months of welfare receipt in the last wave it, he or she participated in. A episode might be left -censored if 12 months receipt of welfare are reported in the same wave a household or person entered the panel. 13 Since we have no further information and as relatively few episodes are affected we neglect the problem of left-censoring.
Table 7 displays the number and duration of episodes construed under the three assumptions mentioned above. The analysis refers to al1 honseholds or persons (including children) which participated in at least one wave or one year of receipt of a panel wave (see table 1 and 2). Results for households and persons are very similar. If we take into account how the data were constructed this creates no surprise. Total time of welfare receipt amounts to about 23 months. This is less than one third of 72 months, i.e. of the maximum time of receipt possible. On average total time spent in receipt involves 1.2 to 1.4 shorter episodes-depending on whether we apply the
12The exact a1gorithm can be obtained from the authors. "According to theminimum conceptleft-ceosoring isalsopossible if ahouseboldreported lllpOlllh<;
of welfare receipt. We do not bave sucb cases in OUt data set, though.
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Table 7: Episodes of Welfare Receipt Based on Different Definitions
Episode Households PetSODS
Definition No.of Censored Duration No.of Censored Duration Episodesa Episodes in Monthsb Episodes" Episodes in Monthsb
Max. Concept 355 (1.2) 123 17.6 871 (1.2) Min. Concept 433 (1.4) 123 11.3 1,025 (1.4) Total Concept 301 (1.0) 119 22.9 752 (1.0)
a Average number of episodes per household er person in parenthesis. b Measured as median with product-1imit-<:Stimate.
314 17.2 314 11.4 313 23.3
maximum or minimum concept. Qnly few households ar persons partake in mare than one episode of welf are receipt during the observation period. When we look at the median duration of episodes the differences between the minimum and the maximum concept are not revealed to be very !arge either. Median duration ranges between 12 and 18 months. We obtained qualitativly similar descriptions even though we had to cope with same uncertainty in constructing episodes.
The median duration of episodes obscures !arge differences between single households and persons-as is revealed by a simple survivar function. In figure 2 we ptesent survivor functions far households (far persons the results are quite similar) which are estimated according to the three methods (see above) by which episodes may be constructed. Quite apart from these methods it appears tha! same households are characterized by very short welfare episodes. A significant proportion, however, remains dependent on welfare far a longer time. Whether welfare receipt is a short or long term phenomen cannot be answered in a straightforward way. Social reality is again more complicated than such a alternative suggests.
Why does the duration of welfare receipt vary so much? A causal interpretation notwithstanding figure 2 a1ready gives same clues. The probability oflea ving welfare is high at fust but then declines swiftly. In other words: The more extended a episode is the stickier the state of being on "welfare" becomes.
This can be described by the concept of transition rate (hazard rate):
r(t) = lim P(t< T< t+Llt I T> t) .:11-+0 Llt
The hazard rate indicates the conditional probability of leaving welfare at time t provided welfare receipt has not yet ended up to this time. Since each survivar function corresponds to adefinite hazard rate the survivar functions in figure 2 may be represented by hazard rates. It is easy to 'smooth' our data if we simply assume that the duration of welfare episodes is distributed in a particular way: Considering the complete spectrum of possible distributions we think our data can be described adequately by a log-logistic distribution. This distribution approximates the empirica1
14
Figure2: CwnulativeProportionsofWelfareRecipiemsSurvivingBasedonDifferent Definitions of Episodes and Measured by Household
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
.... '.
"
Max.Conc
. Min. Conc
Tota1Conc
....................................... ~ ............... ~ .............. . ..... _-
--------.... ......... _--
O%TI-,,,.-,-r-,,-.-.-r.-r-,,-.-,-r.-r-,,~-.~
o 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 Dotation of Welfare Use in Months
Source: German Socio-Economic Panel. Panel Wave 1-6.
distribution of the duration of welfare episodes relatively well-even when we do not allow for further determinants.
When we estimate the log-logistic distributions far the episodes represented by survivar functions in figure 2 the conesponding hazard rates are easily calculated. Figure 3 displays the results and con1irms our assumptions: The transition rate, the chance to escape from welfare receipt, is high at the start and declines as welfare receipt continues.
Calculating hazard rates provides a good start far an analyses of additional detenninants of the duration in welfare receipt. We need to develop a "hazard rate model": here the "dependent variable" is not the duration of welfare episodes but the. transition rate. We hope to find out which factors determine the chances to leave the welfare raUs.
In our analysis we worked with the foUowing log-logistic model:
6. >.(>.t)6-t r(t) = , . ",\& , >. = exp(L:z;ß;).
15
Figure 3: Estimated Transition-rates from Welfare Receipt According to Different Definitions of Episodes (Measured at the Household Level and Based on a Loglogistic Distribution)
0.06
0.05
0.04
0.03
0.02
0.01
....... : .... .. ... Max. Concept
......
.............•.•...........
"-",
Min. Concept
Total Concept
" ....... ,
......... --.-..-
-------------
........ .............................................. .
0+1.-"-,,,~.-,,",,-.,,~.-,,""~ o 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72
Dutation of Welfare Use in Montbs
Souree: German Socio-Economic Panel. Panel Wave 1-6.
A is the parameter which is seen as dependent on the variables Z j. 6 is the shape parameter which specifies the kind of time dependence of the transition rate; it will be estimated as a simple parameter.
In table 8 we present the results of estimating the duration of welfare episodes. The model is only applied to adults not to children The welfare episodes of children are not included since we treated the presence of children in a household as covariables. 14
The model involves the following variables (but for the number of children all variables were coded as dummy variables):
- Household size: This variable has no significant effect, though there is one exeption. For women in single-person-households a longer duration of welfare receipt is characteristic; their hazard rate, their chance of leaving the welfare rolls,
"We clid not include a dummy variable in the model with whicb we wonld hope to contral wbether a episode refleets • single eontinuous uni! of we1fare receipl or is part of • series of episodes. Sucb. variable clid not prove to be a strang inclicator.
16
Table 8: Log-logistie Model for the Transition-IRte from Welfare Receipt for Adult Persons
Variables Max.Con. Min.Con. TotalCon.
Constant -2.549" -2.297" -2.776" (0.092) (0.082) (0.117)
One-Person-Household Men 0.079 0.218 0.276 (0.234) (0.205) (0.278)
One-Person-Household Women -0.545" -0.194 -0.543" (0.134) (0.117) (0.167)
Ageover 60 -0.486" -0.642" -0.514" (0.167) (0.151) (0.214)
Horne Care of Siek or -0.883" -0.800* -1.020" Disabled pezson (0.157) (0.147) (0.196) Number of Children 0.041 0.013 0.050
(0.050) (0.046) (0.062) New Child in the Household -1.299" -2.305" -1.144"
(0.300) (0.449) (0.255) Natlonality (Non-German = 1) 0.007 -0.129 0.109
(0.114) (0.104) (0.140) Log(Shape Parameter) 0.382" 0.396" 0.253"
(0.043) (0.038) (0.049) Shape Parameter 1.465 1.486 1.288
No. of Episodes 602 702 514
x.z 87.26 95.62 74.26
standarderror in parentheses .• significant on the 5%-level.
is much lower. On the whow, however, gender differences with respect to the duration of welfare episodes are not prominent
- Age: Older persons-persons above the age of sitxy-have a significantly lower chance to leave welfare.
_ Persons in need 0/ constant care in the household: This factor is even more important and clearly results in prolonged welfare receipt.
_ Number 0/ children in the household: To our surprise this variable does not affect the duration of welfare receipt. Of course this does not indicate !hat the presence of children does not increase the probability of becorning a welfare recipient. If the number of children changes while welfare is received this will, however, extend duration of welfare receipt Nevertheless, we should be cautious about causa! inferences since having a child becomes more likely the longer a welfare episode
lasts.
_ Nationality:· It is remarkable !hat this dummy variable does not significantly effect the duration of welfare episodes.
17
- Shape Parameter: In spite of the covariables the shape parameter Ii of the log-logistic distribution is still significant and bigger than 1. There exists an unexplained negative serial corre1ation between time spent on welfare and probability of exit: The longer a welfare episode lasts the more difficult it is to leave social assistance roUs, the harder it is to tenninate a "welfare career".
These effects when regardedqualitatively are moreor less independent ofhow we define welfare episodes. Table 8 shows similar results for each of the three methods, especially as regards the significant coefficients.
7 Summary
The dynamics of welfare receipt are not properly understood monocausally-even if such a view informs official statistics-and it is impossible to chart a direction for their development. A dynamic analysis of welfare receipt needs to reflect on how risks and chances combine over time. Only then will may we expose the effects of welfare receipt as weH as reveal the potentials for overcorning long-tenn welfare dependency.
Analysis of welfare receipt with SOEP data shows that being on welfare in Gennany is a relatively short-term situation in an individual's life cycle. Even if we, due to restrictions of SOEP, cannot determine specifically why welfare receipt starts we were able to identify some general determinants of the risk of becoming a welfare recipient. Previous receipt of welfare, a person in need of continuous care in a household, changes in household size, single-person households of women and non-Gennan natiouality were found to determine the beginning of a welfare episode. These determinants-with the exception of nationality-alsoprolong welfare receipt or inhibit leaving the welfare roUs. We could also show how the ability to escape from welfare differs substantially by age group.
An analysis of welfare receipt based on life events conld revea1 sorne dynamics of welfare receipt. It provided a starting point for social intervention and administrative support. Even after 6 waves the SOEP-as weIl as other data bases which are representative for the country as a whole (cf. the overview in Fischer/Roth 1986)does not include enough welfare recipients to allow for a detailed analysis for this group. One reason for this sorry state of affairs is that in sampling asylants, residents of social institutions and homeless persons-all of thern "classic" welf are subgroups-have been systematically excluded. With further analysis based on the LSA we hope to find out also the determinants of welfare recipiency of these subgroups.
18
8 References
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Bane, Mary Jo; Ellwood, David T., 1986: Slipping into and out of Poverty: 1be Dynamics of Episodes. The Journal of Human Resources 21:1-23.
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Buht, Petra; Ludwig, Manila!, 1991: Armutsdynam~1I- Zeiranalysen in der Armutsforschung der USA und der Bundesrepublik Deutschland. Discuasion Paper No. 8 of the Special CoUabomtive Programme No. 186 at the University Bremen.
Duncan, Greg J.; Gustafsson, Bjll11l; Hauser, Richard; Hausman, Pierre; Jenkins, Stephen; Messinger, Hans; Noian, Brian; Ray, Jean-Claude; Rodgers, W'illard; Voges, Wolfgang 1991: Poverty and Social Assistance Dynamics in the United Stares, CIIIUUl4 and Europe. Ann Arbor, MI: University of Michigan (Institute for Socia! Research), mimeo.
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Ellwood, David T., 1986: '1Ilrgeting Would-be Long-7erm Recipients of AFDC. Washington, DC: U.S. Department ofHea1th and Human Services, Office ofthe Assistant Secretary for Planning and Evaluation.
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Hauser, Richard; Berntsen, Roland, 1991: Einkommensarmut-Detenninanten von Aufstiegen uud Abstiegen. In: R. Hujer et al. (eds.), Herausforderungen an den ßtJhlfahrtsstaat im strukturellen Wandel. Frankfurt/M.: Campus.
Hauser, Richard; Semrau, Peter, 1990: Trends in Poverty und Low Income in the Federal Republic of Germany. Working Paper of the Special Collaborative Programme No. 3 at the Univemities of Frankfurt and Mannheim.
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Klein, Thomas, 1987: Sozialer Abstieg und Verarmung von Familien durch Arbeitslosigkeit-eine mikroanalytische Untersuchung für die Bundesrepubllk Deutschland. FrankfurtjM.: Campus.
Leibfried, Stephan, 1979: The United Ststes and the West Gennan Welfare SysteniS: A Comparative Analysis. Corne/l International LawJournal Sommer 1979, 12,2: 175-198.
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Leisering, Lutz; Voges, Wolfgang, 1990: Paths through Social Assistance. Chances and Problems 0/ a Longitudinal Approach to the Analysis 0/ Poverty in the ~lfare Stare. Working Paper of the Special Collaborative Programme No. 186 at the University of Bremen.
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Plotuick, Robert, 1983: Thmover in the AFDC Population: An Event Histoty Analysis. Journal 0/ Human Ressourr:es 18:65-81.
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Voges, Wolfgang; Leibfried, Stephan, 1990: Keine Sonne filr die Armut. Vom Sozialhilfebezug als "Karriere" -Obue umfassendere Infonnationkeine wirl<same Armntsbekllmpfung. Nachrichtendienst des Deutsehen Vereins fYr Öffentliche und Private Fürsorge 70: 135-141.
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