In 1996, the US federal government passed welfare reform legislation.
The Personal Responsibility and Work Opportunity Reconciliation Act
(PRWORA) altered greatly the circumstances under which families can
receive public assistance, limiting receipt to 5 years, requiring work after
24 months, and allowing states to impose sanctions and other requirements
such as family caps (Greenberg, 1999). Because many countries
reforming their social welfare system look to the USA as one possible
model, analyses of the effects of US welfare policy on children are of relevance
internationally. We find that the population receiving welfare in
the USA is highly diverse and that background differences and early
experiences explain most of the associations between welfare and poverty
and children's outcomes. After taking account of these background
differences, we find that children who experienced stable albeit disadvantaged
economic conditions did not have worse outcomes than children
who were never poor. Nor were children whose families' economic
fortunes improved at higher risk for poor outcomes. However, children in
families whose financial circumstances declined or fluctuated were more
at risk for behavioural problems and scored lower on reading tests than
were children who had never been poor.