PREDICTING THE EFFECTS OF CHANGES IN WELFARE PAYMENTS ON THE PROBABILITIES OF RECEIVING ALTERNATE SOURCES OF INCOME: THE CASE OF HOMELESS PERSONS IN LOS ANGELES

This article investigates the role that changes in welfare payments are likely to have on the earnings behavior of homeless persons. Using a cross-sectional random sample of 1,489 homeless persons in Los Angeles, the author analyzes the marginal effect of reducing public transfers on (a) the probability of earning and (b) the level of income from various traditional and nontraditional sources. This procedure allows the author to control for a number of important factors (including background, human capital, and social network variables) that may also influence the probability of earning income. Findings suggest that reducing government benefit income by $100 increases the probability of receiving income from traditional and nontraditional sources by 1.37% and 2.18% respectively. Among the latter are selling items on the streets and "other" (nonspecified) sources. It is concluded that welfare reform measures may in fact create additional societal costs as former welfare recipients turn to alternative forms of income.