For poor people it is the classic Catch-22. Ever since the welfare
reforms of the '90s, most aid recipients have been required to
work to qualify for the Temporary Assistance for Needy Families
(TANF) program. The problem is, since you need dependable transportation
to get to work, very often you need a car. But if you own a car
worth more than $1,000 you no longer qualify for aid in nine states,
while other states have a higher limit.
"The policy appears to be contradictory," says James X. Sullivan,
Notre Dame assistant professor of economics. "A lot of states
have recognized this and have raised the exemption or removed
the value restriction on vehicles altogether, but not all."
Upon analyzing data on vehicle ownership and expenditures, Sullivan
found that aid-recipient-ownership of vehicles has, in fact, increased
in those states with loosened value restrictions. "A single mother
with no more than a high school education in a state with a $1,000
vehicle limit is 17 percent less likely to own a car than a comparable
single mother living in a state that does not pose a limit on
vehicles," Sullivan notes. Additionally, he found that the rate
of vehicle ownership increases 5 percent for every $1,000 increase
in the vehicle-value limit in those states that still impose limits.
Easing the restrictions appears to have had the intended effect
of increasing auto ownership, presumably helping employment efforts.
Sullivan says some economists argue that removing or raising
the restrictions is a mistake because it offers public-assistance
recipients an incentive to invest in an asset that depreciates
rather than in a savings account which would appreciate in value.
Ultimately this is not in the best interest of the poor, these
economists assert.
(July 2004)
