A notable feature of most developed economies in the postwar period has been a seemingly inexorable growth in expenditures on entitlements. Although most nations have made attempts to restrain that growth through legislation, administrative action, and other policy mechanisms, for the most part these attempts have not met with success. While there are good and obvious political reasons for this failure – sometimes the programs have strong constituencies, for example – the causes of this growth are still not completely understood.

The role of demographic forces in contributing to the growth of social welfare expenditures in the United States is the subject of this chapter. This issue has been a topic of considerable interest in policy discussions surrounding welfare but little formal analysis. There is a perception among the public and in some policy and research circles that the growth of the main cash program in the United States, formerly called Aid to Families with Dependent Children (AFDC), has been the result of an increase in the number of female-headed families, most commonly (in the public eye) because of increases in the rate of out-of-wedlock childbearing. Yet this has not been shown, and economic research on the determinants of participation in welfare programs has concentrated instead on other factors – for example, the influence of the level of the welfare benefit relative to private labor market opportunities.