It is widely believed that welfare participation in one generation encourages welfare participation in the next generation. This perception helped motivate the 1996 overhaul of the welfare system in the United States: it was hoped that the combination of time limits and work requirements that were imposed as part of the Personal Responsibility and Work Opportunity Reconciliation Act would reduce mothers' participation in (and children's exposure to) welfare programs. Limiting the length of time that children experience welfare is expected to reduce the likelihood that they participate as adults.

There are at least three different reasons why welfare receipt might promote dependence among future generations. The most frequently discussed idea is that parents' participation may lower children's distaste for welfare. While Moffitt (1983) and others have suggested that stigma may act as an important participation deterrent for many families, children who grow up on welfare may learn to think of it as the default means of support. Another reason is that such children may face lower participation costs as adults since they will already have had first-hand experience with how the system works. A third story is that parents' participation reduces their offspring's informal access to job opportunities. Welfare parents are less connected to the labor market, so their children may be less likely to learn about jobs that are available, useful job search strategies, or proper work etiquette.