Publications
Welfare Reform: Four Years Later
by Douglas J. Besharov & Peter Germanis
This article appeared in the Summer 2000 issue of the Public Interest.
Four years ago this August, a Republican Congress pushed a
reluctant President Clinton to sign a bill that ended welfare as we had known
it. But since the 1996 welfare-reform act expires on September 30, 2002, its
eventual fate is not yet clear. Much will depend on how the law's impact is
viewed. So far, it certainly seems to be a success. By June 1999, welfare rolls
had fallen an amazing 49 percent from their historic high of five million
families in March 1994. That's nearly seven and a half million fewer parents and
children on welfare.
It has suited the purposes of both the Clinton administration
and the Republican Congress to claim that "welfare reform" has caused
this dramatic decline--and that over two million former recipients are now
working because of the new law. But that's not quite true. The strong
economy--and massively increased aid to the working poor--almost certainly have
had more impact than welfare reform per se. Moreover, as many as 40 percent of
the mothers who left welfare are not working regularly but are instead relying
on support from boyfriends, family members or friends, and other government and
private programs.
Both liberals and conservatives have found it convenient to
ignore this reality--conservatives because it gives the "Clinton
economy" and the president's success in expanding aid to the working poor
too much credit and Republican welfare reform too little, and liberals because
it suggests that many welfare recipients didn't "really need"
government benefits. But the failure to be clear about why the rolls have
declined so much prevents an accurate accounting of the law's impact--and what
needs to be done next.
Welfare's rise and fall
For nearly 60 years, it seemed that welfare rolls could only
grow. With the exception of a few short-lived declines, the rolls grew from
147,000 families in 1936 to about 5 million in 1994, from less than 1 percent of
all American families with children to about 15 percent.
Between 1963 and 1973, there was a striking 230 percent
increase--not because of a bad economy (unemployment was actually quite low
during most of this period) nor simply because of an increase in family
breakdown (both divorce and illegitimacy were rising, though not nearly as fast
as the welfare caseload). Rather, the increase was largely the result of
programmatic changes that made it easier for income-eligible families to get
benefits, as well as the destigmatization of being on welfare. Where once
welfare agencies discouraged applicants (by pressing them to seek other means of
support or by imposing a grueling eligibility process), the obstacles to
enrollment were now lowered. New York City's rolls almost tripled in only five
years (between 1965 and 1970) under liberal mayor John Lindsay. The same
liberalization was taking place across the nation, as welfare came to be seen
more as a "right" than as a temporary safety net. Some of the drive
behind this national movement was undoubtedly the long-overdue repeal of Jim
Crow-like rules in the South that kept African-American mothers off welfare.
After this liberalization, caseloads stayed roughly steady
for almost 15 years. They rose again, by 34 percent, between 1989 and 1994,
largely because of the weak economy. But there were other important causes: a
spike in out-of-wedlock births among some groups; an increase in immigrants
applying for means-tested benefits, either for themselves or their American-born
children; half-a-decade's outreach efforts to get single mothers to sign up for
Medicaid (and thence welfare benefits); and an increase in child-only cases,
perhaps as a result of the spread of crack addiction among mothers and an
increase in cases of parental disability.
Regardless of what caused rolls to rise in the past, they
rarely fell back very far. Thus no one predicted the recent halving of welfare
since 1994. Fifteen states have had declines of over 60 percent; three report
declines of 85 percent or more. Indeed, almost everywhere, welfare rolls are way
down and work is way up. For example, never-married mothers, the group most
prone to long-term welfare dependency, were 40 percent more likely to be working
in 1999 than in 1994. What's responsible for the decline in welfare and the
increase in work?
The end of welfare as we know it
In 1992, Barbara Sabol, then New York City's welfare
commissioner, visited two of her own welfare offices dressed in a
"sweatshirt, jeans, and scarf or wig." She told the welfare workers
she needed a job in order to care for her children. But try as she would, she
could not get the workers to help her find a job.
The same year, candidate Bill Clinton showed that he was a
New Democrat by ambiguously promising to "end welfare as we know it."
After the election, his administration granted many state waivers that, among
other things, toughened work requirements and imposed partial time limits on
benefits--ultimately culminating in the Republican-inspired 1996 welfare-reform
law.
T he Republican bill bore a superficial resemblance to what
Clinton proposed, so both sides were able to claim credit for reforming welfare.
But the changes in welfare were largely based on the Republican plan. While both
bills imposed time limits on benefits, the Clinton proposal included an
entitlement to a public job afterward. The Republican bill had no such
entitlement, and also transformed the program into a capped block grant, which
gave states an incentive to cut caseloads because they would get to keep any
unexpended funds.
Today, Sabol would find that welfare workers are eager to
find jobs for their clients. Across the nation, the culture of welfare offices
has changed--from places where mothers are signed up for benefits (with almost
no questions asked) to places where they are helped, cajoled, and, yes,
pressured to get a job or rely on others for support. The U.S. General
Accounting Office described the change this way:
Under states' welfare reform programs, participation
requirements are being imposed sooner than under JOBS [the old welfare regime],
with many states requiring participation in job search activities immediately
upon application for assistance. Before reform, recipients could wait months--or
even years--before being required to participate, and many never were required
to participate because of the lack of sufficient services and staff.
Many welfare offices are now "job centers," where
workers help applicants and recipients find employment. Depending on the office,
they teach how to write r�sum�s and handle job interviews; provide access to
word processors, fax machines, telephones, and even clothes; offer career
counseling and financial-planning services; and refer applicants to specific
employers with job openings. In a survey of former welfare recipients in Texas
who left the rolls in December 1996, over 60 percent said the welfare agency
"gave me the kind of help I needed."
Some of this is boosterism, plain and simple, with welfare
workers giving young mothers the moral support they so often need. As one
caseworker said, "Some of these women never thought that they could get a
job. We give them the confidence to try." But the assistance also can be
quite concrete. Besides large expansions in Medicaid and child care, many states
provide cash assistance to families on welfare to help them leave or stay off.
These payments range from a few hundred dollars to over $2,000. For example,
Texas provides stipends to help such families pay for employment-related
expenses, such as transportation, education, and training. Virginia gives
transportation allowances for up to a year after leaving welfare. And about a
dozen states have created or expanded EITC-like tax credits for low-income
families which can be used for any purpose.
In a real break from the past, however, few welfare agencies
seem to put any stock in job training. Administrative data from the states
indicate that less than 2 percent of adult welfare recipients are in some sort
of formal job-training program. Instead, agencies emphasize immediate job
placement and on-the-job work experience. This gives mothers much-needed work
experience, but it also adds to the pressure they feel to leave welfare or not
apply for it in the first place. For there is also a sharper edge to welfare
reform.
In most places, the welfare application process has a new
element: "diversion." Diversion is a straightforward effort to keep
families off welfare. It is encapsulated in two simple questions now asked of
welfare applicants: Have you looked for a job? Can someone else support you?
Many welfare agencies maintain a bank of phones that applicants must use to call
as many as 20 potential employers before they can even apply for benefits. When
told of these requirements, many applicants simply turn around and walk out.
In New York City's "Job Centers," for example, all
applicants are encouraged to look for work (and offered immediate cash support
for child care) or to seek support from relatives or other sources. Those who
still decide to apply for welfare are required to go through a 30-day assessment
period during which they complete the application process and undergo a rigorous
job-readiness and job-search regimen involving many sessions at the Job Center
and other offices. At the end of this period, eligible able-bodied adults who
choose to receive assistance are required to participate in the city's workfare
program. As a result, New York City officials estimate that the percentage of
mothers entering these Job Centers who are eventually enrolled has fallen by
about 40 percent, from about half to about a third of applicants.
The hassle factor
Being on welfare has also changed but not as much as many
people think. When welfare reform was being considered by the Congress, most
analysts expected the states to establish large, mandatory work programs in
order to satisfy the bill's "participation" requirements. However,
because those requirements were set in relation to 1995 caseloads, the sharp
decline in the rolls since then has obviated the need for such programs--and few
places beyond Wisconsin and New York City have established them.
Instead, almost all states require recipients to sign
"self-sufficiency agreements" describing their plan for becoming
self-sufficient within a specified time frame. Iowa, for example, requires all
able-bodied recipients without infant children to develop and sign a Family
Investment Agreement. Failure to sign or comply with this agreement can result
in immediate and complete termination of cash assistance. About 10 percent of
those who begin this process seem to have their benefits terminated for failure
to sign or comply with the agreement.
In addition, most states now impose various behavior-related
rules. Parents are required to have their children immunized and to send them to
school; in a few places, mothers and fathers must even attend family or
parenting skills classes. Failure to comply with these requirements can result
in the welfare grant being reduced--and, in about 37 states, even terminated.
According to state administrative data, in 1998, 6.2 percent (or 180,000) of the
2.9 million families that left welfare did so after a sanction. In some states,
the percentage was as high as 30 percent.
These and other new requirements raise what economists would
call the "cost" of being on welfare. By a rough calculation that
assumes recipients value their time at the minimum wage, these kinds of
requirements can reduce the advantage of being on welfare versus working by
about 50 percent. In very low-benefit states, the advantage can fall to zero.
This amounts to the reintroduction of a long-gone aspect of
being on welfare, "hassle." And it clearly leads some welfare
recipients to seek other ways of supporting themselves. When these new
requirements are explained to applicants and recipients, they often say things
like: "I guess I might as well get a real job" or "I might as
well move back home." Or they just walk out of the office--or stop
responding to warnings that they will lose their benefits if they do not
participate in work-related activities.
In the 1996 Texas survey of former recipients, about a
quarter said that important factors for leaving were either "unfriendly
caseworkers" or "new program requirements." And in a survey of
those who left welfare in South Carolina between January and March of 1997, 60
percent said they felt "hassled," and 13 percent said that is why they
left. About a third said that the state's welfare program "wants to get rid
of people, not help them." A similar survey was conducted in Wisconsin for
those who left welfare in 1998, and the results were about the same. (Of course,
hassle may have led others to leave welfare, though they cited some other
reason, such as finding a job.)
These are dramatic changes in welfare, and it is natural to
assume that they are responsible for recent caseload declines. But welfare
reform has coincided with the strongest economy in at least three decades,
coupled with an unprecedented increase in aid to the working poor. The increased
returns for low-skilled work are probably as responsible for the decline in
welfare, and perhaps more so.
Work pays
The strong economy, most experts agree, has played a key role
in the welfare declines. The rolls started falling in 1994, two years before the
enactment of the 1996 welfare law, and before the welfare waivers that allowed
some states to "get tough" on welfare recipients could have had much
impact. The weak economic conditions that helped drive up welfare rolls during
the Bush presidency ended a few months before George Bush left office (not soon
enough, of course, to affect the election). Since January 1993, the economic
news has been truly remarkable: Real per capita Gross Domestic Product up about
25 percent in real dollars, 20 million new jobs, the highest ever
employment-to-population ratio (64.3 percent), and the lowest unemployment rate
since 1970 (4.1 percent).
Most relevant to the welfare decline has been the increase in
average real earnings, especially among low-wage workers. For example, since the
second quarter of 1996, weekly earnings for full-time workers have grown 5.3
percent. The gains for low-income, full-time workers have been even larger: 7.0
percent for those at the 25th percentile of earnings and 8.5 percent for those
at the 10th percentile of earnings.
Also helping to reduce caseloads has been the progress in
fulfilling Clinton's promise "to make work pay." Both Democratic and
Republican Congresses have supported (the latter sometimes reluctantly)
Clinton's initiatives for massive increases in government aid to the working
poor. So much so that this spending now far exceeds what was spent on the old
AFDC program. Between 1993 and 1999 alone, total aid to the working poor
increased by about $25 billion a year, from about $40 billion to about $65
billion (in 1999 dollars). At its height, combined federal and state spending on
AFDC never exceeded $30 billion.
The Earned Income Tax Credit (EITC), for example, provides a
cash subsidy to low-income, working parents. Between 1993 and 1999, total
expenditures on the EITC rose from $18 billion to $30 billion (all in 1999
dollars). The increases for particular groups were striking: For example, the
income supplement for a single mother (with two children) working at the minimum
wage more than doubled, rising from about $1,700 to about $3,900 per year.
Child-care aid has also expanded, becoming all but an
entitlement for those families leaving welfare. Total annual federal and related
state child-care expenditures rose from $8 billion to over $12 billion in the
same years, providing child-care slots for well over one million additional
children. Gaps in coverage remain, and take-up rates may be lower than many
advocates say are appropriate (although the latter is probably because so many
parents already have access to government subsidized child care or have other
family members who can care for their children). In any event, subsidized child
care is obviously helping many low-skilled and low-earning mothers work.
Medicaid eligibility, too, has been substantially expanded.
While Medicaid was once limited primarily to families receiving welfare,
sequential expansions for pregnant women and children (beginning in the mid
1980s) have taken eligibility to between 100 and 250 percent of the poverty line
(depending on the child's age and the state program). The welfare-reform law
gave states authority to expand coverage for adults, and some have done so. As a
result, total Medicaid and related health-care costs for low-income families
with children rose from $15 billion in 1993 to $24 billion in 1999--making
millions more children (and sometimes families) eligible.
The absence of health-care coverage is not an insuperable
barrier to work for mothers who are healthy and who have healthy children. But
for those mothers who have chronic illnesses, or whose children have them, the
threat of losing coverage can be a substantial disincentive to leaving welfare.
Clinton also managed to push through the
Republican-controlled Congress a two-stage increase in the minimum wage--from
$4.25 an hour to $4.75 an hour on October 1, 1996, and then to its current $5.15
an hour on September 1, 1997. Moreover, additional expansions in aid to the
working poor are looming. The child tax credit and Child Health Insurance
Program will grow as they are fully phased in. The Clinton administration has
proposed further expansions in child care and the EITC, and has taken steps to
expand participation of low-income working families in Medicaid and Food Stamps.
It also continues to push for increases in the minimum wage.
Explaining the decline
A number of respected researchers have used econometric
models to estimate how much of the caseload decline was caused by welfare reform
itself compared to the economy and increased aid to the working poor. The models
they use, unfortunately, are extremely sensitive to the assumptions and
variables incorporated, making their findings imprecise. Nevertheless, most of
the studies lead to a similar conclusion: In the early years of the caseload
decline (1994-96), around 40 or 50 percent of the decline was due to the economy
and the stronger job prospects for low-skilled workers. Later in the economic
expansion (1996-99), the same and other studies conclude that the economy
accounted for only about 10 or perhaps 20 percent of the decline.
Many studies also attempt to gauge the impact of the
increased aid to the working poor. This decade-long effort to "make work
pay" may be an even more important factor in the declining rolls,
accounting for perhaps 40 to 50 percent of the initial declines and 30 to 40
percent of the later declines.
As for welfare reform itself, these studies usually estimate
its impact at from 15 to 20 percent for the early declines and about 30 to 40
percent for later ones. (Most studies also find that the failure to increase
welfare benefits, a 20-year trend, reduced rolls another 5 to 10 percent.)
Consolidating the estimated impacts on initial and later declines (and weighting
them for the size of each), here is what the studies suggest: The robust economy
explains 15 to 25 percent of the decline; aid to the working poor 30 to 45
percent; increases in the minimum wage 0 to 5 percent; and welfare reform 30 to
45 percent.
Placing too much confidence in the results of such
econometric models is always questionable. These studies have many weaknesses,
including the failure to include all policy changes, such as heightened
child-support enforcement. Most also fail to consider at least partially
independent demographic factors, such as declines in out-of-wedlock births, drug
abuse, crime, and immigration. We doubt, for example, that increased aid to the
working poor has had as much impact as they suggest; we would attribute more of
the decline to the strong economy and to welfare reform generally. Nevertheless,
these studies were carefully conducted, and their results are roughly
consistent. Thus it seems reasonable to conclude that they correctly reflect the
approximate contribution of these four factors to the decline in caseloads.
It is possible that welfare reform has played a more
substantial role, interacting with the strong economy and more generous aid to
the working poor to encourage more single mothers to try working. By this way of
thinking, the strong economy and more generous aid are necessary but not
sufficient conditions--with welfare reform providing the needed motivation for
people to seek jobs or the support of others who have jobs. After all, we have
had strong economies in the past without concomitant welfare declines; sometimes
welfare rolls have even risen. In other words, the impact of each of the factors
may be greater than would otherwise be the case if they had occurred alone.
The results of randomized welfare experiments, however, seem
to confirm econometric estimates of welfare reform's only partial role in
reducing caseloads. Starting in earnest in 1992, states were granted waivers
from the old AFDC rules, but only if they established rigorous,
random-assignment experiments to measure the impact of their new policies. Many
of these new policies bear a close resemblance to the program restrictions in
new-style state welfare regimes, such as tougher work requirements, time-limited
benefits, family caps, and linking benefits to immunization and school
attendance. The experiments also reflect many of the expansions in benefits that
characterize welfare reform, such as liberalized resource limits, transitional
benefits, eligibility for two-parent families, and earnings disregards (which
allow working recipients to keep more of their benefits). About 10 of these
experiments have yielded findings that provide an indirect measure of welfare
reform's impact on caseloads.
Across all 10 of these waiver studies, and regardless of the
varying combination of program components, the difference between the
experimental and control groups is rarely more than a few percentage points. The
biggest declines in welfare receipt due to welfare reform do not exceed 15
percent or so, often over two or three years. This does not mean that welfare
reform's contribution to the decline is only 15 percent. We recognize that these
randomized experiments are an imperfect measure of welfare reform's potential
impact because they do not capture either its role in discouraging people from
going on the rolls ("entry effects") nor its broader impact on
personal and agency behavior (partly through a change in community values). The
point is that no rigorously evaluated program of welfare reform has ever had an
impact even remotely comparable to what has happened to national welfare
caseloads.
Indeed, sometimes the group receiving the
"reformed" welfare services was less likely to leave the rolls. This
is because most of the waiver experiments, like most state-implemented welfare
reforms, include components that both decrease caseloads (like work mandates)
and increase them (like the expansion of earnings disregards). Thus Minnesota's
"welfare reform," which expanded the state's earnings disregard, asset
limits, and two-parent eligibility for benefits while imposing modest work
requirements, increased caseloads by almost 5 percent for long-term recipients
after 21 months.
Leaving welfare without working
In addition to the often unappreciated contribution of the
economy and aid to the working poor, another significant aspect of the caseload
decline is that so many mothers seem to be leaving welfare without taking jobs.
The best source of data about the families that have left
welfare are surveys of former welfare recipients ("leaver studies")
that have been conducted by various states and by the Urban Institute. Although
they all have some weaknesses, such as low response rates and insufficiently
detailed information, the best studies tell about the same story: Between 60 to
70 percent of those who left welfare were employed at the time they were
surveyed (and 60 to 85 percent had been employed at some point since leaving).
Of those who were working, about 60 to 80 percent seem to work full-time,
earning about $6 to $8 per hour (or about $800 to $1,000 per month). The
remainder worked fewer hours and thus earned less money. (Many studies, however,
exclude the 20 to 30 percent of leaver families that returned to welfare, which
tends to minimize the difficulty some mothers have finding work.)
Broader measures of employment are consistent with this high
level of nonwork among leavers--and also suggest that many of the single mothers
who did not go on welfare are also not working. For example, between March 1994
and March 1999, the number of employed single mothers with children under age 18
increased by 1.251 million (from 5.712 million to 6.963 million). During the
same period, welfare caseloads (almost all including a single mother) fell by
2.430 million (from 5.098 million to 2.668 million). Even if the entire 1.251
million increase in the number of single mothers working in this period
represented those who were previously on welfare (or would have gone on welfare
during the period), they would still amount to only about half of the caseload
decline.
Some mothers who left welfare, of course, may not be
reporting their employment. A four-city study conducted by researchers Kathryn
Edin and Laura Lein in the early 1990s found that about 30 percent of low-income
working mothers and about 50 percent of welfare mothers had unreported work. But
there is no reason why the percentage not reporting work should have grown in
recent years. If anything, the expansions in earnings disregards and the EITC
should have encouraged more low-income mothers to report their employment.
Thus only about 50 to 60 percent of the mothers who have left
welfare (and stayed off) seem to be working regularly. The surprisingly large
number of mothers leaving welfare without then working has been all but ignored
by most commentators, including severe critics of welfare reform. Yet this has
profound implications for the economic and social condition of low-income
families.
Other sources of support
How could so many mothers have left welfare without working?
Work requirements and heightened levels of "hassle," by lowering the
value of welfare, would be expected to cause mothers to leave welfare for work,
even relatively low-paid work. But why would mothers leave welfare without
having a job? The burdens placed on them hardly seem sufficient reason for them
to abandon their only support for themselves and their children.
The leaver studies suggest the answer: These mothers have
other sources of support besides welfare. In South Carolina, for example,
nonworking leavers were almost twice as likely as working leavers to have other
sources of support--including other forms of government assistance, such as
Social Security (13 percent vs. 6 percent) or SSI (20 percent vs. 8 percent);
free housing from a parent or relative (15 percent vs. 10 percent); another
adult in the home to help with the bills (17 percent vs. 7 percent); and help
from someone outside the home (22 percent vs. 8 percent). A study of former
recipients in Milwaukee, conducted by the Hudson Institute and Mathematica
Policy Research, found that over two-thirds of all the mothers who left welfare
received help (e.g., transportation assistance, a place to stay, and food) from
family or friends. Those leavers who were not working were about 15 percent more
likely to be receiving such help (72 percent vs. 63 percent).
Most leaver studies do not identify the sources of support
for working and nonworking mothers separately, but they do reinforce the
importance of other household members or income sources. In Iowa, after families
were dropped from welfare, they were about 33 percent more likely to be relying
on others for a place to stay (25 percent vs. 33 percent). Similarly, in
Florida, where families have begun to lose welfare due to a time limit,
one-third of those who hit the time limit either moved or had a different living
arrangement, such as adding another household member to help with the expenses.
Finally, in Connecticut, 43 percent of the families that left welfare due to the
state's 21-month time limit reported living with at least one other adult six
months after benefit termination. (There is no comparison data for the period
before the time limit was reached.)
When welfare reform was being debated, many experts predicted
increases in such "coresidency" or doubling up arrangements as mothers
were pushed off welfare. So far, however, there is little evidence of
substantial increases in coresidency (or marriage, for that matter). According
to Christopher Jencks, for example, the total number of single mothers residing
with another adult has remained essentially stable since 1988, with no
discernible change after welfare reform. It is possible that many mothers
entered such living arrangements while their total number remained
constant--with as many mothers having left such arrangements because of the
improving economy as entered them because they were pushed off welfare. But
without more data, it is impossible to know for sure.
There is another way that mothers can leave welfare without
working: They can fall back on preexisting coresidency arrangements (together
with other sources of support). Based on a study by Rebecca London, which used
data from the Survey of Income and Program Participation, we calculate that, in
1990, before the declines in welfare caseloads, at least 37 percent of welfare
mothers lived with other adults--18 percent with their parents, 6 percent with a
boyfriend, and 13 percent with others.
These findings may seem surprising, but for many years now
the welfare system has largely ignored the household income in such coresidency
arrangements. Depending on the situation, the income of the grandparents, with
whom the adult welfare mother was living, would not be considered (for example,
if the mother was an adult herself); and the man-in-the-house rule (which denied
benefits to households with a cohabiting male) was abandoned years ago. We would
suggest that when faced with the new work and behavioral requirements, mothers
who had other sources of support sufficient to permit them to forgo welfare
(predominantly those living in households with adequate economic resources)
simply left welfare without looking for work.
It also helps that many of these mothers are still receiving
other government benefits--primarily Food Stamps and housing--which are often
much more valuable than the basic welfare payment. (The continued availability
of Medicaid also encourages mothers to leave welfare without finding work, even
if the family does not sign up for coverage until someone takes ill.) Nonworking
mothers on their own could not subsist on only these benefits, but nonworking
mothers living with others (or getting support from others) could get by.
This is in particular the case in low-benefit states where it
may simply no longer "pay" to be on welfare as opposed, say, to Food
Stamps. In Alabama, for example, in 1999, the welfare benefit for a family of
three was just $164 per month, compared to a food-stamp allotment of $329.
(Moreover, the food-stamp benefit comes with virtually no strings attached,
whereas cash assistance can be accompanied by work and other behavioral
requirements that reduce its value still further.) So mothers in low-benefit
states can leave welfare and not suffer anything like a complete loss of income,
especially if there are other adults in the household that have income.
This makes economic sense. If one assumes that these mothers
value their time at the minimum wage or above, then there is little incentive
for them to engage in work activities for 20 to 30 hours per week to avoid a
sanction that can be as little as $10 to $50 per week. The added income from
complying with these requirements translates into an effective wage of fifty
cents to two dollars per hour. This does not compensate for the lost free time
(what economists call "leisure") that mothers can use, for example, to
care for their children or take a job with unreported income. Data on this
behavior are difficult to obtain, but its possible magnitude is suggested by the
following: Between 1994 and 1998, the number of single-parent families on Food
Stamps that were both not on welfare and with no earnings grew by 10 percent, or
55,000 families. While this is an imperfect measure, it could easily understate
the phenomenon.
The economy and aid to the working poor could also play a
role here, as more households would become economically comfortable enough for
the mother to leave welfare without working. This would be consistent with
earlier patterns. Greg Duncan of Northwestern University and his colleagues used
data from the Panel Study of Income Dynamics (PSID) to determine why mothers
left welfare between 1986 and 1991. (Leaving welfare was defined as receiving
welfare in one year but not the next year.) They found that about one-half of
welfare exits were for work (or a rise in earnings), about a quarter for changes
in marital status or living arrangements, about 5 percent because there were no
children under 18, and the remainder were due to a variety of reasons such as an
increase in other transfer income or a change in state of residence. About
one-third of the earnings-related exits involved an increase in the earnings of
an adult already in the household other than the mother, demonstrating the
importance of shared living arrangements.
These dynamics also explain the behavior of those mothers
Larry Mead of New York University calls the "happily sanctioned." Such
mothers accept less in welfare benefits rather than work or meet other
behavioral requirements. In about 14 states, which include about half the
national welfare caseload, the sanction for noncompliance is only a partial
reduction in benefits--that is, the family's grant is reduced by some percent,
usually representing the mother's share of the grant (about one-third of the
welfare check). These mothers may not actually be happy, but since this
reduction typically amounts to only one-sixth of the mothers' total package of
benefits, one can see why they willingly make the trade-off.
Assessing "welfare reform"
When congressional Republicans were pushing for the enactment
of their welfare-reform bill, opponents predicted widespread hardship--including
sharply increased homelessness. Happily, there is no evidence that welfare
reform has caused substantial increases in homelessness or other indicators of
extreme hardship, such as foster-care placements or substantiated reports of
child abuse and neglect. And despite extensive efforts, journalists have found
few individual horror stories of the harmful effects of welfare reform. As one
administrator said, "We underestimated their ability to get jobs that meet
their basic needs--or to get support from other sources."
For a while, it appeared that incomes of the poorest single
mothers might be edging down--a sign that welfare reform might be squeezing
those at the bottom. A widely disseminated study by Wendell Primus of the Center
on Budget and Policy Priorities estimated that, from 1995 to 1997, the bottom
quintile had experienced an 8 percent drop in income. Even though many of these
mothers were not welfare leavers (nor likely to have gone on assistance before
welfare reform), advocates latched onto this income decline as a sign that
welfare reform should be reconsidered. However, Primus's further analysis after
another year of data has reduced the estimated income loss for this group to
about 4 percent. In the same period, 1995 to 1998, all the other quintiles of
income for single mothers rose, with the middle quintile up 7 percent, going
from $20,617 to $22,063.
But if welfare reform has not been the social catastrophe
some predicted, neither has it lifted large numbers of female-headed families
out of poverty. Thanks to the EITC and other aid, most of the mothers who left
welfare and are working now have more income than when they were on welfare. But
average earnings are only about $12,000 a year. And as we saw, many mothers
simply left welfare--without working. Unless they lived with someone or moved in
with someone earning a great deal more, they probably suffered at least a
partial loss of income.
Moreover, some of those who gained income through work may
not be immediately better off. They also have more expenses. Even if their
child-care costs are fully covered, they still face other work-related expenses,
such as transportation and clothing. And by working, they lose the ability to
earn additional money off the books. Thus their higher income comes at the price
of having to work many hours a week while also raising their children, often on
their own.
There are many weaknesses in the data that underlie the
foregoing conclusions. For example, it is very difficult to find and count the
number of homeless families and individuals, much less get detailed information
on their characteristics. Data on substantiated cases of child maltreatment are
a function of the number of reports received, the ability of the system to
investigate them, and the willingness of states to report them. Even the
much-cited income data used to measure trends in financial well-being are
plagued by numerous problems. Perhaps most significantly, reported welfare
receipt in the Current Population Survey (CPS) is over one-third lower than
indicated by administrative records, a problem that has been worsening in recent
years. These surveys also miss much of the income that is earned working
"off-the-books" or received from boyfriends or other household
members. For example, recipients may want to conceal this income from those
administering the survey, for fear that it could affect their eligibility for
welfare.
This mixed picture of life after welfare is captured in the
"before and after" questions asked in six of the more reliable leaver
studies (Mississippi, New Mexico, South Carolina, Virginia, Washington, and
Wisconsin). Depending on the study, between 20 to 40 percent of those responding
said that "life was better" while on welfare. Conversely, 60 to 80
percent of former recipients think that life is the same or better being off
welfare. (Three states asked separately about being better off. In all three,
about 55 percent said they were "better off"; about 25 percent said
they were doing the "same"; and about 20 percent said they were
"worse off.")
What should we make of these patterns? First, reducing
welfare rolls is a tremendous and unprecedented achievement--especially given
the apparently small amount of additional hardship. If this result had been
guaranteed when welfare reform was being debated in 1996, most opposition would
surely have melted away. Indeed, even some past opponents of welfare reform have
been quieted by its apparent early success. Nevertheless, welfare reform should
not be given credit for the consequences of a stupendous economy and
unprecedented increases in aid to the working poor. More of the mothers who
gained ground after leaving welfare can probably thank the latter two factors
for their improved situation, and more of those who lost ground probably left
assistance because of welfare reform and the added hassle associated with it.
What about those mothers who are now working but not making
much more than their previous welfare benefits, or those who are now relying on
the support of others rather than welfare? Robert Haveman, an economics
professor at the University of Wisconsin-Madison, says that they are
"treading water, but staying afloat." We hope they are not just
treading water, but building their skills or living in households where the
prime earner is doing so.
For most Americans, welfare reform was not just about reducing the rolls, nor
was it some silver bullet that would immediately eradicate poverty. Instead, it
was about reducing the deep-seated social and personal dysfunction associated
with long-term dependency, thereby ultimately reducing poverty. For welfare
reform to be a success on this measure will depend on whether the low-paying
jobs taken by many leavers lead to better jobs, whether the household
arrangements (and other sources of support) that have allowed mothers to leave
welfare without working prove supportive and nurturing, and whether the eventual
result is less dysfunctional behavior among parents and better outcomes for
children. We may need a generation to find out.
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