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What Did the 1990s Welfare Reform Accomplish?
Rebecca M. BlankDecember 2003
(A topic closely related to Gene Smolensky’s past research and concerns)
What Did Welfare Reform Do?
1996 legislation followed waiver experimentation
Created TANF Funding stream, not a program Ended entitlements Block Grants
Other provisions (immigrants, food stamps)
State Responses Welfare-to-work efforts Earnings disregard changes Sanctions enforcement Time limits establishment Few cash benefit changesResult: State and federal welfare dollars for
noncash assistance rose from 23% in 1997 to 56% in 2002; proportion of money spent on direct cash assistance fell from 77% to 44%.
Other Program Changes Child care subsidies rose Declines in AFDC led to declines in
Food Stamp and Medicaid usage (although other Medicaid changes had delinked it with cash assistance)
EITC increases Minimum wage increases
Figure 1
Total AFDC/TANF Caseloads
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Year
Nu
mb
er
of
Ho
us
eh
old
s R
ec
eiv
ing
AF
DC
/TA
NF
Note: 2003 data is through March of 2003.Source: Website for Agency for Children and Families, Department of Health and Human Services (http://w w w .acf.dhhs.gov)
1996 Welfare Reform
Figure 2Total Caseloads
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
-6 -4 -2 0 2 4 6
Year Relative To Year of Implementation of Waivers or TANF
Nu
mb
er o
f H
ou
seh
old
s R
ecei
vin
g A
FD
C/T
AN
F
Waiver States
Non-Waiver States
Source: March Current Population Survey and Table A1 from "The Effects of Welfare Policy and the Economic Expansion on Welfare Caseloads: An Update" by the Council of Economic Advisers. August 3, 1999.
Figure 3
Percent of Single Mothers Reporting Work During the Year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1988 1990 1992 1994 1996 1998 2000 2002
Year
No High School Diploma
Only High School Diploma
More than High School Diploma
Source: Author's tabulations of the March Current Population Survey
Figure 4
Percentage of Single Mothers on Public Assistance in Previous Year Who Report Working in March
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1990 1992 1994 1996 1998 2000 2002 2004
Year
Source: Author's tabulation of the March Current Population Survey
Table 1
Single Mothers' Income Composition
Total Income
(in 2000
dollars)
Percent of Total Income
Public
Assistance Own EarningsOther
EarningsOther
Income
1990 $18,563 23.08% 53.21% 4.30% 19.41%
1991 18,383 24.37 53.20 3.76 18.67
1992 17,882 23.22 52.73 3.50 20.55
1993 18,401 23.26 51.94 3.34 21.46
1994 19,296 20.06 54.73 3.78 21.43
1995 20,523 17.13 56.31 4.07 22.49
1996 20,512 15.43 57.98 4.16 22.43
1997 20,979 12.47 61.21 3.95 22.37
1998 22,054 9.37 64.93 4.43 21.27
1999 23,498 7.60 65.92 4.77 21.71
2000 24,318 5.74 68.39 4.54 21.33
2001 25,195 4.97 67.29 4.62 23.12
Note: Total income is the mean dollar value (in 2000 dollars) before taxes, and it does not include EITC subsidies. Public Assistance is composed primarily of AFDC and TANF benefits and does not include the inputed value of Food Stamps or Social Security Income.
Source: Author's tabulations of the March Current Population Survey
Key missing information in these calculations:
Work expenses Tax and transfer benefits Cross-household transfers
Table 2
Changes Among Single Mothers: 1995 to 2001
Earnings as a share of Family Income (1995)
Change from 1995
to 2001
Public Assistance as a share of Family Income (1995)
Change from 1995
to 2001
Ratio of Column (2) to Column
(4)
Part 1. (1) (2) (3) (4) (5)
All 0.564 0.110 0.171 -0.122 -0.903
By Education
No High School Diploma 0.366 0.191 0.342 -0.224 -0.854
Only High School Diploma 0.582 0.097 0.173 -0.115 -0.840
More than High School Diploma 0.647 0.066 0.084 -0.066 -0.989
By Race
White (non-Hispanic) 0.612 0.078 0.105 -0.077 -1.013
Black (non-Hispanic) 0.529 0.149 0.232 -0.172 -0.868
Hispanic 0.479 0.160 0.284 -0.190 -0.841
By Age of the Youngest Child
No Preschooler 0.604 0.064 0.100 -0.070 -0.917
Preschooler(s) (less than 6) 0.510 0.171 0.265 -0.186 -0.917
Infants(s) (less than 2) 0.451 0.208 0.331 -0.229 -0.909
Source: Author's tabulation of the March Current Population Survey
Table 2
Changes Among Single Mothers: 1995 to 2001
Percent Working (1995)
Change from 1995
to 2000Percent on
Welfare (1995)
Change from 1995
to 2000
Ratio of Column (2) to Column
(4)
Part 2. (1) (2) (3) (4) (5)
All 0.735 0.081 0.274 -0.175 -0.461
By Education
No High School Diploma 0.487 0.160 0.465 -0.281 -0.568
Only High School Diploma 0.752 0.059 0.272 -0.161 -0.367
More than High School Diploma 0.854 0.037 0.173 -0.120 -0.307
By Race
White (non-Hispanic) 0.818 0.044 0.197 -0.130 -0.338
Black (non-Hispanic) 0.671 0.126 0.356 -0.229 -0.551
Hispanic 0.599 0.139 0.369 -0.236 -0.591
By Age of the Youngest Child
No Preschooler 0.808 0.035 0.188 -0.123 -0.285
Preschooler(s) (less than 6) 0.646 0.133 0.381 -0.235 -0.567
Infants(s) (less than 2) 0.560 0.163 0.425 -0.244 -0.665
Source: Author's tabulation of the March Current Population Survey
Table 2
Changes Among Single Mothers: 1995 to 2001
Percent Below Poverty
Line (1995)
Change from 1995
to 2000Percent Working
(1995)
Change from 1995
to 2000
Ratio of Column (2) to Column
(4)
Part 3. (1) (2) (3) (4) (5)
All 0.402 -0.078 0.735 0.081 -0.970
By Education
No High School Diploma 0.682 -0.105 0.487 0.160 -0.656
Only High School Diploma 0.413 -0.053 0.752 0.059 -0.898
More than High School Diploma 0.241 -0.054 0.854 0.037 -1.463
By Race
White (non-Hispanic) 0.291 -0.045 0.818 0.044 -1.021
Black (non-Hispanic) 0.510 -0.118 0.671 0.126 -0.934
Hispanic 0.566 -0.145 0.599 0.139 -1.043
By Age of the Youngest Child
No Preschooler 0.305 -0.047 0.808 0.035 -1.346
Preschooler(s) (less than 6) 0.522 -0.106 0.646 0.133 -0.794
Infants(s) (less than 2) 0.584 -0.098 0.560 0.163 -0.604
Source: Author's tabulation of the March Current Population Survey
Did some groups gain more than others? Little evidence that single mothers who were
more disadvantaged in the labor market (I.e. lower skill; minority; younger children) had greater difficulty finding work. Striking similarity in changes between public assistance and income shares.
More disadvantaged groups better able to increase their work share relative to their declines in welfare participation
More disadvantaged groups had greater difficulty translating employment increases into poverty declines.
Welfare Leaver Studies Very useful descriptive information Not very useful in providing an
overall evaluation of welfare reform. No information on other populations.
Not useful in helping separate policy changes from other changes.
Regression Estimates from of Existing National Data Samples
Used to estimate caseload changes, employment changes, income changes, etc.
Major reviews of these: Blank (2002), Grogger, Karoly and Klerman (2002)
Most show BOTH policy and economy mattered; but large amounts unexplained
Particularly promising approaches
Compare differential effects among more and less educated women
Look at flows rather than levels in caseload change
Find a good instrument for a policy effect (EX: Grogger’s use of age of children to study time limtis)
Yet, all of these estimation approaches have limits – identification of a policy effect is extremely difficult
TANF was implemented everywhere within a year’s time.
TANF implementation occurred as the economy boomed and EITC was expanded nation-wide
Individual policy components within TANF are hard to code and not well identified either
Experimental Data Very effective for looking at single
policy changes; less effective for evaluating multiple changes.
No states are running post-waiver experiments on welfare reform programs.
Key Results from Experiments
Effectiveness of work-first programs Amazing results of financial
incentive programsCan increase both earnings and income with combined incentives and mandates
Effects of work pgms on children
What Big Questions About Welfare Reform Remain Unanswered?
Interpreting the Caseload Decline and Employment increase
• Both changes were far greater than anyone would have predicted
• Uncertainty about why such a large changes occurred
* Synergies?* Behavioral shifts?
* Misinformation?
What Big Questions About Welfare Reform Remain Unanswered?
The Effects of an Economic Slowdown in the new Policy Regime?So far very limited effects.
* Is this the fulfillment of the promise of welfare reform?
* Is this just a mild slowdown?* Are we missing key measures of economic pain?
What Big Questions About Welfare Reform Remain Unanswered?
Relation of Assistance Programs to Family Composition & FertilityMajor goal of welfare reform, but timing of changes doesn’t match timing of policy changeCurrent research investigating policy/marriage/fertility links is still limited and contradictory
Figure 5Birth Rates for Unmarried Women, Age 15-44
0
10
20
30
40
50
60
70
80
90
100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Year
Liv
e B
irth
s to
un
mar
ried
wo
men
per
1,0
00 u
nm
arri
ed w
om
en
Black
AllWhite
Source: Centers for Disease Control and Prevention. (2002). Births: Final data for 2000 (Table 18). National Vital Statistics Reports, 50(5).