Full report at http://www.manhattan-institute.org/html/cr_17.htm
Jacob Segal
Gaining Ground? Measuring the Impact of Welfare Reform on Welfare and Work
June E. O¹Neill Department of Economics and Finance and Center for the Study of Business and Government, Baruch College, CUNY
M. Anne Hill Department of Economics, Queens College, CUNY and Center for the Study of Business and Government, Baruch College, CUNY
EXECUTIVE SUMMARY
The report¹s main findings are as follows:
* The number of families on welfare declined by 50 percent between the passage of welfare reform legislation in August, 1996 and the date for the most recent caseload statistics, September, 2000. * Most of the women heading these families have gone to work, contrary to the expectations of many welfare reform critics. The proportion of single mothers who work has increased dramatically since welfare reform, nearly matching the proportion leaving welfare. * Regression results indicate that Temporary Assistance to Needy Families (TANF), the federal program created in 1996 pursuant to the welfare reform law, accounts for more than half of the decline in welfare participation and more than 60 percent of the rise in employment among single mothers. * These results also show that although the booming economy of the late 1990s contributed both to the decline in welfare and to the rise in work participation among single mothers, that contribution was relatively minor compared to the contribution of TANF, accounting for less than 20 percent of either change. * The decline in welfare participation was largest for groups of single mothers commonly thought to be the most disadvantaged: young (1829) mothers, mothers with children under seven years of age, high school dropouts, black and Hispanic single mothers, and those who have never been married. * Employment gains have also been the largest among disadvantaged single mothers: mothers who have never married, mothers between the ages of 18 and 29, mothers with children under seven years of age, high school dropouts, and black and Hispanic mothers. * TANF¹s beneficial effects extend even to the most disadvantaged portions of the welfare-eligible population. TANF accounts for 40 percent of the increase in work participation among single mothers who are high school dropouts; 71 percent of the increase in work participation among 1829 year old single mothers; and 83 percent of the increase in work participation among black single mothers.
INTRODUCTION
The history of welfare reform in the United States has recorded many failures and few successes. To the surprise of many observers, however, we now appear to be witnessing a major policy success. Between January of 1994 and September of 2000, eight and a half million people left the U.S. welfare rolls and the proportion of the total population on welfare declined from 5.5 percent to 2.1 percent, a level not seen since the early 1960s. Equally important, during the same time period single mothers‹the dominant group of welfare beneficiaries‹greatly increased their work participation as their welfare participation declined. Thus, the past six years have seen dramatic progress.
These dramatic changes in welfare and work occurred during a time of radical change in welfare policy itself. The most notable feature of that change was the passage in August, 1996, of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which terminated Aid to Families with Dependent Children (AFDC), the nation¹s basic welfare program since the 1930s, and replaced it with Temporary Assistance to Needy Families (TANF). TANF is a striking departure from the past. Under AFDC an eligible family was entitled to an income from welfare as long as it had a child under the age of 18 present in the home. Under the new law, welfare is no longer an entitlement either in terms of its financing or its philosophy. As its name suggests, TANF is intended to serve as a temporary helping hand. TANF benefits are restricted to a lifetime limit of five years, and all adult recipients must fulfill a strict work requirement.
PRWORA did not have an easy passage. Many welfare rights groups bitterly contested the ³tough love² character of the policy reforms which had been written into the legislation by the Republican-dominated Congress. Three high level officials in the Clinton Administration resigned in protest. Nonetheless, President Clinton eventually signed the bill into law. Critics expected the worst. Writing in the New Republic, Katha Pollitt said,² . . . we know how welfare reform will turn out, too: wages will go down, families will fracture, millions of children will be more miserable than ever.²1
The apparent failure of these predictions to come true has not stopped welfare reform critics. As increasingly positive news has been reported, critics of PRWORA have faced off with reform proponents over what is responsible for the record-breaking decline in the welfare rolls. Critics have alleged that most of the credit is due to the booming economy of the late 1990s, while reform proponents have contended that the law itself was the primary cause of these positive developments. Some critics concede that the law has reduced welfare rolls but claim that the result has been the impoverishment of families. Proponents point to the dramatic increase in work participation among those formerly receiving welfare. As of yet, however, there has been little definitive evidence to resolve the debate.2
This report is the first in a series documenting the actual results of welfare reform. Here we examine in detail the changes that have occurred in the welfare and work participation of single mothers. We ask whether single mothers with the greatest socio-economic disadvantages have left welfare and entered the labor force to the same degree as mothers with more education and skills. Equally as important, we use regression analysis to estimate the extent to which welfare reform efforts themselves can explain the changes in welfare and work, taking account of the booming economy and many other relevant factors. Our main conclusions are as follows:
* Contrary to the concerns of many critics, women who are thought to be least able to become self-sufficient have left the welfare rolls in large numbers since the mid 1990s. Single minority mothers who never married and those who dropped out of high school were among those with the largest absolute declines in welfare participation. * Single mothers entered the work force nearly as quickly as they have left the welfare rolls. Large increases in work participation were made by those with educational and other disadvantages, mirroring the pattern of change in welfare participation. * TANF is the most important single factor accounting for the decline in welfare and the rise in work participation among single mothers in the years since TANF was implemented. Regression results show that TANF accounts for half of the decline in welfare participation and more than 60 percent of the rise in employment among single mothers. The decline in unemployment‹which we use as a proxy for the booming economy‹during the TANF period accounts for less than 20 percent of either the decline in welfare or the increase in work.
These results strongly suggest that the positive news of the last few years is primarily the result of the passage of PRWORA.