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

Economic Changes Important

Unemployment rates fell and stayed low

Wages rose

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

Did some groups gain more than others?

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).

Conclusions 1996 legislation did constitute a

major reform (this happens rarely) Transformation of the public

assistance system is still a work-in-progress. The arguments between critics and supports remain very unsettled

Role of economy remains key