Evaluating the Effects of U.S. Welfare Reform Rebecca Blank University of Michigan
Major welfare reform act passes in 1996 Shifts program design authority from Federal government to states Eliminates Federal program (AFDC) and creates a Federal block grant: TANF Temporary Assistance for Needy Families Imposes work requirements that states must meet to get TANF funds
Key changes in the states after welfare reform Benefit levels change little Large increases in earnings disregards Push to put recipients into welfare-to-work programs These are the benefits states offer post welfare-reform to provide positive incentives for women to work
Key changes in the states after welfare reform Imposition of time limits: 60 months of Federal benefits funded Imposition of sanctions on those who don t participate in welfare-to-work Efforts to divert the applicants and keep them off the welfare rolls These are the costs states impose to force women into work
Creates more complex welfare programs differing substantially across the 50 states After welfare reform it becomes almost impossible to categorize states as more generous or less generous. Multiple parameters define state welfare generosity. These many program parameters also make evaluation of welfare reform difficult.
At the same time as welfare reform is enacted Other work-related policies are enacted Minimum wage increases Expansions in the Earned Income Tax Credit Expansions in child care subsidies Very strong economy from 1996-2000.
Unemployment Rates Amoung Selected Groups by Education 12 10 8 No High School Diploma 6 High School Diploma, Only 4 Some College, Less than a Bachelor's Degree 2 0 College Graduate, Bachelor's Degree or Higher 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Note: 2004 Data reflects August 2004 Source: Department of Labor, Bureau of Labor Statistics, Historical Data From "A" Tables of Employment Situation News Release, http://www.bls.gov/cps/cpsatabs.htm
What Happened Following Welfare Reform? Caseloads plummeted. By the early 2000s, caseloads were at 40% of their levels in 1994.
6,000,000 Figure 1 Total AFDC/TANF Caseloads Number of Households Receiving AFDC/TAN 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 1996 Welfare Reform 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2003 Year Note: 2003 data is through June of 2003. Source: Website for Agency for Children and Families, Department of Health and Human Services (http://www.acf.dhhs.gov)
What Happened Following Welfare Reform? Caseloads plummeted. Work among less skilled women rose substantially
Figure 3 Percent of Single Mothers Reporting Work During the Year 100% 90% 80% 70% More than High School Diploma Only High School Diploma 60% 50% No High School Diploma 40% 30% 20% 10% 0% 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year Source: Author's tabulations of the March Current Population Survey
What Happened Following Welfare Reform? Caseloads plummeted. Work among less skilled women rose substantially Poverty fell among families headed by single women
Poverty Rates in Total and Among Single Mother Households Percent 40 Rate Among Single Mothers 35 30 25 20 Total Poverty Rate 15 10 5 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: U.S. Bureau of the Census
Much larger effects than expected Were these all due to welfare reform? No Evidence suggests that the economic expansion, welfare reform and other policy changes all mattered The fact that all of these were occurring at precisely the same time probably helped accelerate the total change.
What happened during the recent economic slowdown? Caseloads stopped falling and poverty and labor force participation stopped growing. But all of these measures remain far away from their pre-reform levels. Many critics expected major problems once jobs became less available. Why didn t more problems arise?
What happened during the recent economic slowdown? No one knows the full answer. 3 possibilities: 1. Attitudes and behavior of welfare participants were permanently changed 2. Women were in jobs less affected by the slowdown. Maybe employers were reluctant to fire these women 3. Women found other forms of support than welfare (family and household income sharing)
On-going policy issues for U.S. welfare programs 1. What does it mean to support low-wage work? What supports should we have in place? Requires ongoing discussions about Child care subsidies Health care availability Access to unemployment insurance, etc.
On-going policy issues for U.S. welfare programs 2. Ongoing concern about family composition issues Some view reducing unwed motherhood as more important than increasing work What policy levers are availability to address this issue (beyond work-oriented welfare reform)?
On-going policy issues for U.S. welfare programs 3. What can/should we do about the Fathers? Much of the focus has been on Moms and their children Are there job programs that will be effective for the men? Might be especially concerned about jail-to-work programs.
Conclusions The U.S. has been in the midst of a major social experiment. The impact of welfare reform was much larger than anyone expected. We moved from a primarily cash-support-oriented welfare system to a primarily work-support-oriented welfare system.
Conclusions But the long term effects of these changes are still unclear. Can we maintain current work levels? What would be the effect of a deeper economic cycle? How politically supportable are programs such as child care subsidies and EITC in the long run? Will welfare reform and the emphasis on work reduce nonmarital childbearing and affect family composition in the long run?
Conclusions The answers to these questions (and others) are deeply linked to the wellbeing of poor women and children in the United States.