Did reform or economy help lower states' welfare rolls?

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April 2002

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Did reform or economy lighten the load on states' welfare rolls?
Five and a half years after the welfare reform act of 1996, and in anticipation of reauthorization this year, the debate over the success and failure of the 1996 legislation has heated up once again. While statistics do indicate less people are relying on welfare and more people are employed, some analysts say that a closer look at the data reveals deep flaws in the system. Welfare rolls have, in fact, decreased. But measures of material sufficiency such as the ability to purchase food, clothing, and housing for a family have not improved.

The Manpower Demonstration Research Corporation authored a state-sponsored study entitled "Jobs First: Final Report on Connecticut's Welfare Reform Initiative." The study was unique in that it measured the results of participants in Connecticut's Jobs First program—a product of welfare reform with employment requirements and time limits—against the results of a control group who remained under the regulatory regime of "pre-reform" welfare, Aid to Families with Dependent Children (AFDC).

Dan Bloom, lead author of the study, says it is hard to tell if the decrease in welfare rolls and higher income rates for welfare recipients was due to the booming economy or the employment requirement and skills training implemented by the 1996 reforms. "The Jobs First program in Connecticut was successful," Bloom says, "and the successes would have happened anyway without welfare reform. These have been presented as contradictory ideas, when really they are not. Both statements are true."

Bloom points out that even though the 1990's saw welfare rolls cut in half, "Historically, people have always gone off welfare. People don't want to be on welfare. It is not a desirable position, both because of the physical poverty and the social stigma attached. So it is not unusual that most people will go off welfare."

Still, Bloom asserts there were real differences between the groups. "The employment rates were slightly higher in the Jobs First group, but they were high in the AFDC group, too. And Jobs First participants had higher incomes." At the end of the four year study, only 19 percent of Jobs First families were still on welfare, while 28 percent of AFDC families remained on public aid.

Connecticut's program allowed Jobs First beneficiaries to continue to receive welfare income even when they were employed. Once time limits ran out on benefits, the income levels of Jobs First participants dropped and they no longer held an income advantage over the AFDC group.

The study also found the Jobs First program did little to actually lift families from material hardship. Both groups fared equally in their ability to provide basic necessities for their families.

In one category, homelessness, Jobs First participants actually fared lower than their AFDC counterparts. "The [homelessness] rates were pretty low for both," Bloom says, "But the Jobs First group was a percentage point higher, which we consider to be statistically significant. Because homelessness is a serious consequence, even if it's only a few people, that makes you concerned.

The Manpower study was conducted during a period of historic economic growth in Connecticut. "It is logical to think that the consequences would be worse in a slump," Bloom says.

In evaluating the overall success of Jobs First, Bloom says, "A lot depends on what purpose the state is trying to serve. People have different ideas about what the point of welfare reform is. In Connecticut, the point was to reduce the number of people relying on welfare payments.

"But many say [reform should be] about making people less poor. The data from this report show the program did not do that. There was still a real lack of material wealth [in the Jobs First group]. Material wealth rates did not differ between the groups, nor did the hardships."

Defining the specific goals for the societal benefit of welfare reform is a primary demand of a report issued by the Center on Law and Social Policy (CLASP) called "TANF [Temporary Assistance to Needy Families] Reauthorization: Opportunities to Reduce Poverty by Improving Employment Outcomes." It argues that any reauthorization should specifically state its goal and recommends that goal should be to reduce poverty for children and families "by ensuring that employment translates to improved economic well-being and that states actively help those with the most serious barriers to enter stable employment."

The center's study agrees with Manpower's conclusion that it is difficult to tell if welfare reform is responsible for increased employment and independence from public aid. According to the report, "It is probably impossible to isolate the independent role of TANF in the increase in employment among single mothers. The growth in employment of low-income single mothers with young children began between 1992 and 1993. During the 1990's, a set of factors contributed to employment growth for single mothers: the strong national economy, the expansion of the Earned Income Tax Credit, increased availability of child care subsidies, expansion of health care coverage for children, the minimum wage increase, and improved child support enforcement.

"There seems to be a consensus among researchers that welfare reforms played an important role, with the effects more pronounced in later years. . . " but "we don't know how the same policies would have worked in a different economy."

Another factor to consider is that TANF allotments were based on welfare caseloads in the early 1990's. Caseloads had already dropped substantially by the time welfare reform was initiated. As a result, many states had excess funds that were then put to use in employment-related services and child care. With increased assistance recipients obviously fare better. The improvement was often credited to reform, although a completely accurate evaluation of welfare reform's performance is hard to ascertain among many social and economic variables say the study's authors.

The CLASP study lists its recommendations for reauthorization of the upcoming welfare reform, based on the premise that the purpose of reform is to reduce poverty and increase families' financial security, including:

Federal time limits should not be imposed on working families.
Federal funding for child care should be increased.
States should have the option of using employment outcome measures in lieu of the participation rate process measures in TANF, such as minimum hours worked per week.
The "caseload reduction credit" should be replaced with a new employment credit that rewards states when families leave welfare for employment. Extra credit should be given to states that help families obtain higher-paying jobs.
A Career Ladders Fund should be created to enable low-wage workers to upgrade their skills.

CLASP says the the Career Ladders Fund is designed to address the problem that "those leaving welfare for work have typically found jobs at below-poverty wages, and the majority of them are not receiving key benefits, such as health care, through their employers." The fund would not only pay for individual training for employment and advancement, but would train the states how to determine what programs will be most effective. CLASP feels job training programs have been undervalued and underfunded in the current system. In the Ladders program, participants would earn access to such training benefits by staying employed for certain lengths of time.

Of course, funds like Career Ladders, child and health care subsidies, and transportation assistance—while proven to increase a low-wage worker's ability to provide basic necessities—cost money that Congress is often hesitant to allocate. In the Connecticut study, the state spent an average of $4,100 more on Jobs First participants than it did on AFDC individuals. Is such an additional outlay cost-effective?

According to Bloom, "It's hard to say."

"A few states have actually reduced their welfare payments and reduced the amount of people receiving benefits. But saving money isn't necessarily the point. Some states increase their payments for things like child care or transportation assistance, which are positive things to spend on. Much of it is money being shifted from one cost to another. Again, it depends on the state's goals and priorities."—Tara Dix

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