Better Off Welfare

Policy Reports | Welfare

No. 255
Monday, October 07, 2002
by Joe Barnett

Executive Summary

Welfare rolls nationwide have fallen by more than 50 percent since welfare reform was enacted in 1996. The goal of reform was not simply to reduce the number of welfare cases, but to move families on welfare - the vast majority of which are headed by single women - from dependency to independence through work. Despite this success, there are two lingering questions: Have the easiest-to-employ women left welfare, leaving the "hardest" cases behind? And are the families who have left welfare better off? Research conducted since 1996 has provided some surprising answers:

  • Both national surveys and state data show that the women most at risk for long-term welfare receipt have left the welfare rolls at rates as fast as or faster than women who are much less at risk.
  • In the states studied in depth, most of those leaving the welfare rolls have found employment, have increased their incomes relative to those who remain on welfare, and are gradually moving up the income ladder; a majority of those who have left feel they are better off.

It is well established that the single mothers most at risk for lengthy welfare receipt and long-term welfare dependency are those who have never married, are poorly educated, are young (18 to 29 years old), have young children (under age 7) and are black or Hispanic. Yet these are the ones who have been leaving the welfare rolls at the fastest rates. For example:

  • Former Congressional Budget Office Director June E. O'Neill and M. Anne Hill, her colleague, found that during the 1990s, and particularly since 1996, welfare participation declined the most for the youngest mothers, for mothers with children under age 7, for those who had not completed high school, for black and Hispanic women and for never-married mothers.
  • The Urban Institute found that welfare enrollment for both blacks and Hispanics fell proportionately more than for whites, and the decline was steepest for blacks.
  • The Urban Institute data also showed that those who remain on welfare are not suffering the greatest hardships; for example, they do not have greater health problems than do those who have left the rolls.
  • A Joyce Foundation study found that some who have left welfare continue to face such financial hardships as having a utility cut off or occasionally being late with a rent check; however, the study found that moving from welfare to work does not necessarily increase such hardships.

What proportion of long-term welfare recipients can be moved from welfare to work? We do not know, but in Wisconsin - which reduced its welfare rolls by more than 70 percent - only 2 percent of women who had been on the welfare rolls in 1990 were either still receiving welfare or had returned to the rolls after some work experience by 1998.

During the booming economy of the late 1990s, welfare reform critics claimed that the good economy was primarily responsible for the fall in welfare rolls. They predicted that if the good times ended, welfare rolls would rise. But a national analysis of welfare leavers by O'Neill and Hill found that:

  • The Temporary Assistance for Needy Families (TANF) program created in 1996 has accounted for more than half of the decline in welfare participation since then and for more than 60 percent of the rise in employment among single mothers.
  • By contrast, the contribution of the booming economy of the late 1990s to these declines was relatively minor, accounting for less than 20 percent of either change.

The most significant factor in caseload reduction is the policies established by the states - specifically, whether or not the state has an effective sanctions policy. Effective sanctions withhold benefits from welfare recipients who refuse to work or to comply with other program requirements. The states that have been less successful have had ineffective sanctions, high benefit levels and other counterproductive policies. Two of these states, New York and California, account for nearly a third of the remaining welfare caseload.

  • In New York State, if welfare recipients refuse to comply with work requirements, their benefits are reduced by a small amount (from $588 per month to $475 for a family of three), but they continue to receive food stamps, public housing and other benefits.
  • As a result, recent figures show that only 54 percent of adults perform assigned work.
  • California offers high benefits and ineffective sanctions, using discretionary state funds and allowing working families to continue receiving benefits.

Without any changes in federal law, the states that have failed to reduce their welfare rolls by as much as the average could adopt more effective policies. The impact would be significant:

  • If the 23 less-than-average states had done as well as the average state, more than 800,000 additional people would have left welfare.
  • Instead of a 59 percent reduction in welfare rolls, the United States would have 66 percent fewer welfare recipients. There is no evidence that welfare caseloads increasingly comprise the hardest cases. Rather, it is evident that the most disadvantaged women have left the welfare rolls at rates comparable to, and in some states faster than, less disadvantaged women.

The welfare rolls could be reduced further if more states would adopt effective sanctions - swiftly withdrawing all cash benefits when recipients refuse to work. Requiring more welfare recipients to work, as President Bush and the House of Representatives have proposed, also would encourage more single mothers to make the transition to work. Conversely, loosening time limits and work requirements, as the Senate Finance Committee has proposed, would encourage women to continue collecting welfare. The end result would be more families dependent on welfare for years to come.

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