Better Off Welfare

Policy Reports | Welfare

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

Are Those Who Left Welfare Better Off?

Figure III - Employment of Florida Welfare Leavers

Disadvantaged women and their children may have left the welfare rolls at rates similar to or even faster than women with fewer disadvantages, but are the ones who have left welfare better off?

"Employment of welfare leavers nationally rose from 75 percent in 1997 to 79 percent in 1999."

More Employment. In a typical year under the old AFDC program, between one-half and two-thirds of those who left welfare found paid employment.20 Under the new TANF program, the proportion that found employment has been increasing. Researchers compared adults on welfare in 1997 with those on the rolls in 1999, using data from the Urban Institute survey. They found that the share of welfare leaver families with at least one employed parent increased over that period - from 75 percent in 1997 to 79 percent in 1999. In former recipient families with spouses or partners, about 90 percent had at least one adult working.21

In the states studied in depth, most welfare leavers had found employment, increased their incomes relative to welfare recipients and were gradually moving up the income ladder. For example, Floridians who received benefits from 1996 to 1998 were surveyed in November 1998 and again in March to May 2000.22 Among the survey findings:

  • The proportion of former welfare recipients who had found a job after leaving welfare increased from 76 percent in the first survey to 88.8 percent in the second.
  • Welfare leavers who currently were employed increased from 56.9 percent to 65 percent, and they were working an average of 35.1 hours per week because most had full-time jobs.

Employment Rates by Race and Ethnicity: State Studies. The Florida surveys found that a higher proportion of blacks and Hispanics than whites had found employment:

  • White people were less likely than nonwhites23 to have found a job (85.1 percent compared to 91.2 percent for minorities) and whites had been employed less often in the preceding 12 months than nonwhites (7.4 and 8.2 months, respectively).
  • Minorities had higher employment rates although the level of education attainment for the minority groups was lower - 33.5 percent of whites had education beyond high school graduation, compared to 23.1 percent of nonwhites.

Another analysis, based on Florida administrative data for those who left TANF in the second quarter of 1997, found that 21 months afterward:

  • The average quarterly employment rate of blacks was higher (at 59.7 percent) than that of Hispanics (47.9 percent) or whites (45.9 percent).
  • The percentage that had been employed at any time in the preceding two years was higher for blacks (78.2 percent) and about the same for Hispanics (65.5 percent) and whites (65.9 percent).24 [See Figure III.]

Other studies sponsored by the U.S. Department of Health and Human Services found similar results. Of these leaver studies, only six reported employment rates by racial and ethnic groups. Five of the six studies found that black leavers had higher employment rates than white leavers. [See Table I.]25

  • At any time in the year after exit, the black employment rate exceeded the white rate among welfare leavers by 6 percentage points in Arizona and 14 percentage points in Florida.
  • Arizona, Missouri and South Carolina reported similar differences for employment in the fourth quarter after exit.
  • Only in Illinois were the employment rates slightly higher for whites (56 percent) than for blacks (54 percent), and this difference may have been due to differences in employment rates between Chicago and downstate Illinois rather than to race.26
Table I - Employment and Earnings for Single-Parent Welfare Leavers by Race%2FEthnicity

Of the three studies that reported separate employment results for Hispanics, two (Arizona and Illinois) found employment rates of Hispanic leavers were similar to those of black leavers. In Florida, the employment rate of Hispanic leavers at any point in the year after exit (48 percent) was similar to that of whites and lower than that of blacks.

"Five of six state-level studies found minority leavers had higher employment rates than whites."

More Income. Researchers compared adults who had been on welfare in 1997 with those on the rolls in 1999, using data from the Urban Institute survey. They found that a year after exit the average household income of welfare leavers was about 125 percent of the poverty level, and 10 percent of households were above 250 percent of the poverty level.27 Furthermore, the monthly average poverty rate of more recent leavers declined significantly, from 48 percent in 1997 to 41 percent in 1999. In Baltimore, researchers found that poverty rates (not including noncash benefits) were 70 percent for leavers, compared to 85 percent for "stayers."28

Between 1998 and 2000, the proportion of Florida welfare leavers earning low wages (between $5.15 and $7.99 per hour) declined by 7 percent, while those earning more than $8 an hour increased by 24.1 percent.29 In Iowa, after two years, more than 60 percent of family heads earned an average wage of $8.16 per hour - more than enough to lift them above the poverty level.30

Earnings by Race and Ethnicity: State Studies. Of the state leaver studies, only six reported earnings by racial and ethnic groups. The evidence on earnings was mixed. [See Table I.]31

  • The Florida and Georgia studies both found that mean annual earnings a year after exit were higher for blacks than for whites - about $700 higher in Florida and $900 higher in Georgia.
  • Earnings for Hispanic leavers in Florida were significantly higher than for blacks or whites, at $7,732 a year.
  • In the fourth quarter after exit, Missouri found that all nonwhite leavers (nearly all black) had mean quarterly earnings almost $400 higher than white leavers.
  • In Arizona, Hispanic leavers had lower earnings in the fourth quarter after exit ($2,487) than black leavers, and white leavers had higher earnings than blacks.
  • South Carolina found that working white leavers had higher mean monthly earnings than working black leavers.

Less Recidivism. Those who have ever received welfare are at higher risk for returning to the welfare rolls than nonrecipients. As noted previously, under the old AFDC program, many families left welfare after a few months, but returned to the rolls.32 Nationally, researchers compared adults on welfare in 1997 with those on the rolls in 1999, using data from the Urban Institute survey:

  • In both 1997 and 1999, about one-quarter of adults on welfare were new to the rolls, about one-fifth had received cash assistance intermittently during the previous two years, and almost half were long-term recipients.33
  • By comparison, under the old AFDC program, about 45 percent of welfare leavers returned within a year and 70 percent returned by the end of five years.
  • State studies also found that recidivism rates had fallen; for example, one study found that in Iowa, only one in five families was back on welfare after two years.34
Figure IV - Back on Welfare within 18 Months

In California, researchers found that compared to the old AFDC program, fewer returned to the rolls within 18 months of leaving welfare. Among single parent families, 17 percent of 1998 welfare leavers returned within a year, compared to 27 percent of 1993 leavers and 25 percent of 1988 leavers. (Researchers note that economic growth in California in 1988 was at least as strong as in 1998.)35 [See Figure IV.]

Less Poverty. Since the 1996 welfare reforms, the number of Americans living in poverty has fallen 21 percent; and the annual incomes of the poorest women have increased nearly $1,000 - after adjusting for inflation and not including the Earned Income Tax Credit, which was doubled in 1996. The proportion of their income from personal earnings jumped from 26 percent to 36 percent, while the proportion of their income from welfare fell from 53 percent to 37 percent. More importantly, the number of children in poverty declined from 16 million in 1993 to 11.5 million in 2000.36

Other Evidence. Welfare leavers themselves believe they are better off. [See Figure V.] Regardless of their employment status - and with no significant variation by race or ethnicity - 18 months after leaving welfare nearly 60 percent of of Florida welfare leavers said they were better off. Asked if their children were better off since leaving welfare, almost two-thirds of leaver parents said they were; a little more than a quarter said they were about the same, and only 5.5 percent said they were worse off.37

Figure V - Are Their Children Better Off Now%3F

Overall, the evidence is that welfare leavers do not face significantly greater problems than they did while on welfare. 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. Michigan researchers found that those who had left welfare and were relying on wages were better off by several criteria than those who were still on welfare or who had left welfare but had no jobs.38 Florida researchers found that whites were less likely than blacks to have employer-provided health insurance (31.5 percent to 39.6 percent).39

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