NCPA - National Center for Policy Analysis

Welfare Reform Can Help The American Dream Get Out Of Crisis

March 30, 2015

When saying the American Dream is in crisis, many people tend to bunch together negative trends without considering trends that might work toward increasing the upward mobility of poor children.

One possible force for greater upward mobility is the welfare reforms of the 1990s. The 1990s featured a number of policy reforms aimed at low-income families with children. How might these reforms have increased upward mobility? Democrats tend to believe that parental income per se is important for upward mobility. If true, welfare reform was far more effective than the War on Poverty at expanding opportunity.

Economic growth deserves some of the credit for the decline in child poverty. However, economic growth might not have actually lowered child poverty much if not for the work incentives built into welfare reform. Child poverty would not have fallen as much, and it would have risen back to near-peak levels by 2012, if not for the safety net.

Rather than income being important for children, most conservatives believe the key change in the lives of poor children instituted by welfare reform was to increase work among single mothers. Being raised in an environment where work and self-reliance are the norms rather than joblessness and dependence on government support is likely to rub off on children. Conservatives also believe that stable and intact families are also crucial for upward mobility.

Welfare reform changed incentives around childbearing and marriage. Welfare reform, to the extent that it affected unmarried birthrates, would have influenced poorer and lower-educated women more than other women because the latter are much less reliant on federal means-tested assistance. Welfare reform also would have affected younger women more than older women.

Welfare reform seems to have succeeded in advancing parent incomes, increasing work among parents and reducing out of wedlock births to increase upward mobility.

Source: Scott Winship, "Will Welfare Reform Increase Upward Mobility?" Economic Policies for the 21th Century, March 26, 2015.

 

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