NCPA - National Center for Policy Analysis

Effect of Welfare Reform on Poor Single Mothers' Income

June 24, 2002

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.

  • According to the most recent Bureau of Labor Statistics (BLS) data, the number of American households in poverty declined from 39 million in 1993 to 31 million in 2000.
  • More importantly, the number of children in poverty declined from 16 million in 1993 to 11.5 million in 2000.

Unlike previous periods of high employment, when welfare caseloads barely budged, from 1996 to early 2001 the welfare caseload fell from 4.6 million families to 2.1 million. The decline was sharpest among younger mothers (ages 18-24) and mothers with younger children.

Studies of women leaving welfare indicate that about two-thirds are working at any point in time, and a total of 80 percent are either working or seeking work. This has contributed to an overall increase in the labor force participation of never-married mothers from slightly less than 50 percent in 1994 to almost 65 percent in 1999. As a result:

  • The poorest fifth of mothers saw their average incomes increase from $7,920 in 1996 to $8,867 in 2000 -- an average increase of 2.75 percent per year.
  • 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 (see figure).

Although many welfare leavers were initially employed at low-wage jobs, the Census Bureau found that the lower one's current annual income, the greater the likelihood that it would rise the following year. Thus, among those whose 1992 family income was below the poverty level, 51 percent saw their income rise the following year, while just 29 percent experienced drops.

Source: Joe Barnett (NCPA editor-analyst), "Welfare Reform: Reasons To Stay the Course," Brief Analysis No. 401, June 24, 2002, National Center for Policy Analysis.

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