Was Welfare Reform Successful? Lecture 19

1. Was Welfare Reform Successful?Lecture 19 Today’s Readings Center for Budget and Public Policy, “Welfare Reform and TANF”, http://www.cbpp.org/pubs/welfare.htm. Surf around, making sure to examine the Guide to TANF Reauthorization Issues Blank, “Was Welfare Reform Successful?” Economists’ Voice, www.bepress.com/ev, March, 2006. DeParle, Ch 16: Boyfriends: Milwaukee, Spring 1999

2. Today’s Questions • What criteria should be employed when evaluating the success of welfare reform? • What are the prospects for valid evaluations of the effects of welfare reform? • What methodology can we trust? • What do the experts say about the success of welfare reform? • Larry Mead • Rebecca Blank

3. What criteria should be used to evaluate welfare reform? • Should we evaluate TANF in its own terms? • TITLE: TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) BLOCK GRANT OF THE PERSONAL RESPONSIBILITY AND WORK OPPORTUNITY RECONCILIATION ACT OF 1996: A bill to restore the American family, reduce illegitimacy, control welfare spending and reduce welfare dependence.

4. What criteria should be used to evaluate welfare reform?, cont. • Should we ask if TANF has: • Restored the American family? • Decrease divorce and cohabitation and increase marriage • Reduced illegitimacy? • reduce the number of children born to unmarried mothers • Controlled welfare spending? • Reduce the amount of money spent on welfare • Reduced welfare dependency? • Decrease the caseload • If it has accomplished these goals should we declare welfare reform a success?

5. What criteria should be used to evaluate welfare reform?, cont. • Or should we also judge TANF by criteria developed to evaluate previous welfare programs? • Does the reform reduce poverty? (adequacy) • Does the program encourage personal responsibility? (work incentives) • Does the reform treat participants and non-participants fairly? • Does it treat persons in similar situations similarly? (horizontal equity) • Does it treat people in different situations differently? (vertical equity)

6. What criteria should be used to evaluate welfare reform?, cont. • Does it target just the poor? (target efficiency) • Are the rules easily understood by all? (participants and tax payers) • Can be the programs be easily accessed by those eligible? (hassle factor) • Can the program be administered without error or fraud?

7. Lessons from Federally Mandated Evaluations of Demonstration Projects • National Evaluation of Welfare-to-Work Strategies (NEWWS) • NEWWS sites: Atlanta, GA; Grand Rapids,MI; Riverside, CA • Participants followed for 3 to 5 years. • Work-first programs increase employment and reduce welfare receipt relative to not having such a program • Major effect: speed entry into a job • Increases in earnings did not offset reductions in case benefits and food stamps

8. Lessons from Federally Mandated Evaluations of Demonstration Projects, cont. • Education-first programs • No difference in impacts between work-first and education-first programs for participants in many programs • Where differences were recorded, work-first outperformed education-first • None of the education-first programs increased incomes over 5 years

9. Lessons from Federally Mandated Evaluations of Demonstration Projects, cont. • “Mixed” Approach: Portland, OR and Riverside, CA (GAIN): Short-term educational activity and delayed entry to look for “good” job • Significant increases in earnings (25 to 49%) • Significant decreases in cash assistance (15-24%) • No increase in incomes

10. Ongoing Federally Funded Demonstration Projects • Federal dollars support evaluations of demonstration projects for specific subgroups of the recipients • The hard to employ • Substance abuse and/or chronic mental health problems • Disabilities • Victims of domestic abuse • Families living in rural areas

11. Ongoing Federally Funded Demonstration Projects, cont. • Programs that aim directly to affect family formation outcomes • Encourage marriage between unmarried parents • Support to sustain marriage among low-income couples

12. What methodology can we trust? • The GoldStandard: control versus treatment groups • Identify two groups of eligible persons, families, etc. with identical demographic and socioeconomic compositions • Subject one group to the treatment • Prohibit the other (control) group from experiencing the new rules • Compare the outcomes for each group through time

13. What methodology can we trust?, cont. • What are the advantages of this approach? • What are the limitations of this approach as the basis of policy formulation?

14. How are Conclusions Actually Drawn? • Spotty privately sponsored analyses • Evaluating Trends in: • national data bases (CPS) • State/National administrative data • Limitations • Cross-sectional data--snap shots • Data do not reflect what happened to families when they left welfare

15. Conclusions: Work and Income • Decreased Dependency • Mead:Welfare rolls fell by around 60 percent. • Blank: Welfare rolls fell by around 60 percent between 1996 and 2000. • 2001 Lowest level in 30 years • Caseloads did not increase with recession • Personal responsibility • Mead: Most people leaving welfare took jobs. • Mead: Work levels rose. • Blank: LFPR for single mothers rose from 44 to 66 percent between 1994 and 2001

16. Conclusions: Work and Income • Adequacy • Mead: Incomes rose • Blank: Average incomes rose by about $5,000 • Earnings increases were larger than welfare benefits declines • Income is not adjusted for costs of working

17. Poverty reductionMead:Poverty fell, especially for children. 1994 2000 2004 All ages All races 14.5 11.3 12.7 Blacks 30.6 22.5 24.7 Hispanics 30.7 21.5 21.9 Under 18 All races 21.8 16.2 17.8 Blacks 43.8 31.2 33.6 Hispanics 41.5 28.4 28.9

18. Poverty Reduction Blank’s Conclusions • Poverty fell • Poverty rates for single-mother households fell to historically low levels by late 1990s • Slight increase in past 4 years • Increases in employment greater than declines in poverty • Share of the working poor rose and is higher than in early 1990s

19. Especially for children . . . Poverty Rates Among Children Source: U.S. Census Bureau, http://www.jointcenter.org/DB/printer/chilpovt.htm

20. Poverty Rates Among Black Children, cont. Melissa G. Pardue, “Sharp Reduction in Black Child Poverty Due to Welfare Reform,” The Heritage Foundation Backgrounder #1661, June 12,2003 http://www.heritage.org/Research/Welfare/bg1661.cfm?renderforprint=1

21. Conclusions: Work and Income • Hardship? (Adequacy) • Mead: • Some leavers did not go to work. • Most appear to have other income. • No clear evidence of hardship due to reform. • Blank: • More single-mothers report not being on welfare and not working • Women involuntarily terminated have lower incomes and worse outcomes--how are they surviving?

22. Extreme Poverty (50%) for all persons • Trends 1994-2004 • fell from 5.9 percent in 1994 to 4.5 percent in 2000 • Rose continuously to 5.4 percent by 2004 • By age in 2004: • Persons 18-24 had highest rates--9.0 percent • Persons under 18 were next at 7.6 percent • By family status: • Persons in unrelated subfamilies have highest rates of extreme poverty: 26.7 percent • Children under 6 years: 9.0 percent

23. Extreme Poverty Rates Among Children by Race Source: U.S. Census Bureau, http://www.jointcenter.org/DB/printer/chilpovt.htm

24. Extreme Poverty Among Black Children Pardue,2003 http://www.heritage.org/Research/Welfare/bg1661.cfm?renderforprint=1

25. Extreme Poverty Among Black Children, cont. Pardue,2003 http://www.heritage.org/Research/Welfare/bg1661.cfm?renderforprint=1

26. Extreme Poverty Among Black Children, cont. Pardue,2003 http://www.heritage.org/Research/Welfare/bg1661.cfm?renderforprint=1

27. Conclusions: Other effects • Restore the American Family • Mead: family effects are small and largely positive. • Blank: • cohabitation has increased since post-1996 • A slightly higher share of children are living with adults who are not their parents

28. Conclusions: Other effects, cont. • Effects on Children • Mead: Effects on children are small and largely positive • child abuse—down since early 1990s • Blank: • Some positive achievement and behavioral effects on young children associated with use of center-based child care • Some small negative effects on adolescents associated with lack of parental supervision

29. Conclusions: Other effects, cont. • Reduce illegitimacy • Mead: Unwed pregnancy—down since early 1990s. • Blank: No comment

30. Trends in births to Unmarried Women(Lecture 12-Slide No. 14) • The total number of live births to unmarried women is rising: • From 1,165,000 (1990) to 1,366,000 (2003) • By race: • The number of births to white unmarried women is up: 647,000 to 904,000 • The number of births to black unmarried women is down: 473,000 to 405,000. Source: Statistical Abstract of the United States (SAUS), Table 77, p. 8, available at http://www.census.gov/statab/www/

31. Trends in births to Unmarried Women(Lecture 12-Slide No. 15) • By age: • The number of births to women less than 20 is falling: 361,000 to 347,000 • The number of births to unmarried women 20 years and older is rising: 804,000 to 1,1019,000. Source: SAUS, Table 82, p. 10

32. Trends in births to Unmarried Women(Lecture 12-Slide No. 16) • The percentage of births to unmarried mothers is rising: • From 26.6% (1990) to 34.0% (2003) (Source: SAUS, Table 80, p. 9) • The percentage of all births outside of marriage born to white mothers is rising: • From 55.6% in 1990 to 66.2 in 2003 • The percentage of all births outside of marriage born to black mothers is falling: • From 40.6 in 1990 to 29.6 in 2003 Source: SAUS, Table 82, p. 10

33. Trends in births to Unmarried Women(Lecture 12-Slide No. 17) • The percentage of white babies born outside of marriage is rising: • From 16.9% in 1990 to 28.5% in 2003. • The percentage of black babies born outside of marriage is rising much less dramatically: • From 66.7 in 1990 to 68.2 in 2003 Source: SAUS, Table 82, p. 10

34. Causes of the effects • Work enforcement • Mead: Diversion effects. • Blank: Sanctions, time limits, messages?? • Good economy--Cited by Meadand Blank • Many jobs, even for the unskilled. • Rising real wages. • New benefits • Especially EITC (Meadand Blank) • Blank adds higher minimum wage (Sept. 1997) • Relative role of these factors is disputed.

35. Limitations of reform: Mead’s “to-do” list: • By and large, welfare reform was a grand success • Finish work enforcement. • Recent reauthorization of TANF. • Keep welfare leavers at work: • An hours threshold for EITC. • Raise the incomes of leavers: • EITC, minimum wage. • Extend work enforcement to men: • Using criminal justice and child support. • Strengthen marriage.

36. Limitations of reform: Blank’s “to-do” list: • Too soon to claim success • Collect and analyze nuanced data on • Well-being of low-income families no longer on welfare • Child effects • Family effects • Determine what combination of negative and positive incentives work best • Increase child care subsidies • Expand health insurance for low-income working adults • Sustain safety net for those for whom employment is just not possible

37. Key Elements of TANF Reauthorization: (Signed into law, February 8, 2006) • Eliminates the separate work participation rate requirements for two-parent families (thus applying the same lower rate to all families). • Increases minimum state work participation rates from 50% for FY2006 to 70% for FY2010. • Revises requirements for calculation of participation rates and recalibration of the caseload reduction credit.

38. Key Elements of TANF Reauthorization: Work Requirements • Adds a new part C (Fatherhood Program) to promote responsible fatherhood. • Requires TANF programs to be mandatory partners with One-Stop Employment Training Centers created under the Workforce Investment Act of 1998 • Includes $150 million to support programs designed to help couples form and sustain healthy marriages.