Working Families and Growing Kids Caring for Children and Adolescents (2003) / Chapter Skim
Currently Skimming:
7. Effects of Welfare Reform
7. Effects of Welfare Reform
Pages 199-226
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From page 199... ...
, which subsidizes the earnings of lowincome families. Together, welfare reform and expansion of the EITC built on and furthered ongoing policy developments with origins in the federal 1988 Family Support Act, as well as 1980s and 1990s state welfare reform "waiver" programs that sought to increase assistance to low-income working families and to require, prepare for, and support labor market participation among welfare recipients and would-be recipients (e.g., Ellwood, 1988)
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. And, indeed, the years following welfare reform have seen major increases in labor force participation among single mothers with children.
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. Specifying the treatment is difficult because welfare reform legislation has spawned a complex variety of welfare policy changes by states and substate entities (see the section below on state reactions to welfare reform)
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. Evaluations of the effects of welfare reform generally begin by reviewing aggregate trends in welfare caseloads and employment rates of single mothers over the 1990s that might plausibly be attributed to welfare reform.
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Although earlier research on the AFDC program concluded that there was little evidence for effects on labor supply of more generous earnings disregards,2 1996 welfare reform included strong work requirements, so employment response to incentives might be different than under AFDC (Moffitt, in press, 1992)
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The employment rate of single mothers with children increased over 12 percentage points between 1993 and 1998, peaking in 2000 at 75.5 percent for those with children under 19. For unmarried women with children under age 6 who traditionally made up the majority of welfare recipients, the increase in labor force participation was even more dramatic: the employment rate for single mothers with children under 6 increased from 52.5 percent in 1995 to 69.1 percent in 2000.
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205 Employment Rate 56.0 50.6 59.5 55.0 51.3 67.5 59.2 48.5 population) Force of 2001 Labor Participation Rate 60.2 54.9 57.5 53.9 68.5 58.3 (% averages)
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. Earnings, Poverty, and Income Since employment increased substantially at a time when welfare caseloads were falling, analysts have attempted to determine whether employment improves the economic status of recipients and former recipients.
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These calculations also depend importantly on whether former recipients have major unreimbursed work expenses, particularly for child care. Combining employment and welfare unambiguously raises income for recipients in states that have adopted generous earnings disregards (see the section on state reactions to welfare reform)
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; lack of information on income sharing within and between households; and failure to measure work expenses, including outof-pocket child care expenses. Causal Analysis A variety of approaches have been taken to estimate causal effects of welfare reform.
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A second approach to evaluating welfare reform is leaver studies, which describe the economic and social status of welfare families that exited welfare in the years following welfare reform. Although these studies do not provide direct estimates of the effects of welfare reform (because many welfare leavers would have exited welfare even in the absence of reform)
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The impact of some related policy changes, such as those related to child support, child care, and health insurance, have rarely been accounted for in econometric studies of the caseload decline (Blank, 2002) .3 Some studies have attempted to identify the specific policy components most responsible for the caseload decline.
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Studies that control for state unemployment and income changes find that welfare waivers are associated with increased employment of single mothers, but they have not made clear whether or how much TANF contributed to the very substantial increase in employment of single mothers after 1995.4 4 In contrast, Blank notes that there is "unambiguous agreement that EITC increased labor force participation among single parents" and concludes that "the lack of studies that effec
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From page 212... ...
changes in the 1990s are unlikely to be due to the economic recovery alone, because caseload reduction and the employment response of single mothers are much greater in the 1990s than the earlier 1980 recovery. Reviews of this literature generally conclude that welfare reform played a role (Blank, 2002; Moffitt, 2002)
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found that both waivers and TANF increased the income of single mothers; Schoeni and Blank (2000) found that waivers reduced poverty 2.4 points among less skilled women; and TANF reduced poverty 2 to 2.2 percentage points.
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. Earnings Supplements Other interventions tested the effects of earnings disregards and financial incentives to work, some of which were combined with work requirements.
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Time Limits Few recipients hit TANF time limits prior to 2001, so the direct effects of exhausting eligibility for federal assistance are not known. However, six states had early limits (Arizona, Connecticut, Delaware, Florida, Indiana, and Virginia)
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. Conclusion In the 1990s, welfare receipt declined and labor force participation increased markedly among single mothers.
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. These theories converge on five main mechanisms: changes in employment, family resources, family processes, family structure, and child care.
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Most of these have been hypothesized about welfare recipients making transitions to work. First, increases in employment brought about by TANF policies may result in higher levels of stress and family instability, due to the juggling of frequently shifting child care and work schedules and the pressures of lowwage employment.
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From page 219... ...
. For example, little change was found, before or after 1996, in rates of maternal depression, parent cognitive stimulation of young children, or developmental delays in children in one study of single mothers with very young children on welfare in California, Connecticut, and Florida (Fuller and Kagan, 2002)
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four earnings supplement programs, which either provided cash supplements contingent on full-time work or generous earnings disregards; (2) six mandatory employment programs, which mandated employment-related activities but did not include earnings supplements; and (3)
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. Among the other hypotheses regarding mediators of welfare policy effects on children, data exist on employment, family processes, and child care.
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The strongest evidence that welfare policies and welfare reforms matter comes from their results on the number of children in out-of-home care, which is negatively and significantly related to the level of welfare benefits and positively and significantly related to such welfare reforms as family caps, short lifetime limits, immediate work requirements, and tough sanctions for noncompliance (Paxson and Waldfogel, in press)
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. A meta-analytic synthesis of experimental welfare policy effects on child care use, across 13 experiments, suggests that policies that increase employment also increase use of all types of out-of-home care, including center-based care and home-based care (Crosby et al., 2001; Gennetian et al., 2001)
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. The pattern of negative effects did not pertain to any particular kind of policy approach (time limit programs, earnings supplement programs, or those that mandated employment without earnings supplements)
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Certain elements of these policies are well represented in TANF programs, post-1996 (earnings disregards and other earnings supplements; mandated employment activities without earnings supplements; time limits)
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were brought about only by those policies that incorporate services or subsidies to increase child care use.
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