What Did the 1990s Welfare Reform Accomplish? Rebecca M. Blank December 2003 (A topic closely related to Gene Smolensky’s past research and concerns)

What Did Welfare Reform Do? 1996 legislation followed waiver experimentation Created TANF Funding stream, not a program Ended entitlements Block Grants Other provisions (immigrants, food stamps)

State Responses Welfare-to-work efforts Earnings disregard changes Sanctions enforcement Time limits establishment Few cash benefit changes Result: State and federal welfare dollars for noncash assistance rose from 23% in 1997 to 56% in 2002; proportion of money spent on direct cash assistance fell from 77% to 44%.

Other Program Changes Child care subsidies rose Declines in AFDC led to declines in Food Stamp and Medicaid usage (although other Medicaid changes had delinked it with cash assistance) EITC increases Minimum wage increases

Economic Changes Important Unemployment rates fell and stayed low Wages rose

Table 1 Single Mothers' Income Composition Total Income (in 2000 dollars) Percent of Total Income Public AssistanceOwn Earnings Other Earnings Other Income 1990$18, %53.21%4.30%19.41% , , , , , , , , , , , Note: Total income is the mean dollar value (in 2000 dollars) before taxes, and it does not include EITC subsidies. Public Assistance is composed primarily of AFDC and TANF benefits and does not include the inputed value of Food Stamps or Social Security Income. Source: Author's tabulations of the March Current Population Survey

Key missing information in these calculations: Work expenses Tax and transfer benefits Cross-household transfers

Did some groups gain more than others?

Table 2 Changes Among Single Mothers: 1995 to 2001 Earnings as a share of Family Income (1995) Change from 1995 to 2001 Public Assistance as a share of Family Income (1995) Change from 1995 to 2001 Ratio of Column (2) to Column (4) Part 1. (1)(2)(3)(4) (5) All By Education No High School Diploma Only High School Diploma More than High School Diploma By Race White (non-Hispanic) Black (non-Hispanic) Hispanic By Age of the Youngest Child No Preschooler Preschooler(s) (less than 6) Infants(s) (less than 2) Source: Author's tabulation of the March Current Population Survey

Table 2 Changes Among Single Mothers: 1995 to 2001 Percent Working (1995) Change from 1995 to 2000 Percent on Welfare (1995) Change from 1995 to 2000 Ratio of Column (2) to Column (4) Part 2. (1)(2)(3)(4) (5) All By Education No High School Diploma Only High School Diploma More than High School Diploma By Race White (non-Hispanic) Black (non-Hispanic) Hispanic By Age of the Youngest Child No Preschooler Preschooler(s) (less than 6) Infants(s) (less than 2) Source: Author's tabulation of the March Current Population Survey

Table 2 Changes Among Single Mothers: 1995 to 2001 Percent Below Poverty Line (1995) Change from 1995 to 2000 Percent Working (1995) Change from 1995 to 2000 Ratio of Column (2) to Column (4) Part 3. (1)(2)(3)(4) (5) All By Education No High School Diploma Only High School Diploma More than High School Diploma By Race White (non-Hispanic) Black (non-Hispanic) Hispanic By Age of the Youngest Child No Preschooler Preschooler(s) (less than 6) Infants(s) (less than 2) Source: Author's tabulation of the March Current Population Survey

Did some groups gain more than others? Little evidence that single mothers who were more disadvantaged in the labor market (I.e. lower skill; minority; younger children) had greater difficulty finding work. Striking similarity in changes between public assistance and income shares. More disadvantaged groups better able to increase their work share relative to their declines in welfare participation More disadvantaged groups had greater difficulty translating employment increases into poverty declines.

Welfare Leaver Studies Very useful descriptive information Not very useful in providing an overall evaluation of welfare reform. No information on other populations. Not useful in helping separate policy changes from other changes.

Regression Estimates from of Existing National Data Samples Used to estimate caseload changes, employment changes, income changes, etc. Major reviews of these: Blank (2002), Grogger, Karoly and Klerman (2002) Most show BOTH policy and economy mattered; but large amounts unexplained

Particularly promising approaches Compare differential effects among more and less educated women Look at flows rather than levels in caseload change Find a good instrument for a policy effect (EX: Grogger’s use of age of children to study time limtis)

Yet, all of these estimation approaches have limits – identification of a policy effect is extremely difficult TANF was implemented everywhere within a year’s time. TANF implementation occurred as the economy boomed and EITC was expanded nation-wide Individual policy components within TANF are hard to code and not well identified either

Experimental Data Very effective for looking at single policy changes; less effective for evaluating multiple changes. No states are running post-waiver experiments on welfare reform programs.

Key Results from Experiments Effectiveness of work-first programs Amazing results of financial incentive programs Can increase both earnings and income with combined incentives and mandates Effects of work pgms on children

What Big Questions About Welfare Reform Remain Unanswered? Interpreting the Caseload Decline and Employment increase Both changes were far greater than anyone would have predicted Uncertainty about why such a large changes occurred * Synergies? * Behavioral shifts? * Misinformation?

What Big Questions About Welfare Reform Remain Unanswered? The Effects of an Economic Slowdown in the new Policy Regime? So far very limited effects. * Is this the fulfillment of the promise of welfare reform? * Is this just a mild slowdown? * Are we missing key measures of economic pain?

What Big Questions About Welfare Reform Remain Unanswered? Relation of Assistance Programs to Family Composition & Fertility Major goal of welfare reform, but timing of changes doesn’t match timing of policy change Current research investigating policy/marriage/fertility links is still limited and contradictory

Conclusions 1996 legislation did constitute a major reform (this happens rarely) Transformation of the public assistance system is still a work-in- progress. The arguments between critics and supports remain very unsettled Role of economy remains key