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Between 1994 and
1999, the welfare caseload fell by almost 50 percent. In other
words, about two million fewer families were receiving welfare
in 1999 than five years earlier. To some observers, this trend
is evidence that welfare reform has been a success. To others,
it raises a host of new questions and concerns and suggests
that the 1996 law was only the first step in the process of
reforming welfare. For example, how are the families who have
left welfare doing? Are most of them working and earning enough
to lift themselves above poverty? And who are the families
who are still left on the welfare rolls? Do they face especially
severe circumstances that may prevent them from going to work?
This report
looks at the changing nature of the caseload by examining
the characteristics and circumstances of three groups: people
who leave welfare and stay off for at least a year (leavers),
people who stay on welfare persistently (stayers), and people
who cycle on and off the rolls (cyclers). The report uses
a unique data set consisting of over 30,000 people who were
targeted for a variety of welfare-to-work programs over the
past decade. The programs were each evaluated using a random
assignment design, in which some families were assigned into
the new program being tested and others were assigned into
the existing welfare system in the state at the time of the
evaluation. The programs include three key components—mandatory
participation in employment or education activities, enhanced
financial incentives, and time limits—used alone and in combination.
Together, they cover the range of policies that states now
have adopted as part of their new welfare programs. Data from
these welfare-to-work programs make it possible to track the
employment, welfare, and economic status of families for up
to five years after they entered the evaluation. By dividing
the caseload into stayers, leavers, and cyclers, the following
key questions can be addressed:
- Who is leaving welfare long term? What potential employment
barriers do welfare leavers face, and how are they faring
economically? How do their circumstances differ from those
of people who stay on welfare persistently and of people
who cycle on and off welfare?
- How many families leave welfare without work? Who are
they, and what potential employment barriers do they face?
How are they faring relative to families who are working
when they leave welfare?
- What effects have welfare-to-work programs had on the
caseload? Who remains on welfare persistently, despite being
subject to a welfare-to-work program? Do they face more
barriers to employment than people who stay under the traditional
AFDC system?
Understanding the circumstances of families
who leave welfare long term is important to designing effective
programs for welfare recipients and for low-income families
in general. If many who do work are still poor, for example,
more effort might be devoted to post-employment services that
help low-wage workers increase their earnings. It is equally
important to find out about the families who stay on welfare.
If many of the families receiving welfare today face severe
employment barriers, then welfare policies that have been
used in the past may not work for this new type of caseload.
Finding new policies for the hard-to-employ may have also
gained added urgency if welfare reform, by encouraging more
and more families to leave welfare, has left a caseload that
is even harder to employ than in the past. Examining the effects
of several welfare-to-work programs on the composition of
the caseload provides hints as to the effects of welfare reform
more broadly. Finally, there has been little research on cyclers,
or people who return to welfare intermittently but do not
stay on it persistently. It is not clear, for example, whether
cyclers face more dire economic circumstances than stayers
and leavers or whether they possess fewer or more barriers
to employment.
Findings
- Long-term welfare leavers face fewer barriers to employment
than long-term stayers and generally fare better economically.
People who cycle on and off the welfare rolls look more
similar to leavers than to stayers.
Leavers differed from stayers in a variety of expected
ways (see Table S1). Leavers were
older, more educated, and had fewer children than stayers. They also faced
fewer barriers to employment; they were less likely to report child care
problems, for example, and were more likely to have had work experience
prior to entering the evaluation. Cyclers, on the other hand, looked fairly
similar to long-term leavers, in part because many of them had only one
or two short spells on welfare.
Although each
of the groups had low incomes during the follow-up period,
leavers and cyclers had somewhat higher incomes than stayers
and were much less likely to have income below the poverty
line. However, leavers and cyclers were more likely to report
facing material hardships, particularly problems in accessing
health care.
- More than one-third of welfare leavers did not work
in the months immediately following their welfare exit.
These nonworking leavers faced more barriers to work than
other leavers but had similar incomes.
Thirty-six percent of long-term welfare leavers did not
work in the months immediately following their exit, according to earnings
data from state Unemployment Insurance systems. In general, people who
did not work at welfare exit were more disadvantaged than those who did
work (see Table S2). They were less
educated, more likely to report other barriers to work, and much less
likely to have had recent work experience. On average, however, they had
similar incomes as working leavers by the time of the follow-up survey.
Although they had lower earnings, they were more likely to rely on other
sources of income and more likely to eventually return to welfare, Food
Stamps, or both. There is little evidence that many nonworking leavers
left welfare for marriage or cohabitation.
- People who stayed on welfare while subject to a welfare-to-work
program had similar characteristics and employment barriers
as people who stayed on welfare under the traditional AFDC
system.
The effects of welfare reform on the characteristics of
the caseload can be inferred by comparing stayers in the program groups
with their counterparts in the control groups. People in the program groups
were subject to one of the programs being tested—each of which contains
elements of states’ new Temporary Assistance for Needy Families (TANF)
programs—while those in the control group were subject to the traditional
AFDC system. In general, the two groups looked fairly similar in terms
of demographic characteristics and potential barriers to employment (see
Table S3).
- People who stayed o welfare while subject to a welfare-to-work
program had more work experience during the follow-up period
than people who stayed under the traditional AFDC system.
These differences were found only for the two welfare-to-work
programs with the most generous financial incentives.
Although several programs included financial
incentives to work, in the form of enhanced earnings disregards,
stayers in the two programs with the most generous incentives
differed in two key ways from their control group counterparts.
First, stayers in the program groups were more likely to have
worked while on welfare, because the earnings disregards allowed
more of them to work and still qualify for benefits. Second,
because stayers in the program groups were more likely to
have worked and because they received more generous welfare
benefits when they did work, they had higher incomes than
stayers in the control groups.
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The findings show that many families continue
to need assistance after they leave welfare. Many families
who leave and stay off long term remain poor after they leave,
and many lack access to important benefits, such as Food Stamps
and health insurance, for which they are probably still eligible.
People who leave welfare without work have always been a group
of special concern, and the findings indicate that they did
not leave welfare without work because they got married. Rather,
they were unable to overcome a range of potential barriers
to work, such as low education and little prior work experience.
These leavers need services to help them find and keep jobs.
It is encouraging that people who cycle on and off welfare
do not face more severe employment barriers than other groups
in the caseload. Nonetheless, many of them obviously need
assistance to avoid returning to welfare, which may not be
an option in the era of time limits. Finally, although welfare-to-work
programs were found to have few effects on the characteristics
of the caseload, they do affect stayers’ economic status.
Enhanced incentives, in particular, increase both the employment
rates and the incomes of stayers. Although the fact that most
states now use enhanced incentives is encouraging, most states
also impose time limits. Time-limit policies could be designed
so that the “leavers” who are forced off the welfare rolls
by these programs would have adequate incomes. Time limits
could also be combined with post-exit services that would
be available to all leavers.
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