To Daniel Friedlander
(1947-1999)
Daniel’s pioneering work on measuring the impact of social
programs laid the foundation for this analysis.
During
the past two decades — particularly since the mid 1990s — Congress
and the states have dramatically reshaped the nation’s system of
cash welfare assistance for low-income families. Many studies and journalistic
accounts have examined these changes, but only a handful have been expressly
designed to assess what difference the new policies make.
This
monograph addresses this critical question by synthesizing the results
from studies of 29 welfare reform initiatives conducted by the Manpower
Demonstration Research Corporation (MDRC). Each study focused on one or
more of three key program features: mandatory employment services, earnings
supplements, and time limits on welfare receipt. Although the programs
under study were launched prior to passage of the landmark federal welfare
reform law of 1996, these three features are central to most states’
current welfare reform programs. This document focuses on the effects
of these features on adults’ employment and income; a companion document
examines their effects on children’s well-being.[1]
All the studies used a rigorous random assignment research
design in which people (most of them single mothers receiving welfare)
were assigned at random to a program group, which was subject to
the welfare reforms, or to a control
group, which was not. The groups were tracked over several
years and compared with respect to a number of outcomes, including employment,
welfare receipt, and income. Because people were assigned to the groups
at random, it can be assumed that, within each study, the groups did not
differ systematically at the outset and went on to experience the same
general economic and social conditions. Thus, any differences that emerged
between the groups during the studies can be attributed to the programs
being tested (the “increases” and “decreases” reported
here refer to these differences).
Together these studies provide a wealth of information on
the effects of different welfare reform strategies and a strong foundation
for future programmatic decisions and legislative deliberations. This
synthesis is particularly timely because Congress will soon begin to debate
reauthorization of the Temporary Assistance for Needy Families (TANF)
block grant, the federal welfare program created in the landmark federal
welfare law of 1996.
Key Lessons
- A number of programs that provided only mandatory employment services
were effective, but the most successful of these programs used a mix
of services — including some education and training — and
strongly emphasized the need to find work.
Almost
all states now require adult welfare recipients to work or prepare for
work, but there is much debate about the best way to do this. Over the
past two decades, the pendulum has swung between an emphasis on rapid
job placement and a focus on education or training.
Side-by-side tests of programs at opposite ends of the spectrum
— those requiring most recipients to look for work (“job search
first”) and those requiring most to enter education or training (“education
first”) — in three counties revealed that they ultimately produced
similar overall gains in employment and earnings. However, the job-search-first
programs produced larger immediate gains and, in the medium term, led
to larger gains for more disadvantaged groups, such as people without
a high school credential. The job-search-first programs were also less
expensive to operate.
The
most effective programs fell in the middle of the spectrum. In these programs,
some recipients started by looking for work, while others started with
education or training. This finding suggests that a more individualized
approach may be most promising, but — given that not all the programs
that used the mixed approach were highly successful — the types of
services provided and the basis on which people are assigned to services
appear to be also critical.
Although
programs across the spectrum increased employment for a variety of groups,
most people who went to work obtained low-wage or part-time jobs; some
left welfare without finding work; and most of the programs had rules
that reduced people’s welfare benefits by a dollar for each dollar
they earned. As a result, programs that included only mandatory employment
services usually left families no better off financially than they would
have been without the programs, even after accounting for the federal
Earned Income Credit (EIC, the federal tax credit that supplements the
earnings of low-income families). There is also little evidence that the
programs benefited or harmed children.
The
only programs that both increased work and made families financially better
off were those that provided earnings supplements to low-wage workers.
In
contrast to the programs that used only mandatory employment services,
two programs that supplemented the earnings of working recipients boosted
both employment and income relative to control group levels. One of these
programs allowed welfare recipients who went to work to keep more of their
benefits than under the old welfare system (an approach now used in many
states), while the other supplemented earnings outside the welfare system.
Both approaches cost more than traditional welfare, but they also produced
a range of positive effects for children — for example, higher levels
of school achievement.
- Relatively little is known about the effects of welfare time limits,
but the available data suggest that time limits need not cause widespread
hardship, at least not in the short term.
Two
of the programs under study provided earnings supplements by allowing
working recipients to keep more of their benefits but also imposed time
limits on welfare receipt. Although these programs initially increased
employment and income, the income gains disappeared after families began
to reach the time limit. In fact, the programs reduced income for a small
group of families, although the only such program whose evaluation has
been completed did not appear to increase material hardship. However,
there are not yet enough data to warrant firm conclusions about the effects
of time limits. Moreover, how families fare may depend on how time limits
are implemented (for example, whether and under what conditions exemptions
or extensions are granted).
These
results suggest that policymakers face a critical choice. Recall that
the programs that provided only mandatory employment services increased
work and reduced welfare use but usually did not lead to notable improvements
in families’ economic circumstances or make children better off than
they would have been without the programs — even after accounting
for the EIC. Achieving these goals may require further supplementation
of families’ earnings. Most states already do this by allowing working
recipients to keep part of their benefits, but the income-enhancing effects
of such policies are undermined by welfare time limits. Federal and state
policymakers who aim to improve outcomes for families and children may
need to develop new ways of providing ongoing financial support to low-wage
workers — an approach that may raise costs — while continuing
to test strategies for raising wages through education and training.
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