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OCR for page 199
7
Effects of Welfare Reform
N ew federal public polices, which began to be enacted in the
1980s, have had a particularly significant effect on work and
family trends among low-income families in the United States.
The 1996 Personal Responsibility and Work Opportunity Reconciliation
Act (PRWORA) replaced Aid to Families with Dependent Children (AFDC),
the major program of cash assistance to families with children, with Tem-
porary Assistance for Needy Families (TANF), a work-oriented time-lim-
ited program designed to encourage single mothers to become self-sufficient
(see Box 7-1). This legislation ended what had become known as "wel-
fare." Prior to the passage of welfare reform, efforts had been made to
"make work pay" by increasing the federal minimum wage and expanding
the earned income tax credit (EITC), which subsidizes the earnings of low-
income 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 work-
ing families and to require, prepare for, and support labor market partici-
pation among welfare recipients and would-be recipients (e.g., Ellwood,
1988).
The 1996 act went beyond earlier reform efforts by turning responsibil-
ity for program design to the states, ending the entitlement to cash assis-
tance to poor single mothers, and time-limiting eligibility for federal cash
assistance. Proponents of welfare reform sought to increase employment
among low-income single mothers with preschool-age children (who made
199
OCR for page 200
200 WORKING FAMILIES AND GROWING KIDS
BOX 7-1
Key Provisions of Welfare Reform in Temporary Assistance for
Needy Families (TANF)
1. Replaces welfare entitlement with block grants to states.
2. Establishes a 60-month limit on federal assistance for families with adults, with
shorter time limits permitted at state discretion. However, up to 20 percent of a
state's TANF caseload may be exempt from the time limit for hardship.
3. Requires states to ensure that recipients engage in work and work-related ac-
tivities. For example, half of nonexempt single mothers must be engaged in
work or work-related activities by 2002. Federal law requires 20 hours of work
activity per week for single mothers with children under age 6 and 30 hours for
those with only older children. However, states can offset the work require-
ment with a "caseload reduction credit" that reduces the percentage of the
caseload required to be engaged in work activities by 1 percentage point for
each percentage point reduction in the caseload since fiscal year 1994 for rea-
sons other than changes in eligibility rules. States may exempt mothers of
children under 1 year of age from work requirements.
4. Consolidates streams of federal assistance to states for child care and increas-
es funding.
5. Makes legal immigrants ineligible for TANF for their first five years in the coun-
try, subject to limited exceptions.
6. Gives significant control over program design to the states.
up approximately two-thirds of AFDC cases). And, indeed, the years fol-
lowing welfare reform have seen major increases in labor force participa-
tion among single mothers with children.
This chapter reviews the evidence on the effects of TANF on working
families, first by looking at its effects on adult employment, earnings, pov-
erty, fertility, and marriage and then by looking at its effects on the well-
being of parents which, in turn, affects the development of children and
adolescents in these families.
EFFECTS OF TEMPORARY ASSISTANCE FOR NEEDY FAMILIES
Employment, Earnings, Income, and Welfare Use
Reviewers of evidence on the effects of the 1996 welfare reform ob-
serve, first, that dramatic changes occurred in the 1990s in the employment
OCR for page 201
EFFECTS OF WELFARE REFORM 201
and welfare participation of adults at highest risk of welfare use and, sec-
ond, that the 1996 reforms were not subject to experimental evaluation
(Blank, 2002; Moffitt, in press).1 As a result, the precise causal contribu-
tion of welfare reform to the behavioral changes observed in the 1990s is
uncertain and likely to remain so.
Estimating the causal impact of policy changes such as welfare reform
must begin with a clear statement of both the treatment and the
counterfactual to treatment for those affected (see National Research Coun-
cil and Institute of Medicine, 2000:Chapter 4 and Appendix B). Although
impossible, the ideal study would allow an analyst to observe the same
individuals exposed to and not exposed to welfare reform. Experimental
evaluation approximates this ideal by randomly assigning individuals either
to a treatment group subject to welfare reform policies or to a control
group subject to some alternative policy, such as traditional AFDC. Be-
cause assignment to a policy regime is done at random, if the experiment is
carried out correctly and successfully, characteristics of individuals--even
characteristics difficult for analysts to measure--should be unrelated to
assignment to treatment or control. In principle, the average effect of the
policy on the treated group is simply the difference between the average
outcomes (such as earnings or employment rate) of the treatment and con-
trol groups.
In the absence of random assignment, analysts use statistical proce-
dures to simulate experimental evaluation. Analysts attempt to measure
and control characteristics of individuals related both to the outcome of
interest and to the probability of treatment. Failure to adjust for differences
in such characteristics between treatment and comparison populations can
lead to biased estimates of program effects (selectivity bias).
Despite the widespread understanding among social scientists and
policy analysts of the importance of specifying a treatment and
counterfactual to the treatment, in research on the effect of welfare reform,
an explicit statement of the treatment and the counterfactual may be prob-
lematic (Blank, 2002). 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). Indeed, a central purpose of welfare reform was to in-
crease state control over program design and the ability of states to tailor
programs to state-specific needs and environments.
Specifying the appropriate counterfactual to welfare reform has also
proven difficult because it requires the analyst to project what would have
1 This section draws on these two major recent reviews of TANF and the estimates of its
impact, borrowing some organizational features from Blank (2002).
OCR for page 202
202 WORKING FAMILIES AND GROWING KIDS
happened to those affected by welfare reform in the absence of the policy
changes. For example, one possibility would be to compare behavior under
the 1996 reforms to that under the traditional AFDC program. However,
a before-after study of welfare reform will not always result in a compari-
son to traditional AFDC because about half the states had been granted
major federal waivers under AFDC prior to the passage of the 1996 act. In
short, both the treatment and the counterfactual vary across states. Fur-
thermore, as noted, welfare reform was part of a broader social policy
reform package, one intention of which was to end cash assistance to able-
bodied adults, at the same time increasing the take-home pay of low-in-
come working families through expansion of the EITC and increasing the
minimum wage. This raises the question of whether it is appropriate to
evaluate the effects of TANF provisions of welfare reform in isolation from
(i.e., controlling for) the increased generosity of the EITC and other
nonwelfare provisions intended to support low-income working families.
Because the 1996 welfare reforms were not subject to random assign-
ment evaluation, it is difficult to know what the labor market outcomes and
related behaviors of the population affected by welfare reform would have
been in the absence of welfare reform. In the absence of experimental
evaluation, analysts have attempted to draw causal inferences about the
effects of the 1996 welfare reforms from three types of studies:
nonexperimental (observational) statistical analysis; extrapolation of re-
sults from random assignment evaluations of earlier state waiver reform
efforts that share features of the 1996 reforms; and "leaver studies" (studies
of recipients who leave welfare after the implementation of welfare reform).
Evaluations of the effects of welfare reform generally begin by reviewing
aggregate trends in welfare caseloads and employment rates of single moth-
ers over the 1990s that might plausibly be attributed to welfare reform.
State Reactions to Welfare Reform
Although research on the effect of welfare reform has properly esti-
mated effects on recipient populations, federal welfare reform is mediated
by the choices that states make in how they implement their welfare poli-
cies. As noted, the welfare reform "treatment" received by those on welfare
or at high risk of welfare use depends importantly on the state of residence.
Blank (2002) concludes that variability across states in program character-
istics was generally increased by welfare reform. Some generalizations
about policy choices are possible. Maximum benefit for families with no
other income continued to decline in real value in the 1990s, as they had in
the 1970s and 1980s. The maximum benefit for a family of three in the
median state fell about 21 percent (adjusted for inflation) between 1995
and 2000 (Blank, 2000:Table 2). Many states opted to provide greater
OCR for page 203
EFFECTS OF WELFARE REFORM 203
work incentives for those on welfare through smaller benefit reduction
rates than had characterized AFDC immediately prior to reform. Reducing
the benefit reduction rate increases the net income of women who work at
the same time that they receive welfare, but it can also reduce incentives to
leave welfare and thus jeopardize eligibility for federal assistance under
time limits. 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 require-
ments, so employment response to incentives might be different than under
AFDC (Moffitt, in press, 1992).
The 1996 welfare reform act required increasing proportions of the
caseload in each state to work or to participate in work-related activities.
However, the act also provided a caseload reduction credit that allows
states to reduce the percentage of the caseload subject to work requirements
by 1 percentage point for each percentage point reduction in its caseload
from fiscal year (FY) 1995 (for declines that are not attributable to changes
in eligibility rules). Many states have met caseload work requirements
through caseload reduction. By FY 1999, 38 percent of recipients were
engaged in work or job-related activities (U.S. Department of Health and
Human Services, 2000b), and nearly 30 percent were employed.
According to Blank (2002), most states have used "work first" ap-
proaches for work activities, which require participants to participate in
limited job preparation services and then engage in job search. Little money
has been spent on longer term education and training (Strawn et al., 2001).
A total of 26 states have adopted the 60-month federal limit on assistance,
whereas 8 states have no mandatory time limit to end all benefits (i.e., they
may elect to provide benefits paid for with state funds to individuals who
have exhausted eligibility for federal assistance). And 17 states have elected
to impose limits shorter than 60 months, at least for some families.
Some states attempt to divert new applicants from participating in
TANF either by requiring search for work prior to eligibility (10 states), or
by providing short-term emergency cash payments intended to allow would-
be recipients to return to or to maintain a job. States and the federal
government dramatically expanded work support expenditures such as child
care and wage subsidies (through earned income credits) along with welfare
reform. States have also increased spending on transportation and job
search assistance.
2Earnings disregards allow welfare recipients to keep a proportion of their welfare benefits
as they increase their earnings, rather than reduce recipients' benefits dollar for dollar as
earnings rise.
OCR for page 204
204 WORKING FAMILIES AND GROWING KIDS
Aggregate Trends
Welfare Caseload and Employment
Two patterns are prominent in the data for the 1990s: a sharp decline
in the welfare caseload and a surge in employment among single mothers
(Table 7-1 and Table 7-2). As a percentage of the population of the United
States, the number of welfare recipients increased by about 1 percentage
point from 1990 to 1993 (to over 5 percent of the population, or an
increase of more than 2 million persons), declined modestly between 1993
and 1996, and then plummeted between 1996 and 2000, falling to less than
3 percent of the population by 2000 (Moffitt, in press). Time limits were
not directly responsible for this decline, as it began and took place prior to
the date that recipients began to exhaust eligibility for benefits. In all, the
caseload fell by more than half between 1994 and 2000, and the decline
was widespread across the states.
The welfare caseload decline in many states began well before 1996.
But in the late 1990s, caseloads declined at a faster rate than in any equiva-
lent period. It is unlikely that the decline was merely the product of the
strong economic recovery of the 1990s because the 1983-1989 recovery
was not associated with notable reductions in the welfare caseload (Blank,
2002).
Employment of unmarried women with children increased strikingly in
the 1990s. 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. There were also large
increases for those with children under age 3 and under age 1 (see Table 7-
1). There were no corresponding increases in labor force participation this
period for married women with young children (in fact, their participation
rates declined somewhat over the second half of the 1990s). Although one
might suspect that the surge in employment and labor force participation
rates among single mothers with young children in the mid-1990s is solely
a product of the economic recovery of the 1990s, single mothers saw little
change in labor force participation and employment over the 1980s (Blank
2002). Furthermore, among those who received public assistance in the
previous year, the proportion employed increased from 20 percent in 1990
to 44 percent in 2000 (Blank, 2002). Among adult TANF/AFDC recipi-
ents, the proportion working increased from about 7 percent in 1990 to
about 28 percent in 1999 (administrative data cited by Ron Haskins in
OCR for page 205
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) Employment Rate 56.8 51.0 59.9 55.8 51.0 69.1 59.6 50.7
(annual Force
2000 Labor Participation Rate 60.4 54.6 58.0 53.3 67.9 58.8
Child
Youngest Employment Rate 54.6 49.5 61.0 57.5 52.9 55.2 46.1 39.0
of
Age Force
by
1996 Labor Participation Rate 59.4 54.3 60.3 55.9 56.8 49.4
Mothers
2002).
of
Employment Rate 53.9 50.0 60.9 57.2 53.6 52.5 44.4 38.9
(1997,
Status
Force
Statistics
1995 Labor Participation Rate 58.9 55.0 60.4 57.0 54.3 49.0
Labor
of
Employment 6 3 1
< < < <6 <3 <1 <6 <3 <1
Bureau
7-1 child child child child child child married child child child
U.S.
married not
mothers spouse spouse
Youngest Youngest Youngest Youngest Youngest Youngest Youngest Youngest Youngest
TABLE Total Mothers with Mothers with SOURCE:
OCR for page 206
206 WORKING FAMILIES AND GROWING KIDS
TABLE 7-2 Poverty Rates for Persons in Families Headed
by a Female Householder, No Husband Present
All Black Hispanic
2001 (new weightsa) 28.6 37.4 37.8
2000 (new weights) 28.5 38.6 37.8
2000 (old weights) 27.9 38.7 36.5
1999 30.4 41.0 40.7
1998 33.1 42.8 46.7
1997 35.1 42.8 50.9
1996 35.8 46.4 53.5
1995 36.5 48.2 52.8
1994 38.6 50.2 54.8
1993 38.7 53.0 53.2
1992 39.0 54.0 51.5
1991 39.7 54.8 52.7
1990 37.2 50.6 53.0
1989 35.9 49.4 50.6
1979 34.9 53.1 51.2
1969 38.2 58.2 53.5b
1959 49.4 70.6 NA
aBeginning with data published for 2000, the Current Population Survey
used new population weights. For 2000, figures were published using both
old and new weights to indicate the effects of the revised weights.
b1969 entry for Hispanics is data for 1972, the earliest available from the
Current Population Survey.
SOURCE: U.S. Census Bureau (2000).
Blank and Haskins, 2001) (with some proportion of this increase attribut-
able to changes in eligibility rules that affected eligibility for working fami-
lies).
Earnings, Poverty, and Income
Since employment increased substantially at a time when welfare
caseloads were falling, analysts have attempted to determine whether em-
ployment improves the economic status of recipients and former recipients.
Whether employment increases income depends importantly on wage rates
and hours of work. More detailed analyses of wage rates of welfare leavers
are discussed below. However, simple calculations indicate that half-time
work at the minimum wage (plus the EITC) provides income that meets or
OCR for page 207
EFFECTS OF WELFARE REFORM 207
exceeds the maximum benefit in the median state (e.g., Ellwood, 1999;
Jencks, 1997; Jencks and Swingle, 2000). In states with high benefit levels
or generous earnings disregards, more than half-time work would be re-
quired to improve income relative to welfare. These calculations also de-
pend 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), but it may not increase income in the absence of earnings
disregards. Finally, although wages are low among the low-skilled women
who make up the vast majority of welfare recipients, they do appear to
increase with labor market experience (Gladden and Taber, 2000).
Poverty rates among single mothers fell sharply in the 1990s, especially
after 1995. Poverty rates fell 15 percentage points among black and His-
panic single mothers from their early 1990s peaks to 2000. Perhaps more
strikingly, more than half of this decline took place after 1996 (see Table 7-
2). Census tabulations of poverty rates for 2001 are not strictly compa-
rable to figures for the late 1990s due to the introduction of new population
weights based on the 2000 census. However, it is possible to use the newly
weighted data to compute changes between 2000 and 2001. Between 2000
and 2001, the poverty rate for all persons increased 0.4 percentage points,
but for persons in families headed by single mothers, the increase was only
0.1 percentage points (on a much larger base). More strikingly, despite the
slowing economy, the poverty rate for individuals in families headed by a
black single mother actually declined by 0.8 percentage points, and the
corresponding figure for Hispanic single mothers was unchanged. (Al-
though poverty reduction is a key goal and therefore an important outcome
for assessment of welfare reform, it must be noted that, while they are
receiving welfare, virtually all welfare recipients are very poor, so it is
possible for their income to improve substantially and still be in poverty.)
Poverty rates fell as income increased for single mother-headed fami-
lies. Between 1993 and 1999, income increased across the entire distribu-
tion (Blank, 2002:Table 5, citing data from the Center on Budget and
Policy Priorities), whereas between 1997 and 1999, income increased for all
but single mother families in the lowest quintile. Specifically, single moth-
ers in the lowest quintile saw their average real income decline by about 5
percent between 1997 and 1999, after having risen by over 10 percent in
the first half of the 1990s. Consumption expenditures increased over the
1990s, even among families with very low income headed by women (Blank,
2002, citing Meyer and Sullivan, 2001).
Limitations of measures of income should be noted. Very few studies
of changes in economic status use good measures of disposable income
(Blank, 2002). Limitations include failure to measure accurately tax rates
OCR for page 208
208 WORKING FAMILIES AND GROWING KIDS
and EITC benefits (which are ignored or imputed by analysts); poor or
absent measurement of the value of in-kind public assistance (housing,
food, medical insurance); lack of information on income sharing within and
between households; and failure to measure work expenses, including out-
of-pocket child care expenses.
Causal Analysis
A variety of approaches have been taken to estimate causal effects of
welfare reform. Such attempts encounter several difficulties. Welfare
reform was enacted in the mid-1990s and followed by a period of unusually
strong economic growth. Other programs intended to aid low-income
working families were expanded, and it is difficult to know whether such
programs should be considered a component of or separate from welfare
reform. Specifically, the federal EITC provided a 40 percent subsidy to
earned income to low-income families with two or more children. The
maximum benefit, at about $4,000 per year, is comparable to the maxi-
mum AFDC benefit in many states. Because many related important fac-
tors changed contemporaneously with nationwide implementation of fed-
eral reform, isolating the causal contribution of federal welfare reform,
either by cross-time comparisons within states or comparisons across states,
is difficult.
Some analysts have taken advantage of the cross-state variation in the
nature of welfare reforms enacted and implemented by states as a result of
the 1996 act to estimate effects of specific program components. Estimat-
ing effects of specific welfare reform components requires an accurate and
complete characterization of the components and the prereform policy en-
vironment (and other state-specific characteristics), which has proven diffi-
cult (Blank, 2002). Studies of the experiences of single states can provide
better measures of both the welfare reform treatment and the counterfactual
to welfare reform, but it is not clear that such results can be generalized to
the nation.
Analysts also attempt to extrapolate from studies of prefederal re-
form statewide waiver evaluations that generally did conduct random
assignment evaluations. However, for several reasons there are limits
to generalizations to national welfare reform that can be drawn from
evaluations of state waivers. First, waivers were not randomly assigned
to states. For example, Blank (2002) notes evidence that waiver re-
quests may have been more common among states with high unemploy-
ment rates (perhaps because states attempted to use welfare reform to
curb welfare expenditure growth), but federal welfare reform was imple-
mented in a strong expansion. Limitations of waiver evaluations for
causal inference and especially inference about effects of TANF include
OCR for page 209
EFFECTS OF WELFARE REFORM 209
(1) waivers often involved multiple components that are not all well
measured, making it difficult to determine the specific component of
reform responsible for estimated effects; (2) possible "contamination"
of control groups due to awareness of treatment, including a general
understanding that the welfare system may become time limited or
require work (Blank, 2002:29); (3) waiver states may not be representa-
tive (waivers were more common in Northern and Midwestern states);
and (4) welfare reform may have affected behaviors related to entry,
but such effects are generally not subject to experimental impact evalu-
ation.
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),
they provide useful descriptive information on the well-being of recent
welfare recipients. Problems with leaver studies include (Blank, 2002): low
response rates, loss to follow-up, issues in the quality of administrative
matching, lack of comparability across states, and lack of ability to study
entry effects or other effects of welfare reform on those not on welfare.
The third approach to the evaluation of TANF welfare reform uses
econometric analyses of state panel data. A causal interpretation of esti-
mates of effects of welfare reform or its components from such statistical
analyses requires accurately specified state welfare policies and controls for
characteristics relevant to the outcome that might be correlated with wel-
fare reform or the specific reform measures taken. A key problem with
econometric evaluations of welfare reform is insufficient variation in the
timing of TANF implementation needed for identification of its effects,
independent of other national policy and macroeconomic trends. As noted,
it is also difficult to specify accurately state welfare policies. As a result of
insufficient variation in the timing of implementation of TANF across states
and widespread use of waivers prior to TANF, econometric models may be
most appropriate for evaluation of the overall effect of policies benefiting
low-income households in the 1990s, rather than effects of TANF specifi-
cally (Blank, 2002).
Research Findings
Welfare Use/Caseload Decline
The main concern of this literature has been to separate effects of the
economy from those of welfare reform in explaining the dramatic (over 50
percent) decline in the welfare caseload in the 1990s, most dramatically in
OCR for page 216
216 WORKING FAMILIES AND GROWING KIDS
Causal analyses of the effects of TANF on fertility and marriage have
been limited. The extensive literature on the effects of AFDC on marriage
and fertility suggest small effects on these behaviors (Moffitt, in press;
National Research Council, 1998). However, it is unclear whether the
results of studies of the AFDC program apply to TANF reforms because the
latter represent much larger changes in the incentives for nonmarital child-
bearing and include additional provisions targeted to reducing nonmarital
fertility.
Finally, experimental evaluations of welfare reform have found little
effect on marriage and fertility, with one notable exception. The MFIP
evaluation reported positive effects on marriage of welfare reform with
financial incentives to support employment (Miller et al., 2000).
Conclusion
In the 1990s, welfare receipt declined and labor force participation
increased markedly among single mothers. Even among single mothers
with a child under 1 year of age, rates of labor force participation increased
by nearly 10 percentage points in the five years following the passage of
federal welfare reform (from 49 to 58 percent). Poverty rates for children
fell dramatically in the late 1990s, especially in families headed by a single
mother. The precise causal contribution of welfare reform to these devel-
opments is uncertain and is likely to be debated for many years. However,
implications of these changes for family work policy may not depend im-
portantly on causes. Whatever the cause, the fact remains that many more
single mothers with young children are employed (Bureau of Labor Statis-
tics, 2002), and, relative to the average worker, these employees have little
work experience, low levels of education, and few economic resources.
EFFECTS ON THE WELL-BEING OF PARENTS,
CHILDREN, AND ADOLESCENTS
Processes Through Which Welfare Policies Might Affect
Children and Adolescents
Has the current wave of welfare reform affected child and adolescent
cognitive or socioemotional development? If so, how? Many of the diffi-
culties in inferring causality discussed in this report also apply to consider-
ing developmental effects of welfare policy changes (Blank, in press; Blau,
2003). For example, there are no experimental data demonstrating effects
of different policy approaches, after 1996, on children. Of the three kinds
of studies that have been conducted to estimate causal effects of PRWORA
(leaver studies, econometric studies of state policy contexts, and random
OCR for page 217
EFFECTS OF WELFARE REFORM 217
assignment studies of waiver and other programs prior to 1996), only one
kind (the experiments) have collected data on child development. Thus the
review here is limited primarily to those experiments, with some additional
findings from nonexperimental studies that collected data on children both
before and after 1996.
Theories from developmental research and policy analysis have been
brought to bear on the question of how welfare reform might affect chil-
dren (Chase-Lansdale et al., 2001; Duncan and Brooks-Gunn, 2000;
Huston, 2002; Johnson and Gais, 2001; Moore, 2001; Yoshikawa and
Hsueh, 2001; Zaslow et al., 1995). These theories converge on five main
mechanisms: changes in employment, family resources, family processes,
family structure, and child care.
As the parent behavior most directly targeted in the current legislation,
increases in employment are most often cited as mediators of welfare policy
effects on children. Longitudinal research on employment and develop-
ment among low-income families, although largely nonexperimental, has
shown small but consistent associations between increases in employment
and better child school and cognitive outcomes (see Chapter 4 and Zaslow
and Emig, 1997, for a review). There is other new evidence that shows no
significant associations with mother's welfare and employment transitions
for preschoolers or adolescents and, in fact, some evidence that mothers
working may be related to improvements in adolescent mental health
(Chase-Lansdale et al., 2003). However, these effects may vary by develop-
mental period: recent evidence from national studies suggests that full-time
maternal employment in a child's first year of life may be associated with
decrements in cognitive abilities in middle childhood among non-Hispanic
white families (Waldfogel et al., 2002; Brooks-Gunn et al., 2002). Few
studies have examined the question of employment effects among adoles-
cents, but these data suggest overall that variation in employment brought
about by welfare reform approaches may have detectable, although gener-
ally small, effects on children, and that such effects may depend on age and
gender.
Family resources, as potential mediators of the effects of welfare reform
on children's development, have most frequently been measured as family
income in developmental studies. Evidence from national studies, dating
from the 1980s and 1990s, has shown that income poverty has negative
effects on cognitive and socioemotional outcomes, particularly when expe-
rienced chronically or in early childhood (Brooks-Gunn and Duncan, 1997;
Duncan and Brooks-Gunn, 1997). These data suggest that approaches to
welfare reform that result in decreases in family income and other resources
may harm children and that approaches resulting in increases may benefit
children.
Family processes, such as parenting behaviors, family routines, and
OCR for page 218
218 WORKING FAMILIES AND GROWING KIDS
Jervis keeps coming back to the power of character, to the dignity that
real work bestows on people (Newman, 1999:254):
What people do about going to work or going on welfare depends
on two things: their self-esteem and what's giving them the
greatest benefit. Your self-esteem will definitely make you want to
work. But at the same time, the welfare's giving you the greater
benefit in dealing with your bills.
parent mental health, may be affected by increases in employment or
changes in resources. Several hypotheses have been put forth regarding
how such processes may be affected by welfare reform. 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 fre-
quently shifting child care and work schedules and the pressures of low-
wage employment. Second, increases in employment with regular hours
may result in more regular family routines in the home. Third, engaging in
employment may result in changes in self-concept, or self-esteem, or in
improvements in mental health. Countervailing effects of these mecha-
nisms, when considered in combination, may occur (London et al., 2001).
Family structure is targeted in the language of the 1996 legislation
indicating that "marriage is the foundation of a successful society." The
balance of the evidence indicates that TANF did not bring about large
changes in rates of marriage. Some nonexperimental evidence suggests
small associations between TANF implementation and subsequent changes
in rates of marriage, but in opposite directions (Bitler et al., 2002; Schoeni
and Blank, 2000). These data are subject to the cautions about causality
described earlier. There are no clear overall patterns in the experimental
evaluations. In the Minnesota Family Investment Program, one of the state
waiver programs that provided a generous earnings disregard coupled with
a work mandate, mothers in the experimental group who were single at the
outset of the evaluation were more likely to be married three years later
than their control-group peers; two-parent families in the experimental
group stayed married at a higher rate than those in the control group
(Gennetian and Miller, 2000; Knox et al., 2000). However, in an experi-
mental evaluation of the Iowa waiver program, which also included a
relatively generous earnings disregard together with an employment man-
date, a reduction in the proportion married occurred among new applicants
who were single at the time of random assignment (Fraker et al., 2002; the
follow-up spanned from 2.5 to 6 years). Other experimental programs
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EFFECTS OF WELFARE REFORM 219
have shown some scattered effects, often in particular subgroups of the
welfare caseload (Blank, in press).
Another dimension of family structure that may have been affected by
the 1996 legislation is the birth of additional children; the law allowed
states to institute family caps, which deny additional benefits upon the birth
of subsequent children. A study taking advantage of variations in the
timing of implementation of family cap policies across the states, however,
found no evidence of an effect of these policies on fertility rates (Kearney,
2002).
Increases in employment have been associated with greater need for
child care in many nonexperimental studies conducted both before and
after passage of the 1996 legislation (Brady-Smith et al., 2001; Danziger et
al., 2000a; Zaslow et al., 1998). The child care literature indicates, in turn,
that type, stability, and quality of child care may affect cognitive and be-
havioral outcomes among children in poverty, and more specifically among
children of parents on welfare (Blau, 2001; Helburn, 1995; NICHD Early
Child Care Research Network, 2000b, 2001c; Phillips et al., 1994; Vandell
and Wolfe, 2000; Yoshikawa, 1999). It is likely, therefore, that one mecha-
nism through which welfare reform may affect children is through variation
in type, stability, or quality of care.
Evidence of Effects
Which of these hypotheses are supported in the emerging data on ef-
fects of welfare policies on children and adolescents? No single study (or
set of studies on the same data) has been able to test all of these rival
hypotheses. Nonexperimental studies have begun to track the well-being of
children and families across periods from just before 1996 through the end
of the decade. In general, it appears that no strong trends have emerged,
either negative or positive, in indicators of parent well-being or child devel-
opment across the years just preceding and following the implementation of
PRWORA (Cherlin and Fomby, 2002; Fuller and Kagan, 2002). For ex-
ample, little change was found, before or after 1996, in rates of maternal
depression, parent cognitive stimulation of young children, or developmen-
tal delays in children in one study of single mothers with very young chil-
dren on welfare in California, Connecticut, and Florida (Fuller and Kagan,
2002). In one large study of welfare recipients in three cities, transitions
from welfare to work, post-1996, appeared to have had few negative effects
on children of preschool or young adolescent age. The one exception was
that adolescents of mothers who entered the workforce reported small but
significant declines in levels of psychological distress, particularly anxiety,
across a period of 16 months (Chase-Lansdale et al., 2003). Thus far it has
not been possible to draw causal conclusions about effects of welfare re-
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220 WORKING FAMILIES AND GROWING KIDS
form from such trend data (i.e., that it was in fact the implementation of the
1996 legislation that caused these trends), due to difficulties capturing
relevant policy variation, difficulties defining a consistent counterfactual
condition, and lack of variation in timing of TANF implementation (Blank,
in press).
Experimental evidence provides preliminary support for the hypothesis
that policies that raise parent income may benefit children in the primary
grades. In a series of experiments conducted in the 1990s, a range of
approaches to welfare policy drawn from responses to the Family Support
Act of 1988 and the state waiver programs of the mid-1990s were tested,
with random assignment of families to these policy approaches or to the
existing state AFDC policy regimes. Although none of these experiments
directly tested TANF programs post-1996, many incorporated aspects of
policies that have become widespread in TANF programs, such as earnings
disregards, mandated involvement in employment-related activities, or time
limits. Data on adult economic outcomes, child school performance,
parenting and family processes, and behavior problems were collected across
follow-up periods of two to five years. The programs were divided into
groups that represented three overall approaches to welfare and employ-
ment policy: (1) four earnings supplement programs, which either provided
cash supplements contingent on full-time work or generous earnings disre-
gards; (2) six mandatory employment programs, which mandated employ-
ment-related activities but did not include earnings supplements; and (3)
two time-limit programs, which incorporated time limits on welfare receipt.
In middle childhood (ages 6 to 12), a pattern emerged of consistent
(though small) positive impacts for children in the earnings supplement
programs. In these programs, experimental group members not only
worked more than their control group counterparts, but also received more
income overall, as a result of take-up of earnings supplements (income was
measured as the combination of welfare, earnings, food stamps, any earn-
ings supplements, and state and federal earned income tax credits) (Bos et
al., 1999; Huston et al., 2001; Gennetian and Miller, 2000; Morris and
Michalopoulos, 2000). Moreover, in contrast to two programs that called
for time limits and six programs that mandated employment or education
without earnings supplements, the earnings supplement programs brought
about significant (though small) increases in school achievement and reduc-
tions in externalizing (acting out) behavior problems among children in the
early primary grades (Morris et al., 2001a). School achievement was mea-
sured in these studies through a mix of parent reports, teacher reports, and
standardized measures; problem behavior was measured through a mix of
parent and teacher reports. It was pointed out earlier that the programs
that increased both employment and income consistently were associated
with improvements in these middle childhood outcomes.
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EFFECTS OF WELFARE REFORM 221
A rival hypothesis is that other features of the larger policy contexts of
these programs may have accounted for these effects, rather than the earn-
ings supplement approach. The Minnesota program's experimental design
allowed for the testing of earnings supplements with and without mandated
employment as separate experimental conditions, in addition to a control
group, subject to then-existing AFDC rules. The research design enabled a
test of the rival hypothesis that it was mandated employment that ac-
counted for positive effects on children. Data from that program show
that the positive effects on children were essentially of the same size in the
earnings-disregard-only condition, suggesting that it may have been that
element, rather than any added effect of mandated employment activities,
that brought about the positive effects. In addition, one follow-up study on
the Minnesota program investigated whether it was the rise in employment
or in income brought about by an earnings supplement program that was
more strongly associated with the improvements in outcomes for children.
This study examined the rival hypotheses in the Minnesota Family Invest-
ment Program evaluation, using the two experimental conditions to con-
duct an instrumental variables analysis teasing apart the influence of the
two mediators. The researchers found that parent income appeared to
more strongly mediate the effects of MFIP on child school performance
than employment (Morris and Gennetian, 2001).
Among the other hypotheses regarding mediators of welfare policy
effects on children, data exist on employment, family processes, and child
care. Although data on employment as a mediator of welfare policy effects
is lacking (aside from the one study on MFIP just described), several ethno-
graphic studies have examined experiences of welfare recipients as they
made transitions to work after 1996. This qualitative evidence indicates
that, for many welfare recipients, increased family stress has accompanied
increased employment. Specifically, parents report worries stemming from
spending less time with children, as well as worries about child care, follow-
ing transitions to increased employment (Lowe and Weisner, 2002; Scott et
al., 2001). This pattern extends to parents who experience rises in income
following increased work; some of these parents find that as their earnings
rise, they lose eligibility for federal programs and other supports for low-
income parents (Lein et al., 2002; Scott et al., 2001). Some parents have
also reported that they do feel better about themselves following transitions
to increased work effort, citing benefits in terms of increased respect from
children (London et al., 2001). The ethnographic work finds that parents
typically use a blend of center-based, relative, and nonrelative home-based
care. In studies of one experimental intervention that offered child care
supplements (Gibson and Weisner, 2002; Lowe and Weisner, 2002), par-
ents selectively took up child care supplements depending on beliefs about
appropriate parenting, fears of "stranger care," child ages, ease of access to
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222 WORKING FAMILIES AND GROWING KIDS
child care services, and interference with existing child care arrangements
with kin or partners. Also, if child care supports are tied to work and work
is episodic and unpredictable, then child care arrangements change too
often for some parents (three times over 18 months on average in the New
Hope earnings supplement program, for example; Lowe and Weisner, in
press).
In general, no consistent impacts have emerged across welfare policy
experiments on survey (self- or child report) measures of parenting, across
such dimensions as monitoring, supervision, cognitive stimulation, control,
or warmth (Bloom et al., 2000, 2002; Gennetian and Miller, 2000; Kisker
et al., 1998; Morris and Michalopoulos, 2000; Quint et al., 1997). Very
few of these studies assessed in-depth observational measures of parenting.
One study that did was the New Chance demonstration, an intervention
focused on human capital providing education, training, parenting, health
and life skills classes, and child care to adolescents mothers on welfare and
without a high school diploma. In a three-year post-program follow-up,
researchers found small positive impacts of the program on measures of
affective quality of mother-child interaction and cognitive stimulation in
the home (Zaslow and Eldred, 1998). Another study examined observa-
tional measures of parenting in the Teenage Parent Demonstration, a hu-
man capital intervention for teenage mothers that provided relatively fewer
support services than New Chance. No impacts on parenting were found
(Aber et al., 1995). An analysis combining data from the 1977 to 1996
Current Population Surveys with state-level data on cases of child maltreat-
ment, using a state-level, fixed-effects model, found that state welfare ben-
efit levels were negatively related to rates of neglect cases (Paxson and
Waldfogel, in press). More recently, Paxon and Waldfogel have analyzed
the effects of welfare policies and welfare reforms on measures of child
maltreatement over the period 1990 to 1998. 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 signifi-
cantly related to the level of welfare benefits and positively and significantly
related to such welfare reforms as family caps, short lifetime limits, imme-
diate work requirements, and tough sanctions for noncompliance (Paxson
and Waldfogel, in press).
A surprising set of emerging findings on family process effects of wel-
fare policies concerns mothers' reports of domestic violence. Among the
experimental evaluations of welfare policies that measured this outcome,
five of nine programs have found evidence of significant decreases in re-
ports of domestic violence at follow-up periods from three to five years (the
Minnesota Family Investment Program and four of six programs in the
National Evaluation of Welfare-to-Work Strategies [NEWWS]; the other
four programs showed no change, or nonsignificant decreases; Gennetian
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EFFECTS OF WELFARE REFORM 223
and Miller, 2000; Hamilton et al., 2001). It is not clear what mediating
processes may explain these impacts on domestic abuse, although a set of
nonexperimental analyses from the NEWWS evaluation suggests the roles
of increases in employment and program caseworker attention to support
services (Hamilton et al., 2001). However, another experimental waiver
evaluation, in Iowa, testing a generous earnings disregard coupled with an
employment mandate, was found to increase mothers' reports of domestic
abuse (Fraker et al., 2002).
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). Welfare and employment policies that included elements aimed
specifically at increasing the use of child care, through subsidies, vouchers,
or services to help locate and obtain child care, increased the use of center-
based care more than other types of care. Interestingly, this was true
regardless of whether these child care assistance approaches supported cen-
ter-based care over other kinds of care. These programs that provided child
care assistance also, as intended, reduced out-of-pocket expenses for child
care, increased use of child care subsidies, and reduced reports of child care
as a barrier to employment (Gennetian et al., 2002a). A separate analysis
of effects on Head Start use revealed that welfare and employment policies
did not increase or decrease use of Head Start, on average (Chang et al.,
2002). However, for the subgroup of adolescent and young mothers (under
age 25), a parallel meta-analytic study indicated that these policies did
significantly decrease Head Start use, by an average of 7 percentage points
(Gassman-Pines, 2002). This may be because Head Start remains, in the
majority of sites, a part-day program and thus may not meet the needs of
low-income parents who work full-time, nonstandard hours, or shifting
work schedules.
Data have begun to emerge concerning subgroups differentially af-
fected by welfare policies. Subgroups for whom data are available include
those defined by developmental period (early childhood, middle childhood,
adolescence), risk (particularly risk for being hard to employ and health
risks), gender, and race/ethnicity.
Impacts in the policy experiments fielded in the 1990s on early child-
hood and adolescent outcomes differed from those found in middle child-
hood. In early childhood, small samples of very young children in the
experiments reduced the number of program impacts available for analysis.
In addition, almost no programs were available that had sufficient numbers
of infants in the first year of life. Among the available programs, no
experimental effects were found, either positive or negative, among chil-
dren younger than age 5 at follow-up (Morris et al., 2001a). In adolescents,
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224 WORKING FAMILIES AND GROWING KIDS
in contrast, a negative average effect on adolescent school performance (as
rated by parents) was found across 10 experiments, as well as average
increases in parent-reported grade repetition (12 experiments) and use of
special education services (15 experiments). These findings were calculated
using standard meta-analytic techniques across the available experiments;
actual effect sizes ranged from zero to moderate and a very few large
negative effects. However, no overall effects were found on rates of parent-
reported dropout, suspensions, or high school completion (Gennetian et al.,
2002b). The pattern of negative effects did not pertain to any particular
kind of policy approach (time limit programs, earnings supplement pro-
grams, or those that mandated employment without earnings supplements)
but occurred across all of them. In examining a range of hypothesized
mechanisms that might account for these effects (including intensity of
parent employment, parenting measures, or parent resources), the only
clear pattern pertained to adolescents with younger siblings. For these
adolescents, larger unfavorable effects on parent-reported school perfor-
mance and receipt of special education occurred, as well as some not found
in the full sample: increases in dropout, suspensions, and expulsions. These
adolescents were also more likely to care for younger siblings, a responsibil-
ity that may have helped bring about the unfavorable pattern of impacts
(Brooks et al., 2001). Ethnographic evidence from a study in four cities
tracking urban welfare recipients, post-1996, has also suggested that sibling
caregiving may be particularly harmful for adolescents in families affected
by welfare reform (Gennetian et al., 2002b; Morris et al., 2001a).
Among other subgroups, concern has emerged about the effects of
welfare reform on the hard-to-employ, that is, those parents who are least
work-ready and may have the greatest difficulties in making transitions to
work from welfare and advancing in low-wage job markets (Danziger et al.,
2000a,b; Kalil et al., 2001). Evidence from the earnings supplement pro-
grams described above suggests that the positive impacts of these programs
on middle childhood school performance and behavioral outcomes do not
extend to children of the hardest to employ (Yoshikawa et al., in press).
For the two U.S. earnings supplement programs, positive impacts on chil-
dren were concentrated among the moderately hard-to-employ, with the
very hardest to employ 25 percent of the samples experiencing neutral and
negative effects (increases in behavior problems), despite equivalent and
large increases in both employment and income. The unfavorable impacts
on developmental outcomes among the children of the hardest to employ
were accompanied by increases in maternal depression, decrements in the
regularity of family routines, and smaller increases in center-based care,
relative to the less at-risk other 75 percent of these samples.
Although little research has used reliable measures of child health sta-
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EFFECTS OF WELFARE REFORM 225
tus to examine how welfare policies affect children's health, some data exist
on the experiences of welfare reform among families with existing health
problems. Both survey and ethnographic research, post-1996, has found
that families with health risks, whether of the parent or the child, appear to
experience more difficulty responding to the work mandates of TANF pro-
grams (London et al., in press; Romero et al., 2002). In many families (40
percent in one three-city ethnographic study), both primary caregivers and
at least one of the children have been rated to be in poor health (Burton et
al., 2002). Bernheimer et al. (in press) found that mothers with children
with significant disabilities or other child problems (in school achievement
or problem behaviors) in the New Hope program--a circumstance charac-
terizing perhaps 15 percent of families--struggled with work and child
care.
Other studies have examined how subgroups defined by gender may be
affected differently by welfare policies. The synthesis of primary grade
outcomes of welfare policy experiments did not find consistent gender
differences in school performance or behavior problems (Morris et al.,
2001b). In the synthesis of impacts among adolescents, there was one
notable difference in effects among boys and girls: across the welfare pro-
grams, there was no significant average effect on grade repetition among
female adolescents, but there was a significant increase in grade repetition
among the male adolescents (a significant difference in average impacts;
Gennetian et al., 2002b). Research on other important subgroups, such as
different racial and ethnic groups, families with children with disabilities,
and immigrant families, is in process, with few studies completed as of this
date (Rosman et al., 2002).
SUMMARY
Evidence to date on how welfare policies affect children and adoles-
cents is relatively strong for some of the policies that immediately predated
PRWORA. 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 lim-
its). However, the need is urgent to obtain experimental evidence on im-
pacts of welfare policies in current policy contexts. Given that caveat,
several messages emerge from the data. Policies that increase the incomes
of low-income parents, through earnings disregards or supplements, were
more likely to be associated with improvements in children's school perfor-
mance and reductions in their behavior problems in middle childhood than
those that simply mandated employment. However, welfare policies,
whether of the mandated employment or earnings supplement types, ap-
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226 WORKING FAMILIES AND GROWING KIDS
peared to coexist with small but consistent decrements in parents' percep-
tions of adolescents' school performance. Policies that increased employ-
ment also increased use of out-of-home care, but increases in center-based
care (the type of care associated most consistently with positive effects on
low-income children) were brought about only by those policies that incor-
porate services or subsidies to increase child care use.
Representative terms from entire chapter:
child care
