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6 Changing Family Formation Behavior Through Welfare Reform Rebecca Maynard, Elisabeth Boehnen, Tom Corbett, and Gary San(lefur, with lane Mostly Aid to Families with Dependent Children (AFDC), the signature program of federal welfare policy and the traditional focal point of welfare reform discus- sions, was replaced by Temporary Assistance for Needy Families (TANF) when Congress passed and President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (hereafter PRWORA) on August 22, 1996. Among other things, this legislation ends entitlement to program benefits and devolves program authority to the states in the form of block grants or fixed federal fiscal contributions. PRWORA sets forth four principal goals: (1) to provide assistance to needy families so that children may be cared for in their own homes; (2) to end the dependency of needy parents on government support by promoting job preparation, employment, and marriage; (3) to prevent and reduce the incidence of out-of-wedlock and teen pregnancies and births and to establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and (4) to encourage the formation and maintenance of two- parent families (U.S. House of Representatives, 1996b). The goals of PRWORA mirror those of many state welfare reform demon- strations that were initiated under what were termed Section 1115 waivers of federal welfare policies.] By the mid-199Os, states were proposing sweeping and dramatic changes in their AFDC programs, with strong encouragement from the 1Section 1115 of the Social Security Act, added in 1962, authorized research and experimentation with federal welfare policies. In the 1980s and l990s, Section 1115 became the means by which states endeavored to initiate welfare reforms involving departures from requirements or principles of federal law. 134

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REBECCA MAYNARD ET AL. 135 Clinton administration. PRWORA was seen as another logical step toward the devolution of welfare policy authority from Washington. Indeed, many states that have submitted new welfare reform plans under PRWORA propose to con- tinue the programs and policies they initiated with these waivers. Whether PRWORA actually results in greater autonomy and flexibility at the state and local levels remains to be seen. It may actually diminish local flexibility in at least two ways. First, it imposes a whole set of expectations and mandates on states, including time limits on federal benefits, restrictions on federal benefits for teen parents, and penalties if states do not achieve enhanced work objectives for recipients. Second, PRWORA increases the fiscal risk of innovation on the part of states by making states responsible for all expenditures above a fixed federal contribution. In effect, this increases the marginal price to states of investing in disadvantaged families with children, thereby discouraging states from investing in areas with uncertain returns. There are important concerns about how states will respond to these policy changes. With the increase in fiscal risks associated with state and local policy, do states have sufficient research evidence from the reforms begun under Section 1115 waiver demonstrations to assume additional responsibility for the design and operation of welfare policy? As described in more detail below, despite the extent of policy innovation and related evaluations over the past decade, we have but modest hard evidence to guide states in many of the important decisions they face as they assume the lead role in providing a social safety net for their poor. The nature of the waiver demonstration programs changed over the years. As the number of demonstrations expanded, the focus of reform initiatives also shifted. The early waiver reforms were directed primarily at enhancing the labor supply of AFDC adult caretakers through work-related policies and programs. More recently, other recipient behaviors have emerged as the focus of attention, including personal decisions about marriage and cohabitation, decisions affecting family stability (for example, divorce and other family composition changes), fertility decisions, and the quality of parenting. Reform activity increasingly was directed toward what were termed "strategies to promote responsible behav- ior" in effect, a new strain of social engineering using welfare policies and rules to encourage socially desirable behaviors. In theory, then, the explosion of waiver-based demonstrations, accompanied by federally mandated rigorous evaluations, promised a wealth of information by which states might make decisions in a postfederal world. This chapter examines those state waiver demonstrations that were designed specifically to influence fertility, family formation, and family maintenance behaviors. It seeks to identify what useful lessons were generated to guide states in their design of welfare programs under TANF. We then reflect on how one might better capitalize on the opportunities for knowledge development presented to us by the massive natural experiment that encompasses both the state welfare reform demonstrations of recent years and those reforms now being implemented under PRWORA.

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136 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE AFOUL MOTIVATION FOR REFORM The recent welfare reform debate that led to the shift from AFDC to TANF was framed by several premises. First, it was widely accepted that AFDC was seriously flawed and required radical repair. Both welfare dependency and child poverty had reached record levels and AFDC was regarded by many state and federal officials as worsening these problems. AFDC caseloads exceeded the 5 million mark in 1994 for the first time, an increase of almost one-third in 5 years. Meanwhile, child poverty rates also increased from 19.6 percent in 1989 to 21.8 percent in 1994.2 Second, it was assumed that the era of "solutions from the center" was over and that the future of welfare innovation should and would derive largely from state and local initiatives. Public officials at all levels, as well as the public itself, argued for devolution of authority over welfare policy from the federal govern- ment to state and local governments, which presumably could craft solutions sensitive to the particular needs of the client population and in accord with local conditions and labor markets. Third, there was growing acceptance that reforms should redirect the goals of welfare policy from fairly straightforward objectives, such as reducing income poverty or increasing the labor market participation of adults in welfare families, toward more complex objectives involving fundamental changes in individual and community behaviors. This change in attitude was affected, in part, by the observations that 89 percent of children on AFDC lived in households with no father present; that the out-of-wedlock birth rate more than tripled after 1960; and that half of children in never-married households and over three-fourths of chil- dren born to teenage mothers ended up on welfare. Finally, it has been assumed that states are the ideal laboratories of reform and, through experimentation, will promote both more effective welfare policies and improved knowledge about effective design, implementation, and management of these policies. Arguably, however, the dominant motivation for reform was the growing perception that welfare, especially AFDC, promoted irresponsible and/or self- destructive behaviors. Historically, welfare has embodied work disincentives, issuing the largest benefits to those who do not work and reducing benefits as earnings rise, sometimes drastically, among those recipients who do work. The result has been marginal tax rates, "notch" effects, and penalties for savings that are greater than those imposed on other income classes. A second argument was that welfare discourages marriage by making it easier for single-parent families than for two-parent families to receive benefits and by treating earnings among single-parent families more generously in calculating welfare benefits. A third 2Since 1994 there has been a decline in both national AFDC caseloads and child poverty. At the time the welfare reform debate was fully engaged, however, it appeared we had the worst of possible worlds worsening welfare dependency and rising rates of child poverty (U.S. House of Repre- sentatives, 1996b).

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REBECCA MAYNARD ET AL. 137 notion is that welfare lowers the cost of childbearing among poor women and thus may encourage more childbearing among welfare recipients and teenagers than otherwise would be the case.3 Finally it is argued that welfare creates incentives for noncustodial parents not to report their child support payments or to avoid their child support responsibilities, since all but a modest amount of child support payments were used to offset AFDC benefits rather than to increase support of the children. Policy makers and analysts began focusing on incentive issues in the 1960s, when they set up the various negative income tax experiments. However, it was not until the waiver authority vested in the Secretary of the federal Department of Health and Human Services (DHHS) was liberalized in the 1980s that states began to explore, on a large scale and systematically, alternatives for responding to these issues. Table 6-1 classifies waivers into several major types. As the last column of Table 6-1 shows, by August 1996, 42 states had applied for one or more waivers of federal welfare regulations and the federal government had approved 452 separate state waivers of welfare policies. Column 1 of Table 6-1 shows that 33 states had received waivers of 46 provisions related to the eligibil- ity criteria for unemployed parents. As we move across the top of the table, we see that 40 states had waivers that changed more than 150 provisions related to ongoing program participation requirements. Thirty-seven states had waivers changing 142 provisions related to benefits and services. And 37 states had waivers changing 107 provisions related to the treatment of earnings and assets in the calculation of benefits. As the pace of waiver requests increased in the 1990s, so too did the com- plexity of the proposed policy changes. Many of the more recent waiver requests reflected substantial "borrowing" of ideas from other states and jurisdictions and "bundling" of policy changes to form complex and sometimes radically different welfare policies. Over time, state reforms became increasingly ambitious and were more likely to encompass multiple goals: promoting labor supply, encour- aging family formation and stability, encouraging school attendance, mandating immunization of children, altering fertility decisions, and promoting improved parenting. So too, more reforms focused on target populations other than the adult caretaker children in the assistance group, minor teenage parents receiv- ing assistance, immigrant beneficiaries, and nonresident fathers of recipient chil- dren. Many reforms included multiple strategies for achieving these various goals: testing a variety of behavioral incentives for various household members and, in some cases, nonresident parents; testing incentives for employers to hire recipients; and testing incentives designed to alter welfare agency cultures. There 3some have even argued that many teens may have babies just to get welfare and be able to set up independent homes. so too, some have argued that many welfare mothers have additional children in order to increase their grants. The research base fails to support these claims (see further discus- sion below).

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138 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE AFOUL TABLE 6-1 Number of Waivers of Federal Welfare Policies as of August 1996, by Type and State Number of Different Waiver Provisions Related To Eligibility Ongoing Welfare Benefits Income for Participation and and Asset Benefits Requirements Services Disregards Total States with Provision 3340373742 Total Provisions 46157142107452 Arizona 11316 Arkansas 01102 California 128516 Colorado 01124 Connecticut 216312 Delaware 155314 Florida 234514 Georgia 134210 Hawaii 20103 Illinois 062210 Indiana 254314 Iowa 057315 Kansas 343414 Louisiana 03104 Maine 05319 Maryland 175417 Massachusetts 165315 Michigan 15039 Minnesota 21238 Mississippi 135110 Missouri 142411 Montana 233311 Nebraska 134414 New Hampshire 253414 New York 03205 North Carolina 164213 North Dakota 11002 Ohio 155314 Oklahoma 12418 Oregon 234312 Pennsylvania 296623 South Carolina 195722 South Dakota 11114 Tennessee 174517 Texas 173213 Utah 22228 Vermont 11215 Virginia 175215 Washington 02136 West Virginia 1 427 Wisconsin 276318 Wyoming 03216 SOURCES: U.S. Department of Health and Human Services, Administration for Children and Families (various years). See also U.S. Department of Health and Human Services (1997).

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REBECCA MAYNARD ET AL. 139 also was substantial variation in the focus of the various state welfare demonstra- tions and in the particulars of the individual initiatives.4 Some common themes do, however, appear in the waivers. As Table 6-2 shows, the most common waiver provisions of the majority of approved demon- strations fall within four categories of change: (1) eligibility of two-parent fami- lies, 34 states; (2) welfare participation requirements, 40 states; (3) benefits and services, 37 states; and (4) income and assets disregards, 37 states. With regard to the eligibility of two-parent families for benefits, 34 states eliminated the 100-hour work rule (discussed below) and 25 states expanded eligibility for unemployed parents; 40 states required ongoing work participation of some form, including mandatory participation in work-related activities (36 states) and financial incentives and sanctions imposed depending on work par- ticipation (30 states). Many states (37) made changes in their benefit structure and services: 25 states obtained waivers designed explicitly to impose time limits on benefits, while 22 states chose to expand transitional child care and Medicaid programs to ease the financial burden of moving from welfare to work. Waivers were obtained by 21 states to impose family caps on benefits to discourage (or at least not reward) childbearing among welfare recipients. Many states obtained waivers to liberalize their policies regarding the use of income and assets in the calculation of welfare benefits. Some increased the value of an automobile (26) or other assets (23) individuals could own and still receive public assistance, and some increased the amount of earned income that is disregarded in computing benefit amounts (25~. FAMILY STRUCTURE AS THE FOCUS OF REFORM State waiver demonstrations systematically explored remedies for the per- ceived adverse behavioral consequences associated with AFDC. Other than improving labor market attachment, nowhere has this search been more vigorous than in the area of family structure. Moreover, while PRWORA changes myriad aspects of the economic and social safety net, the provisions related to family structure have been especially important in the political debate over the reforms. Two specific areas have attracted the greatest public attention in the welfare reform discussions, in large part because of their anticipated links to behavioral consequences that could change the future of poverty and welfare policy family caps (also termed child exclusion provisions) and the unemployed parent (UP, or two-parent family) provisions. Family caps, the policy of not adjusting cash assistance benefits when AFDC recipients have additional children, reflect a relatively new and, to many, radical 4Considerable variability prevailed in the number and mix of provisions implemented in states (and sometimes within local areas). For instance, although many states requested waivers to make changes in the benefit eligibility rules for two-parent (or unemployed-parent) families, only two of those provisions were present in waivers granted to large numbers of states (see Table 6-2).

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140 CHANGING FAMILY FORMATION BEHAVIOR THROUGH WELFARE REFORM TABLE 6-2 Common Provisions of State Welfare Waiver Demonstrations: 1986-August 1996 Provision Number of States Eligibility of Two-Parent Families for Benefits Elimination of 100-hour work rule Expanded eligibility for unemployed parents Ongoing Welfare Participation Requirements Mandatory participation in work-related activities Financial incentives and sanctions Financial sanctions Financial incentives School attendance and/or performance for children and/or teenage parents Children must receive appropriate immunizations and health services Teenage parents must live at home or in supervised settings Recipients must cooperate with child support enforcement Participants must have self-sufficiency plans Changes in Benefits and Services Time limits on benefits Expansions in transitional child care and Medicaid Caps on benefits based on initial family size (family caps) Cash-out of food stamp benefits JOBS' services for noncustodial parents Increases in the child support pass-through Changes in Income and Asset Disregards Increases in limit on value of an automobile Increases in resource limits Increases in earnings disregard Expansions in disregards for college assistance, work study, or student earnings 34 34 25 40 36 30 28 5 25 19 17 13 13 37 25 22 21 13 12 10 37 26 23 25 13 NOTE: This table includes only provisions found in 10 or more state waivers. SOURCE: U.S. Department of Health and Human Services, Administration for Children and Fam lies (various years). See also U.S. Department of Health and Human Services (1997). change in welfare policy. New Jersey was the first state to implement family caps, doing so on an experimental basis in 1992. In contrast, virtually all states had AFDC-UP programs as of July 1990, although UP recipients remained only a small portion of the AFDC caseload. Between 1961, when federal legislation allowed states to offer AFDC to two-parent families, and 1988, when the Family Support Act mandated that all states offer AFDC coverage to poor, two-parent families in which one worker had a recent work history, only about half of the states voluntarily enacted AFDC-UP programs. Less than 10 percent of the total AFDC caseload represented UP families. Recent reforms related to family caps and the unemployed parent policies share programmatic goals with PRWORA

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REBECCA MAYNARD ET AL. 141 and are of special interest to states as they design and implement their TANF reforms.5 Family Cap Rules Generally the family cap provisions under the waivers in effect at the time PRWORA was passed contained the stipulation that an AFDC family would not receive additional cash assistance for those children born while the family was receiving AFDC benefits. Under PRWORA, states have the option of imposing family caps, but are not required to do so. By the time PRWORA passed, 21 states had obtained federally approved waivers containing family cap provisions (Table 6-3~. States were given the flexibility to modify existing waiver terms and conditions under PRWORA, though many chose not to do so, at least in the short run. The New Jersey family cap, implemented in 1992 as a provision of the state's Family Development Program, has been the most widely publicized such provision and became somewhat of a model for other states. Under it, AFDC families received no assistance for a child born more than 10 months after AFDC application (there also was a 10-month grace period for current recipients), with three exceptions: (1) the first child of a minor already included in an AFDC grant; (2) families who left AFDC due to earnings, remained employed for 90 days, then terminated employment for good cause; and (3) families who left AFDC for any reason and remained off welfare for 12 consecutive months. New Jersey also offered an additional earned income disregard for employed mothers with infants who are subject to the cap, allowing them to keep more of their earnings. Family cap initiatives were characterized by two features during the pre- PRWORA period. First, as in New Jersey, the "typical" family cap provision was not initiated as a stand-alone provision, but was embedded within larger, more complex welfare reform initiatives.6 Seventeen of the twenty-one states with family caps overlap with states that obtained waivers altering their two-parent family provisions (see further below). Second, there existed considerable varia 5There are additional waiver provisions and goals in PRWORA that may also have an affect on family formation (such as requiring minor parents to live with an adult). However, this chapter limits its focus to the family cap and the two-parent family provisions. 6For example, the New Jersey Family Development Program includes expanded employment, education, and training services; provisions reducing the marriage penalties; and modifications to earnings disregards. The Virginia Independence Program (VIP) contains a family cap provision as well as provisions for time limits, earnings subsidies, modifications to income disregards, changes in Jobs sanctions and exemptions, and links between benefits and school attendance. North Carolinas Work First demonstration includes a family cap as well as benefit time limits, modifications to income disregards, elimination of the 1 00-hour rule, and changes in Jobs sanctions and exemptions (u.s. Department of Health and Human services, various dates, and u.s. Department of Health and Human services, 1997).

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142 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE ~FO~ TABLE 6-3 Key Features of Family Cap Provisions of State Waiver Demonstrations: 1986-August 1996 Liberalize Treatment Time Limit of Earninl DateDate Exclusion and Child State and Program NameApprovedImplemented Statewide (months) Support Number of states with 21 19 20 8 provision AZ-(EMPOWER) Employing5/95ll/95 X 10 X and Moving People Off Welfare and Encouraging Responsibility AR AFDC-M4/947/94 10 CA (WPDP) Work Pays3/944/94 X 10 X Demonstration Project (CWPDP-M) Work Pays8/968/96 X 24 Demonstraton Project Modified CT Reach Jobs 1st12/9512/95 X 10 DE BETTER CHANCE5/9510/95 X 10 FL Family Responsibility Act6/966/96d X 10 GA Personal Accountability11/931/94 X 24 and Responsibility Act IL Work and Responsibility9/959/95d X 10 IN IMPACT12/945/95 X 10 IMPACT M8/968/96d X KS Actively Creating8/968/96 X 10 Tomorrow MD Family Investment8/9510/95 X 10 Program MA Transitional AFDC8/9511/95 X 10 Program (Welfare Reform '95) MS New Direction Modifications 8/95 11/95 X 10

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REBECCA MAYNARD ET AL. remonstrations: 143 Liberalized Time Limit Exclusion (months) Treatment of Earnings and Child Support Exemptions Benefits Vary by Number of Childrena Conceived During Birth to Residence Period of Incest/Rape Minorb RequirementC No Benefits 20 8 3 14 8 5 6 10 X X X 10 X X 10 X X 24 10 10 10 24 10 10 10 10 10 10 X X X X X X X X X X X X X X X X X X X X

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144 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE ~FO~ TABLE 6-3 Continued Liberalize Treatment Time Limit of Earning Date Date Exclusion and Child State and Program Name Approved Implemented Statewide (months) Support NE Welfare Reform 2/95 10/95 X 10 X Demonstration Project NJ Family Development 7/92 10/92 X 10 X Program NC WORK First 2/96 2/96d X 10 OK Mutual Agreement 3/95 3/950 SC Family Independence 3/96 3/96d X 10 Program (FIP) TN Families First 7/96 7/96d X 10 VA Virginia Independence 7/95 7/95 X 10 X Program (VIP) WI Parental And Family 4/92 7/94 10 Act (PFR)e Work Not Welfare 11/93 1/95 10 AFDC Benefit Cap 6/94 11/96 X 10 Demonstration Project (ABC)f NOTE: Twenty-one states have implemented a total of 25 demonstrations that include a family cap provision. In addition, three states, New Hampshire, Texas, and Wyoming require parents to partici- pate in JOBS activities sooner after giving birth to a child conceived while on cash assistance, but continue to increase the cash grant (U.S. Department of Health and Human Services, 1997: Table III). aPercentage of benefits changes as number of children increases. bThese provisions exempt first-born minors already receiving benefits.

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166 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE AFOUL EVALUATING THE GREAT SOCIAL EXPERIMENT The next generation of welfare reforms could well have its largest effects by changing social norms particularly by increasing the social stigma attached to childbearing out of wedlock and to childbearing among those unable to support their children or already dependent on welfare. From the parochial perspective of the states implementing the reforms, there is little reason to look beyond whether welfare rolls decline and fewer children are being reared out of wedlock. A broader social view, however, argues for adopting a more comprehensive and longer-range research and evaluation plan involving multiple goals and assess- ment strategies. Ideally, the next wave of research on welfare reform will support the ability of states to simulate the likely response of target populations to various model welfare policies. In that ideal world, New Hampshire, as an example, would be able to simulate the change in caseloads and in the economic welfare of its low- income population that might be expected from continuing current policies, and to contrast these outcomes with what might happen if the state were to adopt policies more like those in Massachusetts or in Maine. And it would be able to conduct its simulations under alternative assumptions about the direction of its economy and demographic trends. Such simulations will result in a better under- standing than we now have of why the expected results will occur. At the same time, the next wave of research needs to look inside the "black box" of change much more carefully than have past studies. The reforms that are about to occur under PRWORA are simply too major in scope to assume there will be only marginal implications for family and child well-being. Meeting this objective suggests that the future research agenda related to welfare policy should address multiple, overlapping goals: (1) meet local program, policy monitoring, and assessment needs; (2) enhance basic knowledge of behavioral responses to various policies; (3) promote our understanding of contextual influences on hu- man behavior; and (4) strengthen our understanding of program and policy out- comes. The first of these goals is best addressed through research such as that of the waiver demonstration evaluation projects. These projects can inform the remaining goals, but they fall far short of providing generalizable findings. For these, we need both to capitalize on the ongoing national experiment we are witnessing and to conduct some carefully planned subexperiments within this natural experiment. State governors and legislatures, as well as local service deliverers, will need local monitoring and assessment strategies to address their own requirements for accountability and feedback. In order to meet these requirements, states should gather and analyze their program outcome measures on a regular basis, making certain those data are accurate and not subject to the types of reporting errors or delays that have plagued many of the waiver demonstration evaluations, such as the early assessments of New Jersey's family cap policy. States should pay close

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REBECCA MAYNARD ET AL. 167 attention to defining the relevant population. For example, they should consider whether they need to track the rate and characteristics of case openings and closings as well as monitor the activities of the ongoing caseload. Additionally, monitoring efforts should factor in demographic and contex- tual shifts. Economic change is demonstrably linked to welfare caseloads; changes in local labor market conditions can alter the likelihood that resident fathers will increase their hours of work and/or even find employment that will move them off welfare. Such conditions should be included in any monitoring of the consequences of suspending the 100-hour rule. Likewise, significant changes in the availability of family planning services are known to affect both fertility and pregnancy resolutions among low-income women, and these factors, not welfare policy changes, could drive apparent shifts in fertility outcomes among the welfare population. Predicting Behavioral Responses to Welfare Policies In the context of the broader mission of supporting extensive simulation results by states, research needs to focus more on the behavioral responses of individuals to specific welfare parameters. We need to know the expected change in the out-of-wedlock birth rate associated with particular income changes and needs resulting from an increase in family size. It also is important to know how marriage rates change as we vary the probability that individuals will be eligible for welfare and, conditional on their being eligible, vary their expected benefits. In both of these examples, we need to take into account the initial characteristics of the individual and other contextual factors. The change in the out-of-wedlock birth rate associated with various benefit increments likely will differ by the number of children one has already, the baseline benefit level (including whether the person is on welfare at all), and other social circum- stances. The particulars of the policy parameters that states have already changed or will modify under TANF are less important in themselves than are the conse- quences of these changes in terms of welfare eligibility and expected benefit levels for current and prospective welfare recipients. In general, the decisions of current and prospective recipients regarding future employment, family forma- tion, child support, and childbearing are going to be determined less by the policies and policy language than by what actually happens to their family's welfare eligibility status and benefit levels if they make particular choices such as the choice to have another child, to marry the father of their child, to get a job, to cooperate with child support, or to get divorced. Still, the specific formulation of certain policies itself may send important messages to the public regarding expectations and values, which could affect behavior. A prime example in which the message may be as powerful, or more powerful, than the financial consequences of the policy is the family cap. Family

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168 CHANGING FAMILY FORMATION BEHAVIOR THROUGH WELFARE REFORM caps send a very clear message that taxpayers look down upon out-of-wedlock childbearing, especially if parents are unable to support their children. The wave of welfare reforms offers an unparalleled opportunity to learn about behavioral responses to income incentives, economic uncertainty, and so- cial support opportunities. We also can estimate the independent effect, if any, of the manner in which the economic consequences and support opportunities are packaged. For example, imagine that we collect and analyze longitudinal data on decisions that poor or near-poor people make and their consequences in terms of program eligibility and benefits for each welfare jurisdiction and for each year from 1992, when the flurry of welfare reform activity began, through the next 5 years. We could gather such information from a micro-level review of welfare applications and case records.~3 That is, we could sample records from the welfare files for all those years in all 50 states and in some counties and construct a database that includes, for each case: (1) basic information, such as number of children, age of youngest child, marital status, employment status, time on welfare, child support status, area of residence, age, and race/ethnicity; (2) status changes, if any, reflecting major behavioral decisions (for example, the birth of another child, a marriage or di- vorce, the acquisition or loss of a job, and increasing or decreasing hours of employment); and (3) for those with a status change, the impact of this on their welfare eligibility and benefit levels. The resulting database will allow us to create measures of the expected welfare response a person in situation "X" might face if he or she makes particular decisions regarding family formation and status. Once we have the hypothetical consequences for welfare eligibility and ben- efits of various behavioral choices that people make, we can use these data in statistical models designed to measure the strength of the behavioral response by current and prospective welfare recipients to particular welfare policy environ- ments. For example, we can estimate the impact of a particular benefit change (such as the introduction of a family cap) on fertility decisions of individuals with particular baseline characteristics and facing a particular policy context prior to the change. In essence, however, we would translate the family cap into particu- lar eligibility and benefit changes associated with fertility decisions that would result in the particular site and for particular individuals. Similarly, we could estimate the impact of a particular marriage penalty or reward on the likelihood of marriage, given the prevailing baseline context. Alternatively, we could simply gather welfare rules governing eligibility and benefit changes for individuals in various statuses and create rules-driven predictors of the policy response to behavioral choices facing individuals. Or we could survey a representative sample of low-income families and gather data on their reports of system responses to their behavioral changes. This has the problems of introducing recall and reporting bias and of being relatively costly.

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REBECCA MAYNARD ET AL. 169 Assuming we have sufficient variation from our natural experimental data- base, we should be able to generalize the results of particular policy shifts to other settings.l4 We could also incorporate into these behavioral models mea- sures of possible "message" effects (for example, the effects of a family cap policy beyond its effect on the marginal benefit level associated with a decision to have another child). Doing this would require gathering data for analysis on the understanding and beliefs of poor and near-poor families as well as service deliverers. Contextual and Ethnographic Analysis Now more than ever, it is critical that trained social scientists conduct sys- tematic, in-depth evaluations to further our understanding of the economic and social welfare of highly at-risk families; of the behavioral choices these families face and the decisions they make; and of the family, community, and social services they draw on to meet the challenges faced by those living near or in poverty. The most optimistic world under welfare Revolution is likely to be one in which state and local welfare reforms succeed in trimming the welfare rolls by providing greater incentives for those with the greatest social capital and familial support to eschew welfare. It also will undoubtedly fail to meet the income security needs of a portion of the current and prospective recipient pool who simply enter parenthood and/or adulthood without the social capital to escape poverty through their own labor or that of their partners. Even with strong employment support interventions, some poor families will hit the time limits and will risk taking their families to homeless shelters or the streets. The unfolding social experiment in welfare policy will enable us to identify and learn from these two very important subgroups of the poverty population. If we plan carefully, we can estimate the number and characteristics of those falling into each category. But, more important, we also could learn an enormous amount about the factors that contribute to family resilience under a "tougher" world vis a vis social welfare policy, and why some families need much more than offered by either the past welfare system or that which emerges under TANF. The results of such in-depth studies could provide the foundation for designing preventive and ameliorative policies directed at this the most needy group and at moving other families more quickly through transition dependency. One subset of such research could build on more routine longitudinal surveys of near-poor and poor families to track their movements on and off welfare; in and out of the labor market; through family formations and dissolutions; and 14The analytic models would operate rather like Mathematica Policy Research's STEWARD (Simulation of Trends in Employment, Welfare, and Related Dynamics) microsimulation model (Beebout et al., 1995).

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170 CHANGING F~YFO~TIONBE~VIOR THROUGH WELFARE ~FO~ through fertility decisions. Researchers could then carefully select families fit- ting various profiles of special interest for example, seemingly low-resource families who succeed under various welfare support settings, their counterparts who "fail," and high-resource families who fail under various welfare support options and conduct an in-depth study of a sample of such families over a period of time to reconstruct the factors that contributed to varying degrees and in varying combinations to the successes or failures of the families. Another subset of this strand of research would entail intensive ethnographic research with at-risk families.l5 The focus of these studies will be on understand- ing the interactions among a broad set of contextual factors in determining behav- ioral choices of families and their short- and long-run implications. Such re- search would, for example, contribute to our understanding of the issues that poor and near-poor families consider in deciding whether to subsist on a low-wage job rather than apply for welfare or whether to place their child in poor-quality care in order to avoid welfare time limits. This research could then also follow the families to inform us of how the various decisions these families make play out for themselves and their children. Targeted Experimental Evaluations Some areas of reform are so different from past policy and practice that prudence argues for conducting targeted experimental evaluations as part of a phased implementation plan. Despite their limitations in terms of generalizability of findings and their inability to address systemic reform, we should not abandon experimental evaluations. They are unquestionably the best means of judging the efficacy of targeted interventions, particularly in cases where there is not yet sufficient evidence to support universal implementation of the policy. The strategies for conducting these types of evaluations are well documented, and there are dozens of models to draw on (Bell et al., 1995; Gordon et al., 1997; Boruch, 1997~. These types of evaluations are especially valuable in cases where policy makers are interested in comparing the status quo with proposed new policies or interventions designed to achieve specific improvements in outcomes. The researchers then design an efficient experimental evaluation with the pri- mary goal of testing the hypothesis that the new policy or intervention does have the intended consequences. To the extent feasible, such studies should also be accompanied by qualitative evaluations of the intervention or policy change and in-depth studies of purposefully selected subsets of the demonstration partici- pants for the purpose of understanding the contents of the so-called black box and, further, of helping to understand and interpret the impact analysis findings 15We are only recently beginning to constructively integrate the results of such analyses with the statistical research to identify behavioral models and to assess the efficacy of particular program models (e.g., see Polit, 1992; Quint et al., 1994a, 1994b; Luker, 1996; and Herr et al., 1996).

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REBECCA MAYNARD ET AL. 171 and translate them into more general conclusions for the benefit of the broader research and policy community. CONCLUSION State and local governments are being called upon to handle some of society's most vexing and intractable social problems. The empirical evidence available to support prudent policy making at the subfederal level is not as extensive as one might expect, given the amount of recent demonstration and evaluation activity. The basic research needed to guide future policy improvement entails ag- gressive study of the innovation and experimentation associated with PRWORA. We should be proactive in addressing evaluation issues and challenges. Surpns- ingly little was learned about how past welfare reforms have affected those be- haviors considered most important to the current reforms. We must learn from that history and do a better job of exploiting the knowledge development oppor- tunities arising from the devolution of responsibility for welfare from the federal government to the states and even to local governments. Whatever social and economic challenges PRWORA creates, it also opens up an enormous opportu- nity to study behavioral responses to quite major shifts in the incentives created by venous types of welfare policies. ACKNOWLEDGMENTS The authors are most appreciative of comments provided by Isabel V. Sawhill on the conference version of the paper and of comments provided by Robert Moffitt and two anonymous referees on an interim draft. REFERENCES Beebout, H., R. Cohen, J. Czajka, J. DiCarlo, M. Dynarski, J. Jacobson, and R. Moffitt 1995 Simulation of Trends in Employment, Welfare, and Related Dynamics (STEWARD). Report submitted to the U.S. Department of Health and Human Services, Assistant Secretary for Planning and Evaluation. Washington, D.C.: Mathematica Policy Re- search, Inc. Bell, S., L. Orr, J. Blomquist, and G. Cain 1995 Program Applicants as a Comparison Group in Evaluating Training Programs: Theory and a Test. Kalamazoo, Mich.: The Upjohn Institute. Birnbaum, M., and M. Wiseman 1996 Extending assistance to intact families: State experiments with the 100 hour rule. FOCUS 18(1, Special Issue):38-41. Bloom, D., V. Fellerath, D. Long, and R. Wood 1993 LEAP: Interim Findings on a Welfare Initiative to Improve School Attendance Among Teenage Parents. New York: Manpower Demonstration Research Corporation, May. Bloom, H., L. Orr, G. Cave, S. Bell, F. Doolittle, and W. Lin 1994 The National JTPA Study: Overview of the Impacts, Benefits, and Cost of Title IIA. Bethesda, Md.: Abt Associates, January.

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172 CHANGING FAMILY FORMATION BEHAVIOR THROUGH WELFARE REFORM Boruch, R. 1997 Randomized Experiments for Planning and Evaluation: A Practical Guide. Thousand Oaks, Calif.: Sage Publications. Brien, M., and R. Willis 1997 Costs and consequences for the fathers. In R. Maynard, ea., Kids Having Kids: Costs and Social Consequences of Teenage Pregnancy. Washington, D.C.: Urban Institute Press. Brock, T., D. Butler, and D. Long 1993 Unpaid Work Experience for Welfare Recipients: Findings and Lessons from MDRC Research. New York: Manpower Demonstration Research Corporation, September. Brown, S., and L. Eisenberg, eds. 1995 The Best Intentions: Unintended Pregnancy and the Well-Being of Children and Fami- lies. Washington, D.C.: National Academy Press. Cain, G. 1987 Negative income tax experiments and the issues of marital stability and family composi- tion. In Alicia Munnell, ea., Lessons from the Negative Income Tax Experiments. Boston, Mass.: Federal Reserve Bank of Boston. Cain, G., and D. Wissoker 1990 A reanalysis of marital stability in the Seattle-Denver income-maintenance experiment. American Journal of Sociology 95(5):1235-1269. Camasso, M.J. 1995 New Jersey's evaluation. In Addressing Legitimacy: Welfare Reform Options for Con- gress. Washington, D.C.: American Enterprise Institute, September. Cave, G., H. Bos, F. Doolittle, and C. Toussaint 1993 JOB START: Final Report on a Program for School Dropouts. New York: Manpower Demonstration Research Corporation, October. Center for Law and Social Policy 1995 CLASP Guide to Welfare Waivers: 1992-1995. Washington, D.C.: Center for Law and Social Policy, May. Donovan, P. 1995 The 'family cap': A popular but unproven method of welfare reform. Family Planning Perspectives 27(4):166-171. Edin, K., and L. Lein 1997 Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work. New York: Russell Sage Foundation. Ellwood, D., and M. Bane 1985 The impact of AFDC on family structure and living arrangements. In R. Ehrengerg, ed. Research in Labor Economics. Greenwich, Conn.: JAI Press. Friedlander, D., and G. Burtless 1994 Five Years After: The Long-Term Effects of Welfare-to-Work Programs. New York: Russell Sage Foundation. Gordon, A., J. Jacobson, and T. Fraker 1997 How to Evaluate Welfare Reform: Guidance for States. Princeton, N.J.: Mathematica Policy Research, Inc., March. Gottschalk, P. 1990 AFDC participation across generations. American Economic Review 2(May):367-371. 1992 Is the correlation between AFDC participation across generations spurious? Department of Economics, Boston College. Gueron, J.M., and E. Pauly 1991 From Welfare to Work. New York: Russell Sage Foundation.

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174 CHANGING FAMILY FORMATION BEHAVIOR THROUGH WELFARE REFORM Maynard, R., W. Nicholson, and A. Rangarajan 1993 Breaking the Cycle of Poverty: The Effectiveness of Mandatory Services for Welfare- Dependent Teenage Parents. Princeton, N.J.: Mathematica Policy Research, Inc., Decem- ber. McLanahan, S., and G. Sandefur 1994 Growing Up with a Single Parent. Cambridge, Mass.: Harvard University Press. Meter, K.J., and D.R. McFarlane 1994 State family planning and abortion expenditures: Their effect on public health. American Journal of Public Health 84:1468-1472. Moffitt, R. 1992 Incentive effects of the U.S. welfare system: A review. Journal of Economic Literature 30: 1-61. The effect of the welfare system on nonmarital childbearing. In Report to Congress on Out-of-Wedlock Childbearing. U.S. Department of Health and Human Services, National Center for Health Statistics. Washington, D.C.: U.S. Government Printing Office. Moore, K., C. Blumenthal, B. Sugland, B. Hyatt, N. Snyder, and D. Morrison 1994 State Variation in Rates of Adolescent Pregnancy and Childbearing. Washington, D.C.: Child Trends, Inc. Myers, R. 1995 New Jersey's 'family cap.' In Addressing Legitimacy: Welfare Reform Options for Con- gress. Washington, D.C.: American Enterprise Institute, September. New Jersey Department of Human Services, Office of Public Affairs 1995 News release, May 16. Olds, D., C. Henderson, Jr., and R. Tatelbaum 1988 Improving the life-course development of socially disadvantaged mothers: A randomized trial of nurse home visitation. American Journal of Public Health 78(11):1436-1145. Olsen, J., and S. Weed 1986 Effects of family-planning programs for teenagers on adolescent birth and pregnancy rates. Family Planning Perspectives 20:153-170. O'Neill, J. 1994 Expert testimony in C.K. vs. Shalala, USDC, D. NJ, Civil Action No. 93-5354. O'Sullivan, A., and B. Jacobsen 1992 A randomized trial of a health care program for first-time adolescent mothers and their infants. Nursing Research 41(4):210-215. Plotnick, R. 1990 Welfare and out-of-wedlock childbearing: Evidence from the 1980s. Journal of Marriage and the Family 52:735-746. Plotnick, R., and S. Lundberg 1995 Adolescent and premarital childbearing: Do economic incentives matter? Journal of Labor Economics 13:177-200. Polit, D. 1992 Barriers to Self-Sufficiency and Avenues to Success Among Teenage Mothers. Princeton, N.J.: Mathematica Policy Research, Inc. Quint, J., D. Polit, H. Bos, and G. Cave 1994a New Chance: Interim Findings on a Comprehensive Program for Disadvantaged Young Mothers and Their Children. New York: Manpower Demonstration Research Corpora- tion, September. Quint, J., J. Musick, and J. Ladner 1994b Lives of Promise, Lives of Pain: Young Mothers After New Chance. New York: Man- power Demonstration Research Corporation, January.

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176 CHANGING FAMILY FORMATION BEHAVIOR THROUGH WELFARE REFORM APPENDIX 6A Sources of Data on Impacts of Welfare-Related Demonstrations on Fertility Behavior of Teenage Parents Program Source(s) of Information on the Research Findings Job Start Cave, G., H. Bos, F. Doolittle, and C. Toussaint. October. "JOB START: Final report on a program for school dropouts." New York: Manpower Demonstration Research Corporation, 1993. New Chance Quint, J., D. Polit, H. Bos, and G. Cave. "New Chance: Interim findings on a comprehensive program for disadvantaged young mothers and their children." New York: Manpower Demonstration Research Corporation, June 1994. Project Redirection Polit, D. and C. White. "The lives of young, disadvantaged mothers: the five year follow-up of the Project Redirection Sample." Saratoga Springs, NY: Humanalysis, Inc., May 1988. Ohio Learnfare Long, D., J. Gueron, R. Wood, R. Fisher, and V. Fellerath. "LEAP: Three-year impacts of Ohio's welfare initiative to improve school attendance among teenage parents." New York: Manpower Demonstration Research Corporation, 1996. Bloom, D., V. Fellerath, D. Long, and R. Wood. "LEAP: Interim findings on a welfare initiative to improve school attendance among teenage parents: Ohio's Learning, Earning, and Parenting Program." New York: Manpower Demonstration Research Corporation, May 1993. Teen Parent Welfare Maynard, R. (ed.). "Building self-sufficiency among welfare Demonstration dependent teenage parents." Princeton, N.J.: Mathematica Policy Research, Inc., June 1993. Maynard, R., W. Nicholson, and A. Rangarajan. "Breaking the cycle of poverty: The effectiveness of mandatory services for welfare dependent teenage parents." Princeton, N.J.: Mathematica Policy Research, Inc., December 1993. Hershey, A., and M. Silverberg. "Program cost of the teenage parent demonstration." Princeton, N.J.: Mathematica Policy Research, Inc., 1993. Maynard, R. and A. Rangarajan. "Contraceptive use and repeat pregnancies among welfare-dependent teenage mothers." Family Planning Perspectives Vol. 26(5): 198-205. Teen Parent Health O'Sullivan, A., and B. Jacobsen. "A randomized trial of a health care Care Program program for first-time adolescent mothers and their infants." Nursing Research Vol. 41(4):210-215. Elmira Nurse Home Olds, D., C.S. Henderson, R. Tatelbaum, and R. Chamberlin. Visiting Program "Improving the life-course development of socially disadvantaged mothers: A randomized trial of nurse home visitation." American Journal of Public Health, Vol. 78(11):1436-1445.