Signe-Mary McKernan and Caroline Ratcliffe, both senior research associates in the Urban Institute's Center on Labor, Human Services, and Population, study the intersection between welfare policy changes and poverty trends. Their recent report, The Effect of Specific Welfare Policies on Poverty, shows how some welfare policies boosted families' economic well-being-while others pushed mothers and children deeper into poverty.
August 23, 2006
1. Did welfare reform reduce poverty rates among women and children?
Welfare reform-both state welfare waivers in the early 1990s and federal welfare reform in 1996-did not reduce the official U.S. poverty rates of women or children, we find. The big push from welfare to work also doesn't appear to have lifted more people out of deep poverty-defined as living below 50 percent of the U.S. federal poverty line.
Several other researchers also find that welfare reform did not reduce poverty or deep poverty. That's not to imply that welfare reform policies had no effect on women and children's poverty status. The many different welfare policies implemented across the country are expected to have mixed effects. Some policies likely increased poverty among women and children. Others likely decreased poverty. That's why the zero overall change. Specific policies do appear to influence the poverty rates of women and children.
2. Which specific welfare policies affect poverty?
For starters, some stricter time-limit policies may alleviate poverty. Limiting the time that families can receive welfare may encourage more work.
Eligibility rules for welfare benefits, which vary by state, can also influence poverty rates for women and children. For example, the family cap-which some states use to deny welfare eligibility to children conceived while the mother is on welfare-increases the deep poverty and poverty rates of both mothers and children. When states allow families to own higher-value cars without losing welfare benefits, deep-poverty rates drop. These findings suggest that more lenient eligibility rules lead to greater economic well-being for families.
Our analyses show that such policies as higher-cash benefits, shorter-sanction periods for non-compliance with welfare work requirements, higher amounts of child support income passed through to mothers, and higher state minimum wage levels can keep families from falling into deep poverty.
For poverty, as opposed to deep poverty, the results are mixed: lower poverty rates in some cases and higher in others. For example, lighter penalties for those who can't meet work requirements and more generous state minimum wages reduce poverty. Yet, higher cash-benefit levels can sometimes increase poverty if recipients work less. So we do see that many welfare policies that states have initiated since the early 1990s make a difference in the lives of struggling mothers and children.
3. How did you measure the connection between policy and poverty?
We use regression analysis to isolate the effect of welfare policies from other factors that might influence poverty. In other words, we identify the effect of welfare reform on poverty by disentangling the effect of state and federal welfare policies from other social policies, economic conditions, and state characteristics that aren't easily measured or tracked, such as attitudes toward poverty.
Our regression model includes 19 social policies, including welfare, the Earned Income Tax Credit (EITC), and the minimum wage. It also includes age, race, educational attainment, and marital status-plus state economic conditions, such as state unemployment rates and state per-capita income.
Basically, we eliminate bias by controlling for such differences as state attitudes toward poverty and annual economic fluctuations. We measure the welfare/poverty connections within each state before averaging for national estimates. We also measure how policies affect poverty over time. For example, economic conditions were better in 1997 than in 2001. So we look at policy effects for 1997 and then re-measure for 2001.
Also, states started different welfare policies at different times. We take advantage of this variation by state and over time to measure how welfare reform affects poverty in a more defined environment. We further isolate trends in poverty and in the economy by using data back to the late 1980s, several years before welfare reforms began. This way, we get unbiased estimates of the effect of welfare reform on poverty.
4. Besides welfare, what other events can lead families toward-or away from-poverty?
Our research suggests that events such as a job loss or gain, divorce or marriage, and suffering or recovering from a disability can throw a person into poverty or help them get out. Job loss is the event most associated with entering poverty, followed by changes in household composition-a departing adult or the birth of a child.
Similarly, a job gain is the event most associated with getting out of poverty. This new employment by the head of the household, the spouse, or another adult in the home offers a financial boost to the entire household.
More education, a high school or advanced degree, can also help people exit poverty by leading to higher wages or more work hours. Getting married can also help people spring poverty's trap. There is no single path in or out of poverty, which suggests that many different policies can be used to help alleviate poverty.
5. What measures add to our understanding of how policies affect economic well-being?
The U.S. official poverty rate, first developed in the 1960s, adds to our understanding of what it means to be poor, but has limitations. It does not capture some benefits and expenses of growing importance to low-income families, such as the EITC, food stamp benefits, child care costs, and out-of-pocket medical expenses.
A National Research Council panel recommends a new poverty measure to reflect these important changes that affect economic well-being. In future research, we'd like to use this newer poverty measure to better gauge the role of cash welfare assistance, food stamps, the EITC, and other social policies and programs on economic well-being.
