urban institute nonprofit social and economic policy research

Welfare Reform: Ten Years Later

A little girl lost in thought.Ending welfare as we knew it has required ever-more-diligent research on policies to reduce poverty and on outcomes for children.



About the Research

The Urban Institute has long studied poverty, the effects of federal changes on program costs and caseloads, the consequences of block grants, and demographic trends. In the early 1990s, we evaluated how states used federal "waiver" demonstration projects to move welfare recipients into the workforce. As Congress debated massive welfare reform legislation in the mid-1990s, we issued briefs on proposed time limits, welfare benefits' impact on out-of-wedlock childbearing, child care and child support, and more.

After the landmark welfare reform passed on August 22, 1996, we took on our biggest research project yet—Assessing the New Federalism. We conducted three rounds of the National Survey of America's Families to monitor and analyze the well-being of American children and families as states assumed more responsibility for health care, income security, social services, and job-training programs for low-income Americans.

Assessing the New Federalism: Eight Years Later synthesizes key findings from more than 450 ANF publications plus dozens of journal articles, books, and research presentations. These findings show dramatic changes in the experience of low-income families, those who have been on welfare and those who haven't, from the mid-1990s on. This research spans a whole economic cycle, providing rich information about state and federal choices and family experiences in good times followed by tighter times.

What's New

Those who wrote, criticized, and implemented the welfare reform bill took part in an Urban Institute roundtable event on July 25, Reviewing a Decade, Previewing the Future. Most hailed welfare reform as a bipartisan achievement that shrank welfare rolls and put single mothers to work. Still, many experts offered varied views on how well work supports are aiding hard-pressed families and why many former welfare recipients aren't advancing in the workforce.

A Decade of Welfare Reform: Facts and Figures provides an overview of this landmark legislation. Caseloads were cut in half by 2000, but many remaining on the rolls lack a high school degree, work experience, or suffer from poor health. States focused on work rather than cutting benefits in a "race to the bottom." More single-parent families now include a worker, but many are low pay and carry no benefits.

Government Work Supports and Low-Income Families: Facts and Figures shows why the Earned Income Tax Credit (EITC), health insurance, food assistance, child care subsidies, and Unemployment Insurance (UI) can make the difference between surviving off the welfare rolls - or not. Still, the array of rules for this panoply of supports can be hard to decipher.

Building on the ANF research, the Urban Institute's project on low-income working families is tackling questions on what risks working families face, how the workplace raises or minimizes those risks, how public programs can address them, and whether state tax and spending choices match families' needs. Little is known about the dynamics of the 9 million working families who struggle to make ends meet. For instance, how many spiral into poverty on the heels of a single crisis?

Commentary

A former assistant secretary for children and families in the Clinton administration, Olivia Golden, who now directs UI's ANF, offers perspective on implementing welfare reform and the results in Welfare Reform Mostly Worked (Orlando Sentinel, July 24, 2005).

Urban Institute welfare experts Sheila Zedlewski and Pamela Loprest look at how low-income families have fared since the 1996 welfare reform and what needs to be done to keep them from falling through the safety net, in Welfare reform must fix safety net (The Providence Journal, August 25, 2006). Loprest and Zedlewski explain in Welfare Reform: One Size Doesn't Fit All (Christian Science Monitor, August 25, 2003) that most families turning to welfare are significantly disadvantaged and require help overcoming job hurdles.

Recent Findings

Below are findings, analyses, and recommendations from our reports and databases:

In the decade since welfare reform, more recipients work but some families seem to have fallen between the cracks.

How well families have fared since the August 1996 welfare overhaul depends on whether they stayed on welfare, left, or avoided it altogether. Using the Institute's National Survey of America's Families, researchers found an improving picture for families on welfare, a relatively stagnant situation for those who left welfare, and deteriorating circumstances for families with no welfare experience.

The percentage of welfare recipients with jobs increased dramatically between 1997 and 2002, while it declined among former recipients and those avoiding welfare. Average income improved for those on welfare, but little changed for those off welfare or never on welfare.

One in five former welfare recipients lacked cash welfare or disability benefits, a job, or a working spouse in 2002. These are the people the system can no longer track, as they no longer receive any assistance.

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Any statement about welfare is no longer universally true across the country.

President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act in 1996, giving states autonomy to set eligibility rules and to determine how participants will meet federal work and time limit requirements. The Urban Institute's Welfare Rules Database details how states' cash assistance program — Temporary Assistance for Needy Families (TANF) — differs from the pre-1996 program, Aid to Families with Dependent Children (AFDC).

In February 2006, Congress reauthorized TANF and required states to increase work participation among their welfare caseload or incur financial penalties. States will now have to rethink their welfare policies.

The reauthorized program requires that half of a state's caseload participate in work activities for at least 30 hours per week, but what qualifies as work, who must be included in states' work participation calculations, and how states will be credited for caseload reduction will all change.

Some states have already implemented the tougher work requirements called for in the 1996 law — for example, nine states exceeded the minimum federal work requirement hours, with Iowa, Michigan, Tennessee, Wisconsin requiring 40 hours of weekly work activity. Still, most states will need to strengthen their work participation efforts to comply with new rules.

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A work-support system supplements welfare benefits in lifting families out of poverty.

Spending on work supports has risen since welfare reform in 1996, totaling $131 billion in 2002. Medicaid and the State Children's Health Insurance Program (SCHIP), food stamps, child care subsidies, and the earned income tax credit (EITC) provide the core work supports. Those who qualify — and know how to find and negotiate these programs — get health insurance, assistance with food bills and child care expenses, and a tax boost to help make work pay.

Work supports are designed to help families stay off welfare. Yet, only 7 percent of working families receive the full gamut. About 25 percent of working poor families recently off welfare receives the entire package compared to 6 percent without the welfare connection. We're finding that what happens in the local offices greatly influences participation. For instance, moving these services away from the welfare office can help reduce the welfare stigma.

Although the 1996 welfare reforms restricted food stamp eligibility for legal immigrants and able-bodied adults, legislative changes since gave states new opportunities to expand access to food stamps. Many states also made signing up and staying qualified for food stamps easier.

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Results still mixed on welfare reform policies and poverty.

After extensive research, the evidence of welfare reform's impact on poverty remains complex. Many studies have explored the interaction of welfare policies, work support policies, and the economy. Poverty rates fell from a 25-year high of 15.1 percent in 1993 to near record lows of 11.3 percent in 2000. But the rates rose again to 12.7 percent in 2004, when the economy turned downward.

Our analysis of these trends shows that the decline in child poverty during the 1990s traces largely to a better job market, especially for less-educated workers. The economic downturn beginning in 2000 hit all families, though poor black families bore the greatest brunt. Our estimates also suggest the importance of parents' work in preventing child poverty.

Tracking the variation in welfare policies over time and across states, we estimated the relationship between policy and poverty. Like other researchers, we find that the entire package of reforms had little effect on income and poverty, but we also find that certain policies — including more lenient eligibility requirements for welfare receipt and more generous financial incentives to work — do seem to make a difference.

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Child care subsidy system faces challenges in the welfare-to-work push.

The child care subsidy system — the nation's primary approach to child care funding — issues vouchers or certificates that low-income parents can use in the private market. The connection between child care as a work support and welfare reform's mandate to put recipients to work is not simple. The two systems involved — child care and TANF — differ in goals, target populations, and administrative structures.

Despite increases in child care funds since welfare reform, many states cannot meet the demand for basic child care subsidies. Many qualified families remain on waiting lists. And many state administrators find themselves making choices between quality and quantity.

Another challenge is improving the quality of child care settings to meet educational goals. Many subsidized child care arrangements don't meet even modest quality standards for developmental child care.

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Welfare policies help determine outcomes for children.

With former welfare parents going to work in low-paying jobs and losing Medicaid, Congress established the State Children's Health Insurance Program (SCHIP) in 1997 to give states the authority and funding to expand health insurance coverage to low-income children. We found that all states expanded coverage for children following SCHIP's enactment, and most states now ensure health care for children well above the federal poverty level.

As Congress debates legalizing unauthorized immigrants, it's important to consider their more than 5 million children. After welfare reform, benefit use declined among legal immigrants whose eligibility was restricted by the law and among refugees, citizen children, and other fully eligible populations.

Child support enforcement, strengthened in the 1996 welfare reform law, helps determine whether children live in homes where basic needs are met. While considerable research has been aimed at understanding nonresident fathers and their child support, little has gone to tracking absent mothers' ability to provide support. We find that many mothers living apart from their children are relatively poor and unlikely to be working full time.

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