Consequences of Welfare Reform

321 Pages·2013·2.29 MB·English

R
Consequences of Welfare Reform:
A Research Synthesis
Jeffrey Grogger, Lynn A. Karoly, Jacob Alex
Klerman
DRU-2676-DHHS
July 2002
Prepared for the Administration for Children and Families,
U.S. Department of Health and Human Services
Labor and Population Program
RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis.

RAND’s publications and drafts do not necessarily reflect the opinions or policies of its research sponsors.
PREFACE

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996
replaced the Aid to Families with Dependent Children (AFDC) program with the Temporary
Assistance for Needy Families (TANF) program. The TANF program implemented by
PRWORA—and a series of state-level reforms instituted prior to 1996 known as state
waivers—produced changes in the structure of welfare benefits, introduced time limits,
strengthened requirements for mandatory participation in work-related activities, and changed
various administrative procedures.
To inform public debate on issues relating to the reauthorization of the TANF program in 2002
and to help states in refining the designs of their TANF programs, the Administration for
Children and Families (ACF) of the U.S. Department of Health and Human Services (USDHHS)
contracted with RAND to synthesize the current state of knowledge about the effects of the
TANF legislation and the TANF programs of individual states. To this end, this document—the
final report for the synthesis project—considers a range of outcomes, including the welfare
caseload, employment and earnings, use of other government programs, fertility and marriage,
household income and poverty, food security and housing, and child development. The
primary focus of the synthesis is on the net effects of TANF, taking into account the effects of
other factors such as the economy and other policy changes that may have affected the
outcomes of interest. Like the literature on which it is based, the synthesis considers both the
effects of specific policies including benefit structures, time limits, work requirements, and
sanction policies, as well as the effect of the TANF reforms as a whole.
This research was funded as Task Order Number 1 under contract number 282-00-0005 from
the U.S. Department of Health and Human Services. Jeffrey Grogger is a RAND research
associate and professor of public policy at the University of California, Los Angeles. Lynn
Karoly and Jacob Klerman are senior economists at RAND. The opinions expressed and
conclusions drawn in this report are the responsibility of the authors and do not represent the
official views of the USDHHS, other Agencies, UCLA, or RAND.
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CONTENTS

Preface .................................................................................................................................iii

Figures.................................................................................................................................. ix

Tables................................................................................................................................... xi

Summary............................................................................................................................ xiii

Acknowledgements ...........................................................................................................xxvii

Acroynms .......................................................................................................................... xxix

Chapter One

INTRODUCTION ............................................................................................................. 1

1.1. Background......................................................................................................... 1

1.2. Objective and Approach ...................................................................................... 2

1.3. Organization of this Document ............................................................................ 4

Chapter Two

CONTEXT FOR UNDERSTANDING FEDERAL AND STATE WELFARE POLICY

REFORMS........................................................................................................................ 7

2.1. A Brief History of Federal Welfare Policy............................................................... 7

2.2. Key Policy Reforms under Waivers and TANF ....................................................... 9

Chapter Three

METHODOLOGICAL ISSUES.......................................................................................... 15

3.1. Methods of Causal Inference in Individual Studies.............................................. 15

3.2. Measuring the Policy Environment .................................................................... 19

3.3. Data Sources for Welfare Outcomes ................................................................... 25

3.4. Summary of Studies Included in the Synthesis.................................................... 29

3.5. Assessing Results from Multiple Studies ............................................................. 41

Chapter Four

THE CASELOAD AND WELFARE USE.............................................................................. 45

4.1. Background....................................................................................................... 45

4.2. Random Assignment Studies of the Effects of Welfare Reform on

Welfare Use..................................................................................................... 47

4.3. Econometric Studies of the Effects of Welfare Reform on Welfare Use.................. 56

4.4. Evaluating the Effects of Welfare Reform on Welfare Use..................................... 72

4.5. Conclusions ...................................................................................................... 75

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vi Consequences of Welfare Reform: A Research Synthesis
Chapter Five

EMPLOYMENT AND EARNINGS..................................................................................... 77

5.1. Background....................................................................................................... 77

5.2. Random Assignment Studies of the Effects of Welfare Reform on

Employment and Earnings .............................................................................. 80

5.3. Econometric Studies of the Effects of Welfare Reform on Employment

and Earnings................................................................................................... 90

5.4. Evaluating the Effects of Welfare Reform on Employment and Earnings............... 91

5.5. Conclusions ...................................................................................................... 98

Chapter Six

USE OF OTHER GOVERNMENT PROGRAMS .................................................................. 99

6.1. Background....................................................................................................... 99

6.2. Random Assignment and Econometric Studies of the Effects of Welfare

Reform on Use of Other Government Programs.............................................. 104

6.3. Evaluating the Effects of Welfare Reform on Use of Other Government

Programs ...................................................................................................... 114

6.4. Conclusions .................................................................................................... 115

Chapter Seven

FAMILY STRUCTURE................................................................................................... 119

7.1. Background..................................................................................................... 119

7.2. Random Assignment Studies of the Effects of Welfare Reform on

Family Structure ........................................................................................... 124

7.3. Econometric Analyses of the Effects of Welfare Reform on Family

Structure....................................................................................................... 136

7.4. Evaluating the Effects of Welfare Reform on Family Structure............................ 145

7.5. Conclusions .................................................................................................... 147

Chapter Eight

INCOME AND POVERTY .............................................................................................. 149

8.1. Background..................................................................................................... 149

8.2. Random Assignment Studies of the Effects of Welfare Reform on

Income, Income Sources, and Poverty............................................................ 153

8.3. Econometric Studies of the Effects of Welfare Reform on Income and

Poverty ......................................................................................................... 170

8.4. Evaluating the Effects of Welfare Reform on Income, Income Sources,

and Poverty................................................................................................... 176

8.5. Conclusions .................................................................................................... 180

Chapter Nine

OTHER MEASURES OF WELL-BEING ........................................................................... 183

9.1. Background..................................................................................................... 183

9.2. Random Assignment Studies of the Effect of Welfare Reform on Other

Measures of Well-being ................................................................................. 186

9.3. Evaluating the Effects of Welfare Reform on Other Measures of Well­

being ............................................................................................................ 198

9.4. Conclusions .................................................................................................... 201
Contents vii
Chapter Ten

CHILD OUTCOMES ..................................................................................................... 203

10.1. Background................................................................................................... 203

10.2. Random Assignment Studies of the Effects of Welfare Reform on Child

Well-being .................................................................................................... 205

10.3. Econometric Studies of the Effects of Welfare Reform on Child Well­

being ............................................................................................................ 218

10.4. Evaluating the Effects of Welfare Reform on Child Well-being.......................... 219

10.5. Conclusions .................................................................................................. 224

Chapter Eleven

CONCLUSION ............................................................................................................. 225

11.1. Synthesizing the Literature Across All Outcomes and All Policies ..................... 225

11.2. Strengths and Limitations of the Existing Knowledge Base............................... 232

11.3. An Agenda for Further Research ..................................................................... 234

Appendix
A. EFFECTS OF WELFARE REFORM FOR SUBGROUPS................................................. 237

B. METHODOLOGY FOR CHAPTER ELEVEN SYNTHESIS ............................................. 277

Bibliography ...................................................................................................................... 283
FIGURES

4.1 The Welfare Caseload, Unemployment, and Statewide Reform: 1970–2000 ...................... 46

4.2 Impact Estimates for Welfare Receipt in 11 NEWWS Programs, Years 1 to 5...................... 53

5.1 Impact Estimates for Employment in 11 NEWWS Programs, Years 1 to 5.......................... 87

5.2 Impact Estimates for Earnings in 11 NEWWS Programs, Years 1 to 5 ................................ 88

7.1 Percentage of Children Living with Two Parents: 1968–2000 ......................................... 120

7.2 Percentage of Births to Unmarried Women: 1950–2000................................................. 121

8.1 Income, Earnings, Welfare Use, and Poverty for Female-Headed Families: 1990–1999 ... 150

8.2 Impact Estimates for Combined Annual Income in 11 NEWWS Programs,

Years 1 to 5 .................................................................................................................. 168

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TABLES

S.1 Two-Dimensional Matrix of Policy Reforms and Outcomes.......................................... xvi

S.2 Summary of Synthesis Results................................................................................... xviii

1.1 Two-Dimensional Matrix of Policy Reforms and Outcomes............................................. 3

3.1 Four Characterizations of States’ Initial Sanction Policies ............................................. 24

3.2 Sources of Administrative Data for Analysis of Welfare Reform...................................... 26

3.3 Sources of Survey Data for Analysis of Welfare Reform.................................................. 27

3.4 Selected Design Features of Random Assignment Studies Included in Synthesis............ 30

3.5 Key Reforms (Treatment) of Random Assignment Studies Included in Synthesis........... 34

3.6 Outcomes Analyzed by Econometric and Random Assignment Studies Included in

Synthesis .................................................................................................................... 42

4.1 Estimated Impact of Welfare Reform on Welfare Use: Random Assignment Studies ...... 48

4.2 Estimated Impact of Specific Welfare Reforms on Welfare Use: Econometric Studies .... 59

4.3 Estimated Impact of Waivers or TANF Reforms on Welfare Use: Econometric Studies ... 66

5.1 Estimated Impact of Welfare Reform on Employment and Earnings: Random

Assignment Studies ..................................................................................................... 81

5.2 Estimated Impact of Welfare Reform on Employment and Earnings: Econometric

Studies........................................................................................................................ 92

6.1 Estimated Impact of Welfare Reform on Use of Food Stamp Program: Random

Assignment Studies ................................................................................................... 106

6.2 Estimated Impact of Welfare Reform on Use of Food Stamp Program: Econometric

Studies...................................................................................................................... 108

6.3 Estimated Impact of Welfare Reform on Medicaid Coverage: Random Assignment

Studies...................................................................................................................... 110

6.4 Estimated Impact of Welfare Reform on Medicaid Coverage: Econometric Studies...... 112

6.5 Estimated Impact of Welfare Reform on Use of Nutrition Programs: Random

Assignment Studies ................................................................................................... 113

6.6 Estimated Impact of Welfare Reform on Use of Public or Subsidized Housing:

Random Assignment Studies ..................................................................................... 116

7.1 Estimated Impact of Welfare Reform on Marital Status and Household Size:

Random Assignment Studies ..................................................................................... 126

7.2 Estimated Impact of Welfare Reform on Fertility: Random Assignment Studies........... 132

7.3 Estimated Impact of Welfare Reform on Marital Status, Headship, Living

Arrangements, Fertility, and Abortion: Econometric Studies....................................... 138

7.4 Additional Estimates of Impact of Welfare Reform on Fertility: Econometric Studies ... 142

8.1 Estimated Impact of Welfare Reform on Income and Poverty: Random Assignment

Studies...................................................................................................................... 156

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xii Consequences of Welfare Reform: A Research Synthesis
8.2 Estimated Impact of Welfare Reform on Income Sources: Random Assignment

Studies...................................................................................................................... 162

8.3 Estimated Impact of Welfare Reform on Income and Poverty: Econometric Studies .... 172

9.1 Estimated Impact of Welfare Reform on Material Hardship and Food Insecurity:

Random Assignment Studies ..................................................................................... 188

9.2 Estimated Impact of Welfare Reform on Health Insurance Coverage: Random

Assignment Studies ................................................................................................... 190

9.3 Estimated Impact of Welfare Reform on Residential Moves, Housing Hardships,

and Neighborhood Quality: Random Assignment Studies........................................... 194

9.4 Estimated Impact of Welfare Reform on Assets: Random Assignment Studies ............. 197

10.1 Estimated Impact of Welfare Reform on Child Behavior, Schooling, Health, and

Other Outcomes: Random Assignment Studies.......................................................... 208

10.2 Estimated Impact of Welfare Reform on Child Maltreatment: Econometric Studies..... 220

11.1 Impact of Welfare Reform as a Whole and Specific Reform Policies on Various

Outcomes: A Synthesis of the Research...................................................................... 226

A.1 Subgroups Analyzed by Random Assignment Studies Included in Synthesis ................ 238

A.2 Estimated Impact of Welfare Reform on Welfare Use for Subgroups: Random

Assignment Studies ................................................................................................... 240

A.3 Estimated Impact of Welfare Reform on Employment for Subgroups: Random

Assignment Studies ................................................................................................... 247

A.4 Estimated Impact of Welfare Reform on Earnings for Subgroups: Random

Assignment Studies ................................................................................................... 251

A.5 Estimated Impact of Welfare Reform on Use of Food Stamp Program for Subgroups:

Random Assignment Studies ..................................................................................... 256

A.6 Estimated Impact of Welfare Reform on Income for Subgroups: Random

Assignment Studies ................................................................................................... 259

A.7 Estimated Impact of Welfare Reform on Welfare Payments for Subgroups: Random

Assignment Studies ................................................................................................... 263

A.8 Estimated Impact of Welfare Reform on Food Stamp Payments for Subgroups:

Random Assignment Studies ..................................................................................... 267

A.9 Estimated Impact of Welfare Reform on Child Behavior, Schooling, Health, and

Other Outcomes for Subgroups: Random Assignment Studies ................................... 273

B.1 Assignment of Studies for Synthesis ........................................................................... 280
SUMMARY

The Research Synthesis project was undertaken to inform public debate on issues relating to
the reauthorization of the Temporary Assistance for Needy Families (TANF) program in 2002
and to help states in refining the designs of their TANF programs. To this end, this report—the
final report of the project—synthesizes the current state of knowledge about the effects of the
TANF legislation and the TANF programs of individual states. It considers a range of outcomes,
including the welfare caseload, employment and earnings, use of other government programs,
fertility and marriage, household income and poverty, food security and housing, and child
well-being. The primary focus is on the net effects of TANF, taking into account the impact of
other factors such as the economy and other policy changes that may have affected the
outcomes of interest. Like the literature on which it is based, the synthesis considers both the
effects of specific policies, such as benefit structures, time limits, work requirements, and
sanction policies, as well as the effect of the TANF reforms as a whole.
We begin this summary by highlighting the key findings from the synthesis. We then provide
some relevant background for the study, describe our approach to conducting the synthesis,
and discuss the results in more detail, including the limitations of the current knowledge base.
Finally, we consider directions for future research.
FINDINGS IN BRIEF
The following key findings emerge from our synthesis of the research literature:
• Many of the effects of welfare reform on welfare use have been well studied. Over a dozen
econometric studies have attempted to estimate the effects of welfare reform taken as a
whole, and all but a few report that reform had substantial effects on reducing the caseload.
• Most of the reforms that were introduced in the 1990’s had positive effects on employment
and earnings. Thus, it seems likely that welfare reform is responsible for a portion of the
increase in work and earnings among single mothers during the last decade. Nearly all of
the evidence, from both experimental and econometric studies, points in this direction.
• There is little information available about the effects of welfare reform on the use of other
government programs. The research is generally consistent with the hypothesis that welfare
reform has caused part of the recent decline in food stamp use, but it does not explain the
mechanisms that underlie this linkage. Only a few studies analyze the effects of welfare
waivers on the use of school nutrition programs; fewer still have considered housing
subsidies. The existing evidence also provides too narrow a basis to draw general
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xiv Consequences of Welfare Reform: A Research Synthesis
conclusions about whether welfare reform caused part of the initial decline in Medicaid
enrollment that followed the implementation of TANF.
• The evidence from both experimental and econometric studies is insufficient to draw any
firm conclusions about the effects of welfare reform on marriage or fertility. Evidence from
the Minnesota Family Investment Program (MFIP) suggests that providing generous
financial work incentives, either alone or with work requirements, may increase marriage or
keep existing marriages intact. The mixed results from the Canadian Self-Sufficiency
Project (SSP), however, suggest caution in interpreting the MFIP results.
• Some welfare reform components can raise incomes and reduce poverty, although this
result is not associated with all policy components and there is reason to believe that some
of the initially favorable effects will not persist over time. Generous financial work
incentives—high earned income disregards inside the welfare system or earnings
supplements outside the welfare system—generate the strongest income gains and anti­
poverty effects.
• There is evidence of both positive and negative effects on child well-being of various
components of welfare reform. Positive and negative effects were observed for indicators
that capture socio-emotional behavior, academic performance, and health. The most
favorable effects are associated with financial work incentives, most likely because of the
increase in family income that results from combining work and welfare. But even for these
programs, there is some evidence of unfavorable impacts for some subgroups of
participants, particularly for adolescent children and for younger children of parents who
do not experience large income gains. Work requirements do not appear to have strong
impacts on children, either favorable or unfavorable, although again there is evidence of
unfavorable impacts for adolescents, especially in school performance.
BACKGROUND
The last decade has witnessed significant changes in welfare policy, beginning with state
waivers under the Aid to Families with Dependent Children (AFDC) program and culminating
in the Temporary Assistance for Needy Families (TANF) block grant implemented by the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). These
reforms produced changes in the structure of benefits, introduced time limits, strengthened
requirements for mandatory participation in work-related activities, and changed various
administrative procedures.
During the same period, welfare-related outcomes have also changed, with the welfare caseload
falling to approximately 2.1 million families as of September 2001, less than half its all-time
peak level of 5.0 million families in 1994; with the fraction of welfare recipients participating in
welfare-to-work activities, or actually working, increasing rapidly; with employment rates and
earnings of single mothers rising substantially; and with family income increasing and the
poverty rate falling. These improvements in labor market and economic outcomes have been
accompanied by a leveling off of the prior upward trend in nonmarital fertility.
Because these changes occurred as welfare reform took place, some observers have concluded
that welfare reform caused them. However, this inference ignores the fact that other policy
changes—such as increases in the Earned Income Tax Credit (EITC), expansion of subsidized