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Chapter One
INTRODUCTION
1.1. BACKGROUND
Over the years, the objectives of welfare reform have been to reduce dependency and promote work while still alleviating need. The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was enacted in 1996 in part to further those objectives. It also advanced three other goals: to reduce unwed childbearing, to promote marriage, and to maintain two-parent families.
PRWORA represents the culmination of the most recent era of welfare reform. That era began during the late 1980s, when many states sought and received approval to alter their state Aid to Families with Dependent Children (AFDC) programs through waivers under section 1115 of the Social Security Act. The waivers and the Temporary Assistance for Needy Families (TANF) block grant implemented by PRWORA produced changes in the structure of benefits, introduced time limits on the receipt of benefits, strengthened requirements for mandatory participation in work-related activities, and changed various administrative procedures.
Over the last decade, change was not limited to welfare programs: Welfare-related outcomes also changed. The welfare caseload fell by more than half, from its all-time peak of 5 million families in 1994 to approximately 2.1 million families in September 2001 (USDHHS, 2001b). The fraction of welfare recipients participating in welfare-to-work activities or actually working has increased rapidly. Employment rates of women leaving welfare range from 62 to 90 percent (USDHHS, 2001a). Among single women with children more broadly, the fraction employed increased from 69 percent in 1993 to 83 percent in 1999, a 20 percent increase (Grogger, forthcoming). Single mothers worked, on average, 7 more weeks in 1999 (for a total of 37 weeks) compared with 1993, and their earnings have increased by 35 percent over the same time period. Family income has also increased, and the poverty rate has fallen (Blank, 2000). These improvements in labor market outcomes have been accompanied by a leveling off of the prior upward trend in nonmarital fertility.
Because these changes in the caseload, in the labor market, and in other outcomes occurred as welfare reform took place, some observers have concluded that welfare reform caused these changes in behavior. However, this inference ignores the fact that other changes took place during the same time. Other policy changes, such as increases in the Earned Income Tax Credit (EITC), expansion of subsidized health insurance delinked from welfare receipt, and increases in the minimum wage, could have had equally important effects on the behavior of single mothers. The long and robust economic expansion of the 1990s also could have had important effects. Thus, at least some of the improvements in welfare-related outcomes likely resulted from changes in other policies and the improving economy rather than from changes in welfare programs.
Understanding the role welfare reform played in general—and the role specific reform policies played in particular—is important, because policymakers at the national, state, and local level are once again debating the direction of welfare policy. The fiscal provisions of PRWORA, which implemented welfare reform at the federal level through the TANF program, must be reauthorized by September 30, 2002. Reauthorization will serve as an opportunity for Congress to review the decisions made in the 1996 legislation, including various TANF program features such as financial work incentives, mandatory work-related activities, and time limits. Any significant changes at the federal level will, in turn, require subsequent changes at the state and local levels. In addition, it seems likely that over the next few years many state legislatures will revisit their choices about how to implement TANF in their state. Finally, as state budgets grow tighter, it is more important than ever to understand which policies are effective.
Ideally, these debates would be informed by research findings. Since the passage of PRWORA, the research literature on the effects of welfare policies has grown, both with the addition of new studies of relevant pre-TANF experience and with the emergence of a literature exploring post-TANF outcomes. However, incorporating the lessons from the research literature into the policy debate is not a simple matter. The literature is spread over several disciplines, each with its own jargon, and, owing to lags in the release of data and in the peer-review process, much of it has not yet been published. Moreover, the methodological challenges of distinguishing the effects of welfare reform from the effects of other policies and the economy are difficult. Studies sometimes come to different conclusions.
1.2. OBJECTIVE AND APPROACH
To allow policymakers to benefit from this large and diverse knowledge base, 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, with the aim of informing the ensuing debates about TANF reauthorization and state implementation. This study collects, summarizes, and synthesizes what is known about how specific welfare reforms and welfare reform as a whole have affected welfare-related outcomes.
In the remainder of this chapter, we discuss how we organize and implement the synthesis and the conceptual framework that guides our approach. Chapter 3 expands on some of the methodological challenges involved in implementing the framework.
1.2.1. How We Organized the Synthesis
We organized our synthesis using the two-dimensional matrix presented in Table 1.1. Along the rows are reform policies, preceded by TANF as a whole (labeled “TANF as a bundle”) and followed by the major components of state welfare reforms: requirements for work-related activities and welfare-to-work programs, time limits, financial work incentives implicit in the benefit structure, and so on. Along the columns are welfare-related outcomes, beginning with the welfare caseload, employment, earnings, and income, and continuing with other outcomes of interest. Using this framework, we seek to synthesize what is known about the causal effects of each policy and program (the rows of Table 1.1) on each outcome (the columns of Table 1.1). Ideally, the results of such a synthesis would allow us to answer the dual questions discussed above: (1) What caused the observed changes in outcome Y? and (2) What would be the effects (on each outcome) of changing policy or program X?
The four outcomes listed in Table 1.1 represent only a few of the welfare-related outcomes that we analyze. The full list includes the following: (1) welfare use and the caseload; (2) employment and earnings; (3) utilization of other government programs (e.g., food stamps and Medicaid); (4) family structure, specifically marriage and fertility; (5) income and poverty; (6) other measures of well-being (e.g., food security, housing security, and health insurance coverage); and (7) child well-being (e.g., child development and school progress).
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Policy Reforms |
Outcomes (Impact on What) |
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|---|---|---|---|---|---|
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Caseload |
Employment |
Earnings |
Income |
. . . |
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TANF as a "bundle" |
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Specific TANF policies |
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Work-related activity requirements |
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Time limits |
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Financial work incentives |
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. |
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Like the literature on which it is based, the synthesis considers both the effect of the TANF reforms as a bundle and the effects of specific policies. The policies listed in Table 1.1 represent a subset of the policies that we consider. The complete list is determined by the policies for which a research base exists. Those policies include the following: (1) financial work incentives, including earnings disregards and benefit reduction rates; (2) requirements to work or participate in work-related activities (and sanctions for failing to satisfy those requirements); (3) time limits on the receipt of benefits; (4) family caps and minor residence requirements; and (5) parental responsibility requirements. In the case of the second set of policies, requirements to work or participate in work-related activities, we also consider variation in program content or approach, such as the human capital development model (i.e., providing additional education and training before urging work) and work-first model (i.e., encouraging work immediately).4
Ideally, the goal of the synthesis would be to fill in each of the cells in the matrix, expressing in a common format how each policy affected each outcome. However, this goal is not realistic, because the literature that we synthesize here has not yet covered each policy-outcome pair. Moreover, some of the cells in the matrix are “populated” by studies that, for one reason or another, are too tentative or otherwise inconclusive to be relied on for policy purposes. Nevertheless, the empty cells provide useful diagnostic information: They tell us where additional research results would help in making policy decisions and where we do not have enough knowledge.
1.2.2. How We Completed the Matrix
The core of this synthesis is a review of the literature for each policy-outcome pair. We began by cataloging the existing literature. For each policy-outcome pair, we produced a table listing the studies, their key characteristics, and their findings. We considered the following questions: How did each study characterize the policy? What data were used to measure outcomes? What were the results?
The next step was to synthesize the literature. Where possible, we put the estimates on a common scale. We noted where different estimates resulted from different subpopulations or time periods, different data sources, and different methods. We then critiqued the studies, from a methodological perspective, asking the following questions: What methods were used to estimate causal effects? How did the analysis control for confounding factors? How confident should we be that the estimates recover the true causal effect of the program or policy on the outcome? In light of these various considerations, should some studies receive more weight in our synthesis than others? Given the literature as a whole, how confident should we be about our conclusions? Chapter 3 provides more discussion on these methodological issues.
Finally, we considered directions for future research, including the following questions: What research issues, that is, which policy-outcome pairs, are in particular need of attention? What methods should be used to address those issues? Is more time or different data needed to produce policy-relevant results?
1.3. ORGANIZATION OF THIS DOCUMENT
This document is organized into two parts: (1) two chapters that discuss broader issues relevant to each of the synthesis chapters; and (2) the core synthesis chapters themselves. In the first part, Chapter 2 considers the various welfare reform policies and programs, providing both historical context and basic information about specific policies and programs. It also presents the theoretical framework that predicts how the reforms should affect behavior and that serves as a guide to synthesizing the results. Chapter 3 considers the methodological challenges involved in implementing the framework described above, focusing in particular on methods for causal inference and issues with data sources.
The core of this document is found in the second part: Chapters 4 through 10, which are organized around the columns (outcomes) in Table 1.1. Specifically, Chapters 4 through 6 consider conventional welfare-related outcomes—welfare use, employment and earnings, and use of other government programs, respectively. Chapters 7 through 10 consider broader outcomes—family structure (fertility and marriage), household income and poverty, other measures of well-being, and child outcomes, respectively. Within each of these core chapters, we begin with a review of the facts: What is the level of the outcome? How has it varied over time? We then present a discussion of data and methodological issues specific to these outcomes. Having discussed these preliminaries, we then present tables with summaries of research results and provide a narrative synthesis. Finally, Chapter 11 provides a brief summary and discusses some directions for future research. Two appendixes are included as well, one providing results for different population subgroups analyzed in a subset of the studies, and another documenting our method for weighting studies in the synthesis.
4We also considered other reform policies, such as diversion and resource policies (e.g., individual development accounts, and auto and other resource limits that determine eligibility). However, we are not aware of any studies that can be used to identify the causal impact of these specific policy elements on the outcomes we consider. Rather, in the studies we synthesize, these elements are bundled together with other policies so that only their collective impact can be assessed.(back)
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