The Center's work on 'Welfare Reform / TANF' Issues


Why the 1996 Welfare Law Is Not a Model for Other Safety-Net Programs

July 22, 2014 at 2:25 pm

House Budget Committee Chairman Paul Ryan’s upcoming poverty plan will likely showcase the 1996 welfare law, which replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF) — a block grant with fixed federal funding but broad state flexibility — as a model for reforming other safety net programs.  A careful examination of the record, however, indicates that the 1996 law’s results were mixed and that if the goal is to reduce poverty, especially among the most disadvantaged families and children, there are serious downsides to embracing the 1996 law as a model.  The record shows:

  1. A booming economy contributed far more than welfare reform to the gains in single mothers’ employment in the 1990s, and many of those gains have since disappeared.  A highly regarded study by University of Chicago economist Jeffrey Grogger found that welfare reform accounted for just 13 percent of the rise in employment among single mothers in the 1990s.  The Earned Income Tax Credit (which policymakers expanded in 1990 and 1993) and the strong economy were bigger factors, accounting for 34 percent and 21 percent of the increase, respectively.While the booming economy helped many families move from welfare to work during the 1990s, the labor market situation is much weaker today.  The share of single mothers without a high school degree with earnings rose from 49 percent to 64 percent between 1995 and 2000 but has since fallen or remained constant almost every year since then.  At 55 percent, it’s now just slightly above its level in 1997, the first full year of welfare reform (see first graph).
     

  2. TANF provides a safety net for very few families and failed to respond to increased need during the Great Recession.  The welfare law’s relatively modest contribution to raising employment among single mothers came at a substantial price.  TANF now serves only 25 of every 100 families with children that live below the poverty line, down from AFDC’s 68 of every 100 such families before the welfare law (see second graph).  The Great Recession provided the ultimate test of whether states could do better than the federal government in providing a safety net for poor families, as the welfare law’s proponents had claimed, and the results are very unsettling.  As the number of unemployed Americans doubled in the downturn’s early years, TANF caseloads rose by just 13 percent nationally; in 22 states, the number of assisted families rose little or not at all.  In the face of rising need, many states scaled back their TANF programs to save money — tightening time limits and cutting already low benefit levels despite the lack of available jobs — leaving the poorest families poorer.  As a result, TANF emerged from the downturn an even weaker safety net.
     

  3. TANF does little to help recipients succeed in today’s labor market.  Chairman Ryan has spoken of the importance of helping people get the skills they need to move out of poverty.  Yet TANF’s extensive restrictions on what are considered acceptable work activities discourage states from providing TANF recipients with opportunities to increase their education and job skills.  Restrictions on participation in vocational education and GED or high school completion programs leave many recipients unable to compete in today’s labor market.  And although most states’ cash assistance caseloads fell substantially in the late 1990s, states generally haven’t used much of the freed-up resources to improve the job prospects of poor parents with barriers to employment.  Only 8 percent of state and federal TANF dollars directly support work activities for cash assistance recipients.  Even when you add in funds that support working families like child care assistance and the refundable part of state earned income tax credits, states spend only one-third of their federal and state TANF dollars to promote and support work.

2009 Recovery Act Kept Millions out of Poverty

February 18, 2014 at 3:06 pm

The Washington Post points out that the 2009 Recovery Act, signed five years ago yesterday, accomplished much more than its critics acknowledge.  When it comes to using the safety net to keep people out of poverty, for example, the Recovery Act was probably the most effective piece of legislation since the 1935 Social Security Act, as our 2011 analysis explained.

Six Recovery Act provisions — three new or expanded tax credits, two expansions of unemployment insurance, and a SNAP (food stamp) benefit expansion — kept 6.9 million Americans out of poverty in 2010.  This estimate uses an alternative poverty measure based on National Academy of Sciences recommendations (a forerunner to the Supplemental Poverty Measure that the federal government now regularly reports) that considers the effect of government benefit programs and tax credits as well as cash income.

As the graph shows:

  • Expansions in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) kept 1.6 million people out of poverty.
  • The Making Work Pay tax credit, which expired at the end of 2010, kept another 1.5 million people out of poverty.
  • Expansions in unemployment insurance benefits kept 3.4 million people out of poverty.
  • Expansions in SNAP benefits kept 1 million people out of poverty.

These figures total more than 6.9 million in part because some people were kept above the poverty line by more than one program.  The 6.9 million total, though, counts each person only once.

And, as the graph shows, existing (pre-2009) policies to promote family income also kept millions of Americans out of poverty in 2010.

Moreover, these are just the initial effects of government assistance on recipient households.  They don’t show the ripple effect across the economy as government assistance allowed struggling consumers to continue to buy goods and services, despite the crippling recession, contributing to economic growth.

To be sure, these figures don’t mean that government assistance staved off all, or even most, recession-related hardship.  But they show that government assistance kept millions of Americans above the poverty line during the worst economic downturn since the Great Depression.  That’s no small accomplishment.

With Federal Funds Gone, States Take the Lead on Subsidized Jobs

January 30, 2014 at 3:09 pm

I highlighted yesterday the success of a 2009 Recovery Act program through which 39 states and the District of Columbia placed 260,000 low-income parents and young people in subsidized jobs, mostly in the private sector.  The federal funding for that program dried up a few years ago.  But several states — recognizing that these programs hold huge promise for the long-term unemployed and others who often have great difficulty getting hired — have decided to use their own funds to create or expand subsidized jobs programs.  Here are some examples:

  • Connecticut Governor Dannel Malloy this week proposed a $3.6 million initiative, targeted to the long-term unemployed, that will combine a job-readiness program, supportive services, financial coaching, and an eight-week paid work program.  He also proposed expanding a program that offers two incentives to employers to hire additional employees:  a six-month wage subsidy and grants to small manufacturers to train new workers.
  • Colorado is implementing a two-year, $2.4 million subsidized jobs program targeted to non-custodial parents, veterans, and displaced workers aged 50 years or older who are below 150 percent of the poverty line.
  • Nebraska, Minnesota, and California are starting or expanding subsidized programs for recipients of Temporary Assistance for Needy Families (TANF).  Nebraska plans to spend $1.1 million per year to operate a two-year pilot program.  Minnesota plans to spend $2.2 million each year over the next two years on a new program to encourage employers to hire long-term TANF recipients.  And California’s Governor Jerry Brown has proposed boosting funding for subsidized jobs by almost $100 million this year, to $134 million.

As their budgets rebound, states will have resources to make new investments.  More states should follow the lead of these states and some other local communities that have decided that providing subsidized jobs is a winning proposition for the unemployed, employers, and local communities.

Subsidized Jobs Work

January 29, 2014 at 3:04 pm

Eduardo Porter’s New York Times piece today on government investment to boost jobs and demand cites the success of a 2009 Recovery Act program through which 39 states plus the District of Columbia (see map) placed 260,000 low-income parents and young people in subsidized jobs, mostly in the private sector.  In House Budget Committee testimony this week on poverty and the safety net, CBPP President Robert Greenstein discussed that temporary initiative and recommended building on it.  Here are some excerpts:

[T]he Economic Mobility Corporation (EMC) studied what happened to participants in these subsidized jobs programs and found the programs did exactly what they were supposed to do — help disadvantaged jobless individuals find work during hard economic times.  The study also provides evidence that the jobs programs improved some participants’ chances of finding unsubsidized jobs when their time in the subsidized job position came to an end.  And the study indicated that the long-term unemployed benefitted most.

The EMC study looked at subsidized jobs programs established in five sites — Los Angeles, San Francisco, Wisconsin, Mississippi, and Florida — and produced the following findings:

  • . . . Participants in four of the five programs studied were much more likely to have an unsubsidized job in the year after working in a subsidized job than in the year before joining the program. . . .
  • The programs were especially effective for the long-term unemployed. . . .
  • Employers reported hiring more workers than they would otherwise have hired and hiring workers with less experience than their usual hires.
  • Most participating employers reported multiple benefits from the program, including expanding their workforces, serving more customers, and improving their productivity.

Because of its success, state policymakers from across the political spectrum praised the program.  For example, Governor Haley Barbour of Mississippi noted that [his state’s program provided] “much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities.” . . .

I recommend creating a subsidized employment program of this nature that would provide modest funding to states to create ongoing programs targeted on groups that face particular difficulties finding jobs.  Such a program could be structured to target hard-to-employ low-income individuals, such as long-term jobless workers and disadvantaged young adults.  It could provide funding for subsidized jobs for people who have difficulty finding employment and getting a toehold in the labor market even during good economic times — which could help them to overcome those barriers and get on a path to increased labor-market success.  Funding for these jobs could then be increased during recessions in order to temporarily increase the number of subsidized jobs that are created during periods when the economy is shedding jobs in large numbers.

Any such ongoing program should be coupled with an evaluation to identify its overall impact and, in particular, the approaches that are most successful. . . .

For more on the Recovery Act initiative, known as the TANF Emergency Fund, see this report.

Tomorrow, I will highlight actions that states are taking to build on the success of the TANF Emergency Fund.

Simplifying the Child Care Eligibility “Maze”

December 17, 2013 at 11:58 am

An important way to help low-income working families meet their basic needs and improve their lives is to make sure they receive the work supports for which they qualify, such as health coverage, food assistance, and child care assistance.  A new report from the Urban Institute and the Center for Law and Social Policy (CLASP) explains how states can simplify their child care subsidy programs — which help cover low-income families’ child care costs so the parents can get and keep jobs — to better serve families.

The report is part of the foundation-funded initiative Work Support Strategies, through which CBPP, the Urban Institute, and CLASP work with selected states to streamline the delivery of health and human services to low-income working families.

The report outlines an approach in which eligible parents applying for child care assistance give their information once, are then connected not only to child care assistance but also other benefits for which they are eligible, and can keep the full package of benefits as long as they are eligible — all of it with minimal red tape.  That reduces burdens on low-income families and the state.

The report will be an important resource for states seeking to simplify and streamline their child care programs as well as facilitate connections between child care and other key work supports, such as SNAP (food stamps), Medicaid, and TANF (Temporary Assistance for Needy Families).

For more general information on why it’s so vital to deliver work supports more efficiently, the improvements made in recent years, and the steps that states can take, see this CBPP report.