WELFARE REFORM AND CHILD POVERTY

A recent paper by Dr. Rebecca M. Blank, former member of the Council of Economic Advisers in the Clinton White House, examines the link between welfare reform and child poverty.22 Professor Blank analyzes the income of families with children from 1992 to 2000 and finds that incomes rose for all but the bottom 2 percent of families with children. Moreover, poor families showed greater income gains than higher-income families, “suggesting that most poor families experienced larger income gains than did most middle and upper-middle income families.”23

Dr. Blank’s analysis shows a direct link between state welfare reform policies and rising incomes among poor families. States with welfare reform programs that offered “strong work incentives” showed greater increases in the income of single parents with children than did states with weak work incentives. Moreover,

at the bottom of the distribution, states with strong work incentives have the smallest share of children in families with negative changes in income, while states with the weakest work incentives show the highest share of children with [decreases in income].24

In other words, states with strong welfare work incentives had fewer families that lost income than did states with weak welfare work incentives. Blank finds that these income differences are the result of state welfare policies rather than differences in state economies.

In addition, Dr. Blank examines the effects of tough welfare reform “penalties” on the incomes of poor single-parent families. Examining the impact of stricter time limits and strong sanction policies that “provide a strong enforcement mechanism for women to participate in welfare-to-work programs,” she finds that tough welfare policies had a positive effect in raising the incomes of poor families. Overall, states with stricter time limits and stronger sanction policies were more successful in raising the incomes of poor children than were states with lenient policies. Dr. Blank concludes that

states with strict or moderate penalties for not working consistently show higher income gains among poor children throughout the income distribution than do states with lenient penalties…. [I]t is the more lenient states with softer penalties where children’s income seems to have grown least.25

Out-of-Wedlock Childbearing and the Economy
Out-of-wedlock childbearing and marriage rates have never been correlated to periods of economic growth. Efforts to link the positive changes in these areas to growth in the economy are without any basis in fact. The onset of welfare reform is the only plausible explanation for the shifts in these social trends. welfare reform affected out-of-wedlock childbearing and marriage in two ways.

First, even before passage of the law, the public debate about welfare reform sent a strong symbolic message that, in the future, welfare would be time-limited and that single mothers would be expected to work and be self-reliant. This message communicated to potential single mothers that the welfare system would be less supportive of out-of-wedlock childbearing and that raising a child outside of marriage would be more challenging in the future. The reduction in out-of-wedlock births was, at least in part, a response to this message.

Second, reform indirectly reduced welfare’s disincentives to marriage. Traditional welfare stood as an economic alternative to marriage, and mothers on welfare faced very stiff financial penalties if they did marry. As women leave AFDC/TANF as a result of welfare reform, fewer are affected by welfare’s financial penalties against marriage. In addition, some women may rely on husbands to provide income that is no longer available from welfare. Thus, as the number of women on welfare shrinks, marriage and cohabitation rates among low-income individuals can be expected to rise.

Welfare Reform and the Current Recession
When welfare reform was enacted, liberal opponents predicted that it would yield sharp increases in poverty even in good economic times; the effects of reform during a recession were expected to be disastrous. As noted, liberal predictions about the negative effects of reform during good economic times have been proven completely erroneous. Moreover, the disastrous effects expected of welfare reform during an economic downturn have, at least so far, failed to materialize during the current recession.

Historically, during a recession, overall child poverty rises by two to three percentage points. For example, during the economic downturn in the early 1990s, the overall child poverty rate rose from 14.8 percent to 17.8 percent. Historically, black child poverty rises even more sharply during a recession. During the back-to-back recessions in the early 1980s, for example, black child poverty rose by more than six percentage points, from 41.2 percent in 1979 to 47.6 percent in 1982.

However, during the current recession (which began in April 2001), these traditional negative patterns have not appeared. While the poverty rate for adults rose during 2001 in a manner consistent with prior recessions, the poverty rates for children in general — and for black children in particular — differed sharply from prior historical patterns. Despite the recession, from 2000 to 2001, the overall child poverty rate remained flat.26 The poverty rate for black children actually fell by a full percentage point from 31.2 percent in 2000 to 30.2 percent in 2001. Such a decline in black child poverty during a recession is without historical precedent.

While the child poverty figures for 2001 (the first year of the current recession) are unusually positive, a note of caution is warranted. The effects of a recession on poverty often continue and deepen for two or three years after the recession’s onset. Thus, when the Census Bureau releases poverty figures for 2002 and 2003, it is quite possible that reported child poverty will increase.27 However, if the unusual poverty figures for 2001 are any indication, the overall increase in child poverty (if any) generated by the current recession is likely to be far milder than in prior economic downturns.

The welfare dependence figures during the current recession also differ sharply from prior recessions. As Chart 3 shows, the AFDC caseload almost always rose during recessions.28 In some cases, the increase in caseload was dramatic. For example, during the early 1990s, the AFDC caseload rose by around 30 percent. However, during the current recession, the TANF caseload has actually declined. Between the beginning of the recession in April 2001 and September 2002 (the date of the most recent available data), the caseload actually fell by 4.4 percent.

The fact that welfare caseloads have, up to now, declined during the current recession is good news. However, a note of caution is, again, warranted. The effects of a recession in increasing welfare dependence may continue for several years after the onset of the recession. Thus, it is possible that TANF caseloads will rise during 2003. However, the recent trends in caseload strongly suggest that, if TANF caseloads do rise in 2003, the increase will be quite small when compared to increases spurred by prior recessions.

The fact that child poverty has not, as yet, risen during the present recession is linked to the continuing decline of TANF caseloads. During previous recessions, large numbers of single mothers left employment and entered the AFDC program. Families on AFDC are almost always poor. Thus, increases in welfare caseloads during prior recessions invariably led to concurrent increases in child poverty. However, the work requirements and time limits established by welfare reform have created strong pressures discouraging single mothers from leaving employment and entering welfare. The fact that TANF caseloads have not risen during the current recession has, in turn, helped to limit any rise in child poverty.

CONCLUSION

More than 20 years ago, President Jimmy Carter stated, “the welfare system is anti-work, anti-family, inequitable in its treatment of the poor and wasteful of the taxpayers’ dollars.”31 President Carter was correct in his assessment.

The 1996 welfare reform began necessary changes in the disastrous old welfare system. The rewards for non-work in the TANF program have been substantially reduced. But much more remains to be done. When Congress reauthorizes TANF this year, it should ensure that, in the future, all able-bodied welfare recipients are required to work or undertake other constructive activities as a condition of receiving aid.

But increasing work is not enough. Each year, one-third of all children are born outside of wedlock; this means that one child is born to an unmarried mother every 25 seconds. This collapse of marriage is the principal cause of child poverty and welfare dependence. In addition, children in these families are more likely to become involved in crime, to have emotional and behavioral problems, to be physically abused, to fail in school, to abuse drugs, and to end up on welfare as adults.

Despite these harsh facts, the anti-marriage effects of welfare, which President Carter noted over two decades ago, are largely intact. The current indifference and hostility to marriage in the welfare system is a national disgrace. In reauthorizing TANF, Congress must make the rebuilding of marriage its top priority. The restoration of marriage in American society is truly the next frontier of welfare reform.

Robert Rector is Senior Research Fellow in Domestic Policy Studies, and Patrick F. Fagan is William H. G. FitzGerald Research Fellow in Family and Cultural Issues, at The Heritage Foundation. This paper is an updated version of Heritage Foundation Backgrounder No. 1468, published on September 5, 2001.

Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In

Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap.

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Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003.

In the controversial book The Welfare State We’re In, James Bartholomew argues that the welfare state in Britain has resulted in a generation of badly educated and dependent citizens, leading to lives of deprivation for thousands and undermining the original intent behind its creation in the 1940s.

Has the welfare state really led to more harm than good? What does this imply for the ever-expanding welfare state in the United States? – Cato Institute

James Bartholomew trained as a banker in the City of London before moving into journalism with the Financial Times and the Far Eastern Economic Review, for whom he worked in Hong Kong and Tokyo. Returning to England on the Trans-Siberian Railway through communist China and the Soviet Union an experience which influenced his political outlook he subsequently became a leader writer on The Daily Telegraph and the Daily Mail.

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The Continuing Good News About Welfare Reform

By Robert Rector and Patrick Fagan, Ph.D.
February 6, 2003

Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) replaced the failed social program known as Aid to Families with Dependent Children (AFDC) with a new program called Temporary Assistance to Needy Families (TANF). The reform legislation had three goals: (1) to reduce welfare dependence and increase employment; (2) to reduce child poverty; and (3) to reduce illegitimacy and strengthen marriage.

Plummeting Welfare Dependence
The designers of welfare reform were concerned that prolonged welfare dependence had negative effects on the development of children. Their goal was to disrupt inter-generational dependence by moving families with children off the welfare rolls through increased work and marriage. Since the enactment of welfare reform, welfare dependence has been cut by more than half. The caseload in the former AFDC (now TANF) program has fallen from 4.3 million families in August 1996 to 2.02 million in September 2002. (See Chart 3.)

Contrary to conventional wisdom, the decline in welfare dependence has been greatest among the most disadvantaged and least employable single mothers — the group with the greatest tendency toward long-term dependence. Specifically, dependence has fallen most sharply among young never-married mothers who have low levels of education and young children.17This is dramatic confirmation that welfare reform is affecting the whole welfare caseload, not merely the most employable mothers.

Strikingly, the TANF caseload has continued to decline even during the current recession. The caseload has fallen from 2.109 million families in April 2001 at the beginning of the recession to 2.017 million in September 2002 (the most recently measured month). This represents a net decline in caseload of 4.4 percent since the beginning of the recession. The continuing decline in welfare dependence during the recession stands in sharp contrast to the 30 percent growth in the AFDC caseload during the economic slowdown of the early 1990s.

Increased Employment
Since the mid-1990s, the employment rate of single mothers has increased dramatically. Again, contrary to conventional wisdom, employment has increased most rapidly among the most disadvantaged, least employable groups:

• Employment of never-married mothers has increased nearly 50 percent.
• Employment of single mothers who are high school dropouts has risen by two-thirds.
• Employment of young single mothers (ages 18 to 24) has nearly doubled.18

Thus, against conventional wisdom, the effects of welfare reform have been the greatest among the most disadvantaged single parents — those with the greatest barriers to self-sufficiency. Both decreases in dependence and increases in employment have been most dramatic among those who have the greatest tendency to long-term dependence; that is, among the younger never-married mothers with little education.

A Halt in the Rise of Out-of-Wedlock Childbearing
After the beginning of the War on poverty, the illegitimacy rate (the percentage of births outside of marriage) increased enormously. For nearly three decades, out-of-wedlock births as a share of all births rose steadily at a rate of almost one percentage point per year. Overall, out-of-wedlock births rose from 7.7 percent of all births in 1965 to an astonishing 32.6 percent in 1994. However, in the mid-1990s, the relentless 30-year rise in illegitimacy came to an abrupt halt. For the past five years, the out-of-wedlock birth rate has remained essentially flat. (See Chart 4.)

Among blacks, the out-of-wedlock birth rate actually fell from 70.4 percent in 1994 to 68.8 percent in 1999. Among whites, the rate rose slightly, from 25.5 percent to 26.7 percent, but the rate of increase was far slower than it had been in the period prior to welfare reform.

A Shift Toward Marriage
Throughout the War on poverty period, marriage eroded. However, since the welfare reform was enacted, this negative trend has begun to reverse. The share of children living with single mothers has declined, while the share living with married couples has increased.

This change is most pronounced among blacks. Between 1994 and 1999, the share of black children living with single mothers fell from 47.1 percent to 43.1 percent, while the share living with married couples rose from 34.8 percent to 38.9 percent. Similar though smaller shifts occurred among Hispanics.19

While these changes are small, they do represent a distinct reversal of the prevailing negative trends of the past four decades. If these shifts toward marriage are harbingers of future social trends, they are the most positive and significant news in all of welfare reform.