A Synthesis of Random Assignment Benefit-Cost Studies of Welfare-to-Work Programs

Abstract

Over the past two decades, federal and state policymakers have dramatically reshaped the nation’s system of cash welfare assistance for low-income families. During this period, there has been considerable variation from state to state in approaches to welfare reform, which are often collectively referred to as “welfare-to-work programs.” This article synthesizes an extraordinary body of evidence: results from 28 benefit-cost studies of welfare-to-work programs based on random assignment evaluation designs. Each of the 28 programs can be viewed as a test of one of six types of welfare reform approaches: mandatory work experience programs, mandatory job-search-first programs, mandatory education-first programs, mandatory mixed-initial-activity programs, earnings supplement programs, and time-limit-mix programs. After describing how benefit-cost studies of welfare-to-work programs are conducted and considering some limitations of these studies, the synthesis addresses such questions as: Which welfare reform program approaches yield a positive return on investments made, from the perspective of program participants and from the perspective of government budgets, and the perspective of society as a whole? Which approaches make program participants better off financially? In which approaches do benefits exceed costs from the government’s point of view? The last two of these questions coincide with the trade-off between reducing dependency on government benefits and ensuring adequate incomes for low-income families. Because the benefit-cost studies examined program effects from the distinct perspectives of government budgets and participants’ incomes separately, they address this trade-off directly. The article thus uses benefit-cost findings to aid in assessing the often complex trade-offs associated with balancing the desire to ensure the poor of adequate incomes and yet encourage self-sufficiency.

A Unified Welfare Analysis of Government Policies

“…Many states rigorously evaluated the effect of these reforms. Upwards of 100,000 participants were enrolled into into 27 randomized controlled trials (RCTs) nationwide (Greenberg et al, 2010). These RCTs measured and provided a clear estimate of the net cost of each reform.…”

“…Previous work(Greenberg et al, 2010) has conducted a cost-benefit analysis of these reforms by assuming willingness to pay is given by after-tax earnings. However, if the term limit is what causes individuals to choose to move off of welfare and into the labor market (thus increasing earnings), the envelope theorem would suggest the WTP is negative, even if after-tax earnings increase.88 In fact, we find policies that follow this pattern in each sub-category of welfare reform programs.…”

Taking “All Men Are Created Equal” Seriously: Toward a Metric for the Intergroup Comparison of Utility Functions Through Life Values

“…The empirical determination of the relative value of a marginal dollar across income classes is applicable in the BCA of programs that disproportionately affect members of low or high income. In a review of welfare-to-work programs, Greenberg et al (2010) observe that inclusion of the relative value of money to different income classes in BCA would lead to better informed welfare policy decisions. For example, eligibility for the US Supplemental Nutrition Assistance Program (SNAP) requires individuals' incomes to be below $14,088 a year as of 2008 (USDA, 2008).…”

Return on Investment for Adult Basic Education: Existing Evidence and Future Directions

“…The participating programs randomized welfare recipients into treatment and control groups and offered ABE, GED, and ESL to the treatment groups but not to the control groups for at least the first 3 years of a 5-year follow-up period (although control group participants were allowed to access other local programs). Amid many reports and journal articles on the findings of these experiments, at least six are worth noting as they documented crucial 3-year, 5-year, and 9-year program impacts along with cost-benefits estimations (Boudett & Friedlander, 1997;Friedlander & Martinson, 1996;Greenberg et al, 2010;Hamilton et al, 2001;Hotz et al, 2006;Riccio et al, 1994).…”