Before and After TANF: The Economic Well‐Being of Women Leaving Welfare

Abstract

Welfare caseloads have fallen dramatically in the last several years, raising questions about the economic well-being of those who left. In this paper we use administrative data from Wisconsin to identify those who left welfare and to provide information on their economic well-being. We provide a context for understanding post-welfare well-being by comparing welfare leavers under early Wisconsin reforms (those who left in the fourth quarter of 1995) with those who left under the later, more stringent TANF program (those who left in the fourth quarter of 1997). We also provide three-year outcomes for those who left under the early reforms to examine changes in economic well-being over time.We find substantially higher rates of exit in the later cohort. In both cohorts, about 70 percent of leavers have earnings in each quarter of the next year. Earnings are lower in the second cohort, a finding consistent with the hypothesis that the new welfare regime pushes people with fewer employment skills into the labor market where they accept lower-paying jobs. Multivariate analyses show that those with higher levels of human capital (education, employment experience, previous earnings) do better when they leave welfare. We measure post-exit income by adding earnings, cash assistance, Food Stamps, and the estimated EITC and subtracting estimated payroll and income taxes. This limited measure of net income neglects other income sources and employment-related expenses. We find that leavers have substantially higher earnings and EITC than they did prior to exit, but the decline in benefits outweighs these increases so that total measured net income in the year following exit is lower. In both cohorts less than one-third of the leavers have higher incomes than they did previously. Official poverty rates are high in both cohorts, over 60 percent, but are especially high in the later cohort. In the first cohort, earnings increase over the three-year period, benefits decline, and overall net income shows small increases.

The road to economic self‐sufficiency: Job quality and job transition patterns after welfare reform

“…For example, women in Michigan who worked part-time at minimum wage jobs were at the median for monthly net income among 12 states that contained a large portion of the nation's population and about half of the 1998 caseload (Acs et al, 1998). Furthermore, the fraction of women in our sample who are employed, the fraction who have left welfare, and the fraction who have left welfare and are working but do not have employersponsored health insurance, are all very similar to the results of a recent MDRC report on Cleveland (Brock et al, 2002), results in Wisconsin from a study by Cancian et al (2000), and very similar to those reported by Acs and Loprest (2001) at the Urban Institute using administrative data from the Washington, DC area. Because of the similarities in the fraction working across all of these studies, we do not expect our results to differ from those that would be found in other studies if these other studies had measured the same things using the same models.…”

“…Studies of women who have left AFDC find low-paying jobs to be the norm and little wage growth in the first several years after leaving welfare (Cancian et al, 2000;Harris, 1996;Pavetti, Holcomb, and Duke, 1995;Riccio, Friedlander, and Freedman, 1994). Burtless (1995), using National Longitudinal Survey of Youth (NLSY) data, showed that women with low levels of schooling and low Armed Forces Qualification Test (AFQT) scores had lower rates of wage growth with age than did other women, and conjectured that these low rates of wage growth reflect recipients' low skill levels.…”

Cross‐state findings on families leaving welfare

“…In contrast, based on a longitudinal analysis of administrative data, Cancian, Haveman, Meyer, and Wolfe (2000) estimate that annualized income fell by over $2,000 among those leaving welfare in Wisconsin in 1995. Strong increases in earnings and estimates of the EITC were more than offset by decreases in cash assistance and Food Stamps.…”

The long‐term effects of housing assistance on work and welfare

“…Gleason, Schochet, & Moffitt, 1998;Harris, 1996;Hoynes, 2000), and some studies have examined the economic well-being of single mothers who left welfare (Cancian et al, 2002;Cancian & Meyer, 2004;Meyer & Cancian, 1998). But only one study compared the long-term social and economic outcomes of AFDC recipients and nonrecipients (Vartanian & McNamara, 2004), and no previous studies of housing assistance examine the long-term economic outcomes of women.…”