Kristen Edwards and Dr. Mark Showalter, Economics
In 1996 the Aid to Families with Dependent Children (AFDC) entitlement program, where all who met certain requirements received benefits, was changed to the Temporary Aid to Needy Families (TANF) block grant. This grant is given to states to use at their own discretion as long as they observe certain mandates including job participation by recipients and time limits on welfare. While many have noted the recent decline in both welfare caseloads and poverty, no one is sure what is responsible for the improvements because TANF was implemented concurrently with a booming economy.
I followed the methodology of a study done by Rebecca Blank and Robert Schoeni1 and attempted to measure the improvement of a number of labor market conditions due to the TANF program. I extended the study of Blank and Schoeni and examined the impact of the welfare reform on welfare participation, employment, income, poverty and family structure. While Blank and Schoeni looked at the effect of the reform between 1995 and 1998, I included 1999 in my study.
As I duplicated their study, I followed the same data manipulation in order to replicate their results to then use as a baseline comparison for when I included the year 1999. In order to create a more manageable data set, I reduced the Current Population survey down to a set of means of each variable within a given state, educational attainment and age group. I then followed the Blank and Schoeni model and included controls for age, education, race, year, state and economic effects. The difference in the year effects representing 1995 and 1998 or 1995 and 1999 for each education group was the estimate of the effect of TANF on the group. In order to control for the fact that the estimation of the TANF effect could be overstated because all residual changes were attributed to TANF, Blank and Schoeni calculated a difference in difference estimator comparing the residual year effects among women in the low education group versus women in the high education group. While both groups would naturally benefit from the booming economy, only those in the lower education group should have benefited from the welfare reform.
My results varied from Blank and Schoeni’s. They found a favorable impact of TANF, even with economic controls, on the percent of women in poverty, percent of women on welfare and women’s earnings. I found that while the percent of women on welfare, women’s earnings and income variables improved, the percent of women in poverty showed no change between the years 1995 and 1998 once economic controls were included in the model. When I included 1999 in the data set, I found that the percent of women on welfare declined, but none of the other variables showed any significant change. Although my results were different from Blank and Schoeni’s, I attribute that to the fact that while I had a good idea of the variables that they used, I cannot be certain I used the exact same variables from the Current Population Survey. This is because a list of means, standard deviations, maximums and minimums that could be used to compare variables was not included in their report.
It can be argued that four years is not long enough for the program implemented to make any significant changes. However, it has made a significant change on the percent of women dropped from the roles. The problem is that although women are being dropped, they are not escaping poverty. My result that TANF was not responsible for the positive effects on the welfare recipients reinforced other studies that researched the combination of both the economy and welfare reform. The past few years have been optimal for the implementation of the reform, but with the recent downturn in the economy, there could be some surprises. Levine estimated that in the event of a recession, costs would raise seven to fourteen billion dollars, money that states would be hard pressed to find.2
Clinton promised the nation, “No one who works full-time and has children at home should be poor anymore. No one who can work should be able to stay on welfare forever.” Unfortunately, priority of the system has put more emphasis on the second statement and because of this, sacrificed the first. My results showed that while the TANF effect explained some of the changes in the percentage of people on public assistance, it neglected to remove these women out of poverty.
I found that if we desire to lower the amount of government money spent on families in desperate situations, then America is doing well. However, if this reform is supposed to help families escape poverty and make families better off, some kind of restructuring must be attempted. It is true that as the economy booms, past welfare recipients fare well, but as the market crunches, the poor are the first to lose their jobs. And, America is not prepared to help them.
References
- Blank, Rebecca and Robert Schoeni, 2000. What has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure. Working Paper 7627. Cambridge, MA: National Bureau of Economic Research (September).
- Levine, Phillip B. 1999. Cyclical Welfare Costs in the Post-Reform Era. Economic Conditions and Welfare Reform. W.E. Upjohn Institute for Employment Research: Kalamazoo, Michigan.