October, 2001, Vol. 124, No. 10
Précis
Welfare reform conference
Statistics for welfare-to-work
Welfare and neighborhoods
The Personal Responsibility and Work Opportunity Reconciliation Act, the legislative underpinning of welfare reform, became law in 1996. In November 2000, the Federal Reserve Bank of New York held a conference on progress in welfare reform. The papers and proceedings of that conference were published as the most recent issue of the Bank’s Economic Policy Review.
The first and most central question of most evaluations of welfare reform has been its impact on the employment, income, and other material indicators of well being among the program’s constituencies. Pamela Loprest’s paper came to conclusions similar to those of the papers published in this Review in July: A substantial portion of former welfare recipients are working or are living in a household in which an adult member is employed, however the evidence does not show unequivocal success in transitioning from welfare. In Loprest’s National Survey of America’s Families data, about one leaver in five returns to the welfare system, and about a quarter live in a family with no earnings at the time of the survey.
The next session of the conference focused on the relative roles of the improving economic climate in the late 1990s versus the implementation of welfare reform. Rebecca M. Blank identifies the three simultaneous events that characterized the late 1990s and reviewed a wide variety of studies that attempted to disentangle their effects on welfare caseloads. The three factors were welfare reform itself, the decline in unemployment, and the fact that real wages among less skilled workers were rising for the first time in decades. The bulk of the studies suggested that at least 20-35 percent of caseload decline was due to improvements in the economic factors in the early 1990s but perhaps a somewhat smaller portion in the later years of the decade.
A second paper in the session was presented by Robert A. Moffitt and David W. Stevens. Moffitt and Stevens found that "welfare reform per se, after one nets out the effect of the economy, has had little effect on the composition of the caseload in its labor market skill distribution".
The third session focused on welfare program administration both in a National perspective and for the city of New York, the major urban area within the Bank’s district. (See the items below for additional research on tools for administering and measuring the impact of welfare reforms.) The New York Fed’s conference concluded with a session on new policies for using financial incentives in welfare reform.
Statistics for welfare-to-work
With the welfare system changing its focus much more towards employment-based solutions came a need for more effective assessment and referral. Randall W. Eberts reports in the Upjohn Institute’s Employment Research newsletter that such a system has been pilot tested in Michigan. The project, which was funded by the Department of Labor’s Employment and Training Administration, used a statistical screening to provide one of three services to welfare-to-work enrollees in Michigan’s Work First program.
The screening is based on the statistical relationship between enrollees’ attributes, such as age, education, and prior employment, and their probability of employment and job retention. In the Michigan test, according to Eberts, "The statistical assessment tool was successful in distinguishing among participants with respect to their likelihood of employment and retention," and, "The optimal referral pattern based on the statistical assessment tool yielded retention rates that were 25 percent higher than if participants were randomly assigned to providers."
As with many aspects of public administration, welfare and welfare reform have impacts ranging from the national to the very local. Lois M. Quinn and John Paswasarat’s Brookings Institution discussion paper, Tracking the Progress of Welfare Reform Quickly: A Model for Measuring Neighborhood Health and Change, outlines the use of indicators at the ZIP Code level to understand the effect of welfare reform in a relatively small neighborhood.
The indicators they tracked for a single ZIP Code (53206) in Milwaukee included public assistance receipt, family income and poverty, childcare usage, housing values, and automobile access. This small 2.72 square mile area had the highest number of AFDC cases in the State of Wisconsin in 1993. From early 1994 to early 2000, the number of families receiving income support and food stamps fell sharply. Employment and earnings among single parents grew substantially, the number of income tax filers increased, and the number of claims for the earned income tax credit (EITC) rose.
Increasing numbers of families in the neighborhood used subsidized day care, thus relieving one major barrier to employment. A lack of access to automobile transportation among young women, however, may have placed a different constraint on labor market activity. Housing data for the neighborhood showed that ownership rates declined somewhat, but housing values rose enough to slightly outpace inflation.
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