III. EMPLOYMENT OF NEEDY FAMILIES (INCLUDING TRENDS)

Increasing employment is a central goal of welfare reform. There is now a substantial body of evidence showing increased employment among welfare recipients, as well as increased employment among low income women with children. Although the strong economy is undoubtedly a major factor in this increase, there also is evidence that state welfare reform efforts are playing a role. None of the multiple sources of information that support this conclusion is definitive, but they all point in the same direction. In this section, we will discuss the available evidence for increased employment from various data sources.

CURRENT POPULATION SURVEY

The Current Population Survey (CPS), which is the basis for calculation of unemployment rates, is a nationally representative data base. Each March the CPS collects information about income and program participation in the preceding calendar year in addition to employment and earnings data reflecting the month or week of the survey. As a result, we know whether adults who reported receiving AFDC at some point during the preceding calendar year were employed the following March. Although it is not known whether former-year recipients were still receiving AFDC as of the March survey, a time-series analysis can be constructed of the proportion of adults who were recipients of AFDC in a given year that were working in the subsequent year. Doing so reveals a clear pattern of increased subsequent employment among AFDC recipients, with a particularly dramatic increase between 1996 and 1997. Thus, between 1992 and 1996, the proportion of previous year AFDC recipients employed in March increased from 19 percent to 25 percent, and jumped to almost 32 percent in 1997 (See table 3.2).

A second analysis conducted using CPS data examines the proportion of single mothers caring for children under 18 whose income was under 200% of poverty the previous year and were employed the following March.. Again, the data indicate a very significant increase from 44 percent in 1992 to 54 percent in 1997. Although this time series does not show the sharp increase between 1996 and 1997, the average annual increases in 1996 and 1997 are over twice as large as in the previous three years. The findings are even more dramatic when one examines single mothers with younger children (those under 6). Here the increase in the proportion working rose from 35% (slightly over 1 in 3) in 1992 to 50 percent (1 in 2) by 1997. Although it is undoubtedly true that the strong economy has played an important role in these increases, other evidence suggests that welfare reform has also played an important role. For example, the proportion of all low income mothers with children under 6 was 35 percent for both single and married mothers in 1992. However, for married mothers, the 5 percentage point increase in employment by 1997 was only one-third of the 15 percentage point increase for single mothers, the population of parents most likely to be affected by welfare policy (see table 3.2).

STATE WELFARE REFORM WAIVER EVALUATIONS

A second important source of information are the evaluations of state welfare reform efforts that began as waiver demonstrations. These experimental evaluations provide the earliest rigorous information on the actual effects of state policies on employment. Whereas the strength of the CPS is its nationally representative nature, the strength of the state evaluations is their ability to isolate the effects of state policies from the effects of the economy and other external factors. To date, evaluations of specific state programs at the upper range suggest policy-related increases in employment of 8 to 15 percentage points. For example, in Florida's FTP program in the eighth quarter after program entry adults in the experimental group were employed at a rate about 8 percentage points higher than individuals in the control group. In the fourth quarter after entering Delaware's ABC welfare reform program, participants' employment was about 11 percentage points higher than a randomly assigned group of recipients who were not in the program. In Minnesota's MFIP program, employment rates for long term recipients increased by 15 percentage points in the sixth quarter after program entry. Although these studies are not nationally representative, for the most part they represent policies that are quite typical of state TANF policies.

ADDITIONAL STATE STUDIES

A final important source of information are state-specific studies that have been conducted of recipients exiting from welfare. Surveys of people who have left welfare typically find that 50 to 60 percent are working in the period following welfare receipt (with the remainder not employed). This is comparable to or slightly higher than the 45 to 50 percent of welfare exiters who were working after leaving AFDC (point in time studies). Like the CPS analysis above, these studies are suggestive but do not rigorously isolate the extent to which this increase in work results from the strong economy in contrast to policy changes. Early national data show that 1 in 3 families who received welfare in 1996 -- 1.7 million people -- were working in March 1997.

While each of the above sources of information has limitations, the fact that they all point in the same direction suggests that the goal of increased support for children through employment is occurring and at a dramatic rate.

There has been a strong interest in the role of sanctions. States are generally working harder to enforce mandatory work requirements, and sanctions have risen by about 30 percent nationally since 1994. In the studies of specific states sanction rates of as high as 50 percent are seen, with rates in the 25 percent to 30 percent range not unusual. Sanctions may result in either a complete or partial loss of benefits. Across states we find that the majority of sanctions occur because recipients fail to show up for initial appointments. Far fewer families have been sanctioned for refusal to comply with work assignments. Sanctioned families may include many who are already working or who have good job opportunities; in Iowa, for example, families that did not comply with the state's Family Investment Plan tended to be more job-ready than the average.

Attachment 3:1 provides summaries of research plans for state waiver and other evaluations along with studies of current recipients and those who have left the welfare rolls in a number of states. Appendices provide information/preliminary results from the following studies: summary table of Recent Research on Welfare Leavers (Table 3:1)Maryland's Life After Welfare: A Second Interim Report (Attachment 3:2)GAO Study on States' Early Experiences with Benefit Termination (Attachment 3:3)Iowa's Limited Benefit Plan (Attachment 3:4)A Comparison of Characteristics and Outcomes for Current and Former TANF Recipients I in Indiana (Attachment 3:5)South Carolina's Survey of Family Independence Program Leavers (Attachment 3:6) Delaware's A Better Chance Program (Attachment 3:7)Minnesota's Family Investment Program (Attachment 3:8).

High Performance Bonus Section 403(a)(4) of the Act provides for $1 billion over five years to reward states that are high performers in achieving the objectives of the Act--the

"High Performance Bonus (HPB)". Pursuant to the requirement of the PRWORA, HHS consulted extensively with the National Governors Association (NGA) and the American Public Welfare Association (APWA) on the specific measures for the High Performance Bonus. HHS also consulted with the National Conference of State Legislatures (NCSL). HHS has now issued guidance for how the states will compete for the HPB for the first year of the bonus, FY 1998. In our extensive consultations, we explored a range of measures including family formation and stability, and child well-being. We moved ahead with respect to work, because we believed it was vital for states to have guidance with respect to how FY 1998 performance would be measured. We did not include any measures regarding family formation and stability in the guidance, because we had difficulty identifying any that would provide effective incentives to states to design policies to achieve the objectives of TANF and for which a reliable data source existed or could be quickly developed. We will continue, however, to explore such measures for the High Performance Bonus in future years and will seek advice on this matter through the Notice of Proposed Rulemaking process. Measures for the first year of the HPB include job entry, job retention and earnings gain. As these data become available, we will report them in future annual reports, since they will represent a vital source for examining how employment and earnings for needy families change over time, as well as how individual states are doing.

Appendices:

Table 3:1 Summary of Recent Research on Welfare Leavers

Table 3:2 Employment Status of Single Mothers and Previous Year AFDC Recipients

Attachment 3:1 Anticipated Deliverables from Welfare Reform Research Projects

Attachment 3:2 Maryland's Life After Welfare: A Second Interim Report

Attachment 3:3 GAO Study on States' Early Experiences with Benefit Termination

Attachment 3:4 Iowa's Limited Benefit Plan

Attachment 3:5 A Comparison of Characteristics and Outcomes for Current and Former TANF Recipients in Indiana

Attachment 3:6 South Carolina's Survey of Family Independence Program Leavers

Attachment 3:7 Delaware's A Better Chance Program

Attachment 3:8 Minnesota's Family Investment Program