SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 4440 words

COMMITTEE: HOUSE WAYS AND MEANS

SUBCOMMITTEE: HUMAN RESOURCES

HEADLINE: TESTIMONY WELFARE OVERHAUL EFFECTS

TESTIMONY-BY: CHRISTINE DEVERE , ANALYST IN SOCIAL LEGISLATION

AFFILIATION: LIBRARY OF CONGRESS

BODY:
Statement of Christine Devere, Analyst in Social Legislation, Domestic Social Policy Division, Congressional Research Service, Library of Congress Testimony Before the Subcommittee on Human Resources of the House Committee on Ways and Means Hearing on Welfare Reform March 15, 2001 Good morning Mr. Chairman, Mr. Cardin, Members of the Subcommittee. Thank you for inviting me to appear before you today. My testimony this morning will briefly summarize what we've learned from major welfare reform efforts in two areas. First, what has been the impact of policies designed to promote work; and second, what do we know about the circumstances of families who have left welfare? This testimony is an update of work completed by the Congressional Research Service at the request of the House Committee on Ways and Means, included as Appendix L in the 2000 House Committee on Ways and Means Green Book. The main points from my testimony today are as follows: 1 Mandatory welfare-to-work programs -- both programs that emphasize work and programs that emphasize education -- increase earnings and employment, and generally decrease cash assistance payments. 2. The impact of welfare-to-work programs on decisions of welfare mothers to marry or have additional children has received relatively little attention. Available findings suggest little, if any impact on these outcomes. 3. Most mandatory welfare-to-work programs have reported no impact on total income, as participants often replace welfare benefits with earnings. Some mandatory work programs that include financial incentives to work have been particularly effective in raising income among program participants, although these income gains have come at the cost of increasing welfare payments and prolonging the duration of welfare receipt. 4. Mandating work among welfare mothers does not appear to systematically harm or help children. Parents in mandatory work programs that also include financial incentives to work, that raise the income of working parents, report improvements in school achievement among elementary school-aged children. However, this finding is based on a small number of studies, and these children still appear to be disadvantaged when compared to the overall child population. 5. Among those who leave welfare, the majority attribute their exit to employment and are employed for a period of time, although the data suggest that some employment is not continuous. Based on wages alone, many former welfare recipients remain poor and continue to receive Medicaid and food stamps, although participation rates in these programs have also fallen as the welfare caseload has declined. Among those who have returned to welfare, loss of employment is the most common reason. Evaluating policies to promote work Since the mid-1980s, states and localities have increasingly experimented with policy initiatives designed to promote work and end dependency on government benefits. These welfare reforms have included work requirements, financial rewards for work, financial penalties for failure to engage in work, time limits on benefits, rules to promote marriage, and rules to penalize additional births to welfare mothers. Formal evaluations were required of many of these initiatives as a condition of waiving federal rules under AFDC, prior to enactment of the welfare reform law of 1996. Congress and welfare reform administrators wanted to know what worked and for whom and at what cost. To date, what we have learned from policies to promote work is from programs initiated before the 1996 welfare reform law. Many states have built their TANF programs on elements of their AFDC waiver programs and some have converted their welfare-to-work provisions under these waiver programs into their TANF programs. Thus, while evaluations discussed in this review are of programs that precede the 1996 law, some of the findings have application to TANF programs. Evaluation studies of welfare-to-work programs examine the difference that policy changes made on selected outcomes, or their "impact." They do so by comparing outcomes, such as earnings and employment rates under a new set of policies versus what would have occurred in the absence of these policies. These impact evaluations have examined two kinds of programs that seek to move recipients from welfare to work. The first type of program is a "work first" program with a strong employment focus, where immediate job search is usually required among participants. The second type of program requires participation in education or training among participants, also referred to as a "human capital development" program. While the focus of these programs is employment or education, these programs often include other policy initiatives such as increased supportive services, time limits on assistance, financial penalties for noncompliance, and policies to discourage out-of-wedlock births. -Mandatory welfare-to-work programs -- both work-first programs and programs that provide education -- increase employment and earnings, and generally decrease cash assistance payments. The bulk of welfare-to-work research has focused on the impact of these policies on promoting work and ending dependence on cash benefits. Among welfare-to-work programs, evaluations find that mandatory welfare-to-work programs generally increase employment, and often also increase average earnings and decrease cash assistance payments. These findings apply both to work-first programs and programs that provide education and training. This increase in employment reported in the evaluations is also consistent with national data that illustrate an increase in the employment rate among single mothers from 57% in 1992 to almost 73% in 2000.(2) Though both types of programs have succeeded in raising employment and earnings, their impacts appear at different times. Work-first programs produce immediate impacts because they emphasize immediate work. However, their impacts sometimes fade, as individuals subsequently lose their jobs or those in the comparison group find employment. Programs that emphasize education have delayed impacts, as individuals receive education or training for a period of time before they enter employment. Of the welfare-to-work programs evaluated, two of the most effective provided "work first" for some participants, but provided basic education for those determined to need it before entering the labor force. These programs are commonly referred to as "mixed services" programs. -The impact of welfare-to-work programs on decisions of welfare mothers to marry or have additional children has received relatively little attention. Available findings suggest little, if any impact on these outcomes. The TANF law set two new goals for family welfare: reducing nonmarital pregnancies and promoting and maintaining two-parent families. The impact of welfare-to-work programs on encouraging marriage and reducing out-of-wedlock births has been the subject of much less systematic analysis than changes in employment and earnings. Among the small number of evaluations that examine these outcomes, the majority report that these policies have had no impact on decisions to marry or have additional children among women receiving welfare. One evaluation of a welfare-to-work program in Minnesota reported that the state's welfare policy initiatives led to an increase in marriage among single mothers and a decrease in marital break-up among two-parent families, but these results have not been reported in other evaluations. Evaluations of programs targeted at teenage mothers have also found no significant impacts on rates of pregnancy or childbearing. Evaluators of these programs contend that the "right" mix of interventions to help teenage parents has not been found. -Most mandatory welfare-to-work programs have reported no impact on total income, as participants often replace welfare benefits with earnings. Some mandatory work programs that include financial incentives to work have been particularly effective in raising income among program participants, although these income gains have come at the cost of increasing welfare payments and prolonging the duration of welfare receipt. A recent focus of welfare reform research has been to examine programs that mandate work, but also offer financial incentives to work. These programs, which include the Minnesota program mentioned above, allow participants to combine work and welfare by disregarding a larger percentage of their earnings than was previously allowed in determining their continuing eligibility for cash benefits. Under TANF, the vast majority of states are offering some form of a financial work incentive to welfare recipients. Evaluations illustrate that financial incentives to work have been particularly effective in increasing employment and earnings. Additionally, while programs that mandate work report no impact on income, these financial incentives to work have been effective in raising the total income among program participants. However, these income gains have come at the cost of increasing welfare payments and prolonging the duration of welfare receipt. Evaluations indicate that, at least in the short run, many TANF recipients will be unable to escape poverty through work unless taxpayers provide an earnings supplement of some kind. Mandating work among welfare mothers does not appear to systematically harm or help children. Parents in mandatory work programs that also include financial incentives to work, that raise the income of working parents, report improvements in school achievement among elementary school-aged children. However, this finding is based on a small number of studies, and these children still appear to be disadvantaged when compared to the overall child population. Most federal and state welfare policies apply directly to parents, not children. At the time of passage of TANF, some proponents maintained that the new program would help children by increasing earnings and hence family income, thereby providing more resources to meet children's needs, and by also giving children the positive role model of a working parent. However, policies that promote and support work may also alter the child's well-being in other ways. For example, they may increase tension or stress in the adult's life because of the need to balance work with home and child care responsibilities. In addition, requiring mothers to work reduces their time to nurture children and requires them to find other caregivers. Some critics maintained that TANF time limits and mandatory work requirements could result in harmful outcomes for children. Evaluations of mandatory welfare-to-work programs report few impacts on child outcomes, with the bulk of this research focused on elementary school-aged children. The few impacts have been small, and have been both positive and negative. Parents in mandatory work programs that also include financial work incentives report improvements in school achievement among elementary school-aged children, but these children appear to remain at risk given their high levels of disadvantage. At the same time, parents in a time-limited welfare-to-work program in Florida also reported a decrease in school achievement among adolescents. Additional research on the impact on child well- being is forthcoming. While evaluations discussed in this review are of programs that preceded the 1996 law, some of the findings have application to TANF programs as many states have included similar policy initiatives in their state TANF programs. However, it is important to point out that these programs do not encompass all the initiatives undertaken by the states in their TANF programs. Additionally, while some individuals have reached state-imposed time limits in these programs, families will not begin reaching the 5-year lifetime limit on federal TANF assistance until the fall of 2001. Evaluations of shorter, state-imposed time limits thus far provide little evidence that time limits had led recipients to leave the rolls early or that recipients have seen a decrease in income after reaching the time limit, when compared to welfare recipients who were not subject to time limits. However, results thus far are from programs that include both time limits on assistance and financial incentives to work, policies that may have offsetting effects. The time limit may induce some persons to leave welfare quickly and "bank" welfare months for later use in time of need (although research has not found this effect), but generous earnings disregards are an incentive to remain on welfare while working. Monitoring former welfare recipients (the "leavers") Recently, there has been considerable interest in the circumstances of those who have left welfare, commonly referred to as welfare "leavers." The large decline in the welfare caseload that has occurred since 1994 has been welfare reform's biggest surprise. States have initiated and completed studies of welfare leavers to better understand how those who exit welfare are faring. These leaver studies have used administrative data or survey data (and in some instances, both types of data), and the results differ by the type of data used. The studies also illustrate the difficulty in finding individuals once they leave welfare. The results presented here are an update to the work completed in the House Committee on Ways and Means 2000 Green Book and provide an overview of results from studies of those who have left welfare in 38 states and the District of Columbia. Among those who leave welfare, the majority attribute their exit to employment and are employed for a period of time, although the data suggest that some employment is not continuous. Based on wages alone, many former welfare recipients remain poor and continue to receive Medicaid and food stamps, although participation rates in these programs have also fallen as the welfare caseload has declined. Among those who have returned to welfare, loss of employment is the most common reason. The majority of those who leave welfare attribute their exit to employment, as was the case under AFDC. Thus far, a relatively small share of the national caseload has been removed from the rolls because of time limits or reported as sanctioned off the rolls. Compared to those who left welfare for other reasons, individuals whose benefits were cut off by a state-imposed time limit do not appear to face increased difficulties or hardships. Employment rates vary considerably, but the majority of studies report employment rates between 55% and 64% within three months of exit or at the time of the survey. However, the percent of leavers ever employed since their exit is much higher (between 63% and 91% of respondents) and indicates that a number of leavers are not continuously employed. The average hourly wage reported among welfare leavers ranged from $5.50 to $8.80 per hour. Among those who leave welfare and are not employed, the two most common barriers to employment or reasons for unemployment are health, physical or mental illness, or the inability to find a job. Although the majority of welfare leavers are employed, based on wages alone, welfare leavers in a number of states remain poor. For example, a Missouri leaver study reported that 2 years after exit, 63% of single mothers with children under the age of 18 were below poverty, and 92% were at or below 185% of the federal poverty level. The leaver studies illustrate that between 58% and 87% of families had at least one member, either an adult or child, receiving Medicaid since exit or at the time of the survey. When examined separately, the rates of participation in Medicaid are higher for children than adults, and adults are more likely to be uninsured. The studies also report that between 46% and 78% of leavers are participating in food stamps. Reasons for not participating in Medicaid and food stamps among leavers vary. Some welfare leavers did not think they were eligible for these services, while others indicate that they did not need these services or that it was too much hassle to receive them. Between 20% and 67% of eligible welfare leavers were receiving child care subsidies, while a number of respondents indicate no need for these subsidies. Child support also appears to be an important source of income among welfare leavers. While a large number of individuals are leaving welfare for work, less than half of welfare leavers indicate that they have filed for or received the Earned Income Tax Credit. State leaver studies illustrate that less than half of leavers appear to be experiencing hardships after exit from welfare. Whether these problems have increased or decreased since exit varies by state and by the outcome measured. A few states have reported increases in instances where leavers experienced difficulties paying bills and/or arranging housing since exit, while other states have reported decreases in these hardship measures since exit. However, problems acquiring medical care and, on occasion, food have increased among leavers since cash welfare exit. Employment is the reason the majority of recipients leave welfare, and lack or loss of employment is the most common reason individuals return to welfare. Among leavers who remained off welfare for at least 2 months, between 18% and 35% had returned for a period of time since exit. Although lack of employment is the most common reason individuals return to welfare, there is some evidence that those who leave for income-related reasons are less likely to return than those who leave welfare for failing to comply with program requirements. Mr. Chairman, that concludes my formal statement. I'd be happy to answer any questions that Members of the Subcommittee may have. Thank you.

LOAD-DATE: March 17, 2001, Saturday