Economic Well-Being Following an Exit from Aid to Families with Dependent Children

Abstract

Much previous research has focused on how long families receive Aid to Families with Dependent Children (AFDC) before leaving the program and whether and when they return to the program following an exit. Few quantitative studies have looked at broader indicators of the economic well-being of those who have exited AFDC. We use data from the National Longitudinal Survey of Youth to trace poverty status and welfare use in the 5 years following an exit from AFDC. We find substantial diversity in economic well-being. Women who were working when they exited from AFDC do better, and, to a lesser extent, so do those who were married or had a partner when they exited. Higher levels of success are achieved by women with higher earning potential, including those with higher education and those with fewer children or older children. Although some women achieve modest levels of economic success, 41% remain poor even 5 years after an exit from AFDC. Our results highlight the distinction between leaving welfare and leaving poverty and suggest that welfare reforms targeted at reducing caseloads may do relatively little to enhance broader measures of economic success. Key Words: AFDC, poverty, self-sufficiency, welfare. The goal of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 and, to a lesser extent, of previous welfare reforms has been to move women and children off the welfare rolls. Yet we know little about the lives of women and children who have left welfare. Recent research shows that many women who exit from Aid to Families with Dependent Children return-some of them quite quickly, suggesting that life after welfare is a time of economic insecurity for many women and their children (Blank & Ruggles, 1994; Brandon, 1995; Cao, 1996; Gritz & MaCurdy, 1991; Harris, 1996; Meyer, 1993; Pavetti, 1993). But the degree of economic insecurity of those who have left welfare is not yet fully understood because the focus of research generally has been limited to examining returns to welfare. Broader measures of economic well-being are critical; leaving welfare is not synonymous with leaving poverty. As we show in our analysis, the assessment of women's economic success after leaving welfare varies substantially with the measure used. There is little analysis of the extent to which families are able to move out of poverty and into a life of self-sufficiency once they leave AFDC. This article begins to fill this gap. We analyze poverty, welfare use, and alternative sources of income for young women who left AFDC in the 1980s. After reviewing related literature and discussing our data and approach, we analyze the factors associated with women's economic success following an exit from AFDC. Understanding the level of economic wellbeing after AFDC and factors associated with well-being is particularly important in the context of current policy. The Personal Responsibility and Work Opportunity Reconciliation Act eliminates the entitlement to cash assistance and replaces AFDC with a block grant, titled Temporary Assistance for Needy Families (TANF), to the states. Given the block-grant structure, there likely will be substantial variation in the programs that replace AFDC. Nonetheless, the legislation requires that all programs have time limits on the receipt of cash assistance and that all programs lead to substantial increases in employment. Analysis of the levels of well-being and self-sufficiency attained by women who have left AFDC in the past can provide a reference point for the design and evaluation of welfare reforms. Economic theory (as well as anecdotal evidence) suggests that women who have left AFDC in the past are likely to have better prospects of employment and marriage than many who may lose cash assistance under TANF because those with the most attractive alternatives had the greatest incentive to leave. Nonetheless, the experiences of women who have left AFDC provide some of the best information currently available on the conditions of life after welfare. …