Work, Income, and Material Hardship after Welfare Reform

Abstract

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 ended the federal entitlement of cash assistance for needy families with children and created the Temporary Assistance to Needy Families Program (TANF). TANF replaces the former Aid to Families with Dependent Children program (AFDC) and provides transitional assistance conditional on work or the performance of work-related activities; it requires most recipients to go to work within two years of entering the program. The number of individuals receiving assistance has declined sharply since the passage of PRWORA. The employment and earnings of welfare recipients have increased; however, PRWORA's impact on the economic and noneconomic well-being of recipients and their families is not yet well-established (Danziger 1999). Although preliminary evidence does not indicate increased rates of homelessness or foster-care placement among recipients and their children, there is some early evidence that many families who have left welf are remain poor and that some of the poorest single-mother families may be experiencing reductions in income (Cancian, Haveman, Kaplan, Meyer, and Wolfe 1999; Loprest 1999; Primus 1999). A key goal of welfare reform is for recipients to establish stable, long-term work patterns under the assumption that regular involvement in work will eventually improve their well-being. Past research provides little information about the determinants of employment over time for women who were welfare recipients, either pre- or post-PRWORA, and little information about how work affects their economic well-being and experiences of material hardship. After a review of the relevant literature, the following questions are addressed in this paper: (1) To what extent does a sample of women who received cash assistance in early 1997 establish work attachment over time? How is the proportion of time worked over the 1997-1998 period associated with income and poverty at the end of this period? (2) How is the amount of time spent working associated with experiences of material hardship and subjective well-being? STUDIES OF RECIPIENTS' EMPLOYMENT AND INCOME OUTCOMES Analysts using national longitudinal data sets to track the transition from welfare to work pre-PRWORA report that a sizable minority of recipients are unable to keep jobs and tend to cycle between work and welfare (Bane and Ellwood 1994; Harris 1996). Evaluations of welfare-to-work demonstrations typically report that while most participants get jobs, a large proportion, often a majority, lose those jobs within a year (Hershey and Pavetti 1997; Berg, Olson, and Conrad 1991; Friedlander and Burtless 1995; Gueron and Pauly 1991). Also, wages are low among welfare recipients, and recent research suggests that their wages grow over time but only for the minority of former recipients who established regular, stable full-time work patterns (Corcoran, Danziger, Kalil, and Seefeldt, forthcoming; Pavetti and Acs 1996). Certain characteristics enhance recipients' ability to remain employed once they leave welfare--those who are high school graduates, those with prior work experience, and women with fewer than three c hildren are less likely to return to welfare (Bane and Ellwood 1994; Harris 1996). Even among recipients with the same schooling, the same work experience and the same number of children, however, there is considerable variation in the probability of remaining at work and staying off welfare. When recipients are compared to non-recipients with the same schooling and family characteristics, recipients leave jobs at higher rates and have lower wages than do non-recipients (Hershey and Pavetti 1997). These findings suggest that unmeasured personal attributes, in addition to low levels of schooling, lack of work experience, and large families, constrain recipients' employment and wage growth. One unmeasured factor that discourages work may be work-related expenses. …