There are lots of unserious takes on "welfare reform" floating out there in America's political discourse. But if you actually want to learn something about what has and has not happened, Becky Blank is your woman...

Evaluating Welfare Reform in the United States

Evaluating Welfare Reform in the United States
Rebecca M. Blank
NBER Working Paper No.w8983
Issued in June 2002

---- Abstract -----

This paper reviews the economics literature on welfare reform over the 1990s. A brief summary of the policy changes over this period is followed by a discussion of the methodological techniques utilized to analyze the effects of these changes on outcomes. The paper then critically reviews the econometric and experimental literature on caseload changes, labor force changes, poverty and income changes, and family formation changes. A growing body of evidence suggests that the recent policy changes have influenced economic behavior and well-being in a variety of ways. One particular set of 'new-style' welfare programs seems to show especially promising results, with significantly increased work and earnings and reduced poverty.

• More significant caseload declines and larger increases in labor force participation among less-skilled mothers were possible than many observers would have predicted.
• Entry into welfare fell and exits from welfare rose.
  • There remains debate as to how much these results were due to a strong economy, to program reform, or to their interactive effects.
  • While some of this change in behavior is due to traditional labor supply responses to growing wages and increased financial incentives to work, the changes were greater than historical experience would lead one to expect.
• State welfare programs were substantially different post-1996, including such elements as time limits, sanctions, and diversion efforts. Tracking down the exact relationship between these program differences and specific behavioral changes remains difficult, but there is a growing body of evidence indicating that these new program elements mattered.
• At least over the late 1990s, these changes in behavior occurred along with moderate increases in cash income and moderate declines in poverty among less-skilled single mother families, those most affected by the policy changes.
  • This is in contrast to the mandatory employment programs of an earlier era, which increased labor supply but seemed to have few positive effects on income (earnings gains offset benefits losses).
  • These positive outcomes were best demonstrated in a set of experimental evaluations of so-called “financial incentive programs” which both provided financial incentives to work while also mandating strong work efforts.
    • These programs, enacted in only a limited number of states, seem to have been particularly effective in increasing employment and reducing poverty, and they provide perhaps the best model of “newstyle” welfare programs. Their results are markedly different from those of the older negative income tax experiments.
• We have only very preliminary evidence on whether these reforms have had any long-term impacts on marriage or fertility behavior.
• Similarly, we are just at the beginning of observing the impact of actually imposing time limits on larger numbers of welfare recipients.
• Most important, perhaps, is the question of how much the remarkable U.S. economy in the late 1990s was fueling the declines in caseloads, and increases in work and income among low-wage single mothers.

  Only as we experience economic cycles will we be able to effectively separate the economic effects from the policy effects of welfare reform.

  Tracking the changes in a less-robust economy will be important

  As will investigating whether certain states have packages of programs that make their low-income citizens more or less vulnerable in an economic downturn.

• The well-being effects of these policy changes should be better understood.
  • We need to know more about...
    • families’ disposable income changes after leaving public assistance;
    • their long-term opportunities for wage and income growth as their labor market experience grows;
    • how families whose access to public assistance has become much more limited cope with the combined demands of work, parenting, and economic survival.