UI as a Safety Net for Former TANF Recipients

TANF Leaver Samples for Analysis

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Contents

1. Criteria for sample inclusion
2. Characteristics of samples for analysis
3. Employment and earnings before and after TANF exit

Samples of TANF leavers were created from administrative data on recipients of public cash assistance in each of the states. The samples include those voluntarily leaving TANF for employment. Samples exclude those who fail to receive a TANF cash payment because of a sanction or other involuntary reason. Due to the periodicity of some administrative data needed for the study, the time unit for analysis is the calendar quarter. Because of the uneven time periods for data available across the states, a cohort approach was taken for defining samples for analysis. A total of eleven cohorts were examined across the four states. Definitions of the time frames for the analysis cohorts are listed in Appendix A.

Criteria for sample inclusion

Leaving TANF for employment is defined as: zero cash TANF payment to the assistance unit in a calendar quarter (with no sanction) and with earnings of at least $100 in that calendar quarter or the next quarter.

Key concepts in the analysis are:

• TANF exit for employment is defined as zero cash TANF payment to the assistance unit in a calendar quarter with earnings of at least $100 in that calendar quarter or the next quarter. The zero payment must not be due to a sanction.
• Employment is defined as earnings of at least $100 in a calendar quarter. This definition is the same as that applied by the Social Security Administration when measuring the duration of insured employment to determine eligibility for retirement benefits.
• Unemployment is defined as a calendar quarter with earnings less than $100.

All three of these concepts are measured using UI administrative records on earnings as reported quarterly by employers. The definition of unemployment is a very strict one and certainly understates the true extent of experience with joblessness in the samples.

Samples from all states involved in the study are analyzed for calendar year 2000 TANF receipt cohorts. These samples include TANF recipients in calendar year 2000 who exit from TANF for employment by the first calendar quarter of 2001. Analysis is conducted on earlier and later TANF exit cohorts where data are available for other states. The four alternative TANF exit time frames are:

1. TANF receipt 1997Q2 to 1998Q1 and exit by 1998Q2,
2. TANF receipt 2000Q1 to 2000Q4 and exit by 2001Q1,
3. TANF receipt 2001Q1 to 2001Q4 and exit by 2002Q1, and
4. TANF receipt 2003Q1 to 2003Q4 and exit by 2004Q1.

TANF leavers in each cohort are followed for 3 years after TANF exit to check for the start of any jobless spells.

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Characteristics of samples for analysis

The states involved in this study are four of the eight most highly populated states in the nation. Consequently, the TANF caseloads and levels of UI claims are large enough to reliably measure outcomes and impacts of interest. For the analysis, we are first interested in a sample of those who leave TANF for employment. Table 3 lists the total number of adults in TANF households in the data provided by states for calendar years starting with 1996 for Texas. Figure 1 shows that the numbers of TANF caseloads declined dramatically in Florida, Michigan, and Texas up until 2000. Following 2000, yearly declines in the numbers of TANF caseloads were much smaller in the data for all four states.

Figure 1.
TANF Caseloads over Time from Florida, Michigan, Ohio, and Texas

TANF leaver sample sizes are listed in the middle panel of Table 3 for the 1997, 2000, 2001, and 2003 cohorts. The bottom panel of this table lists the shares of TANF recipients in each of the 11 analysis cohorts who leave for employment. TANF recipients and leaver counts are presented in the bar graph Figure 2. The figure illustrates a steady volume of caseloads in 2000 and after. For Florida and Michigan counts of TANF leavers were relatively high in 1997, with the numbers of leavers successively smaller in both states in 2000 and 2001. Numbers of both TANF recipients and TANF leavers declined in Ohio between 2000 and 2001. In Texas, the numbers of TANF recipients declined sharply from 1997 to 2000 then remained relatively flat until 2003. Counts of Texas TANF leavers renewed an upward trend in 2000.

Figure 2.
TANF Recipients and Leavers

The TANF exit rates vary across state and over time. Figure 3 illustrates that exit rates tended to rise from 1997 to 2000 and then decline thereafter. Exit rates were highest in the Florida 2000 cohort (62.4 percent) and lowest in the Michigan 1997 cohort (27.9 percent) with other Michigan, Ohio, and Texas cohort exit rates somewhat above the lower end of the range.

Figure 3.
TANF Leaver Rates (percent)

To understand demographics for our analysis cohorts we summarize characteristics of UI claimants among TANF leavers. Consistent data on demographic characteristics are only available on a limited number of variables. These data are gathered in applications for benefits compiled in UI administrative records. Table 4 presents sample percentages on subgroups by age, sex, race, and educational attainment, and the mean value for base period earnings.⁽¹⁾

Based on three broad age categories, the distributions for the TANF leaver cohorts are similar across the states with the bulk of the samples in the middle range aged 25 to 44. TANF leavers in the Michigan sample tend to be slightly older than for the other states. Over the years, from 1997 to 2001 the mean age in all cohorts tends to get younger, providing some evidence that older TANF recipients left the roles sooner after introduction of the PRWORA reforms.

Since our analysis cohorts are samples of TANF leavers, it is not surprising to see female percentages ranging from 81.2 in the Michigan 2001 cohort to 87.8 in the Florida 1997 cohort. The gender compositions are relatively stable across all cohorts.

Percentages of African Americans in analysis cohorts are fairly steady within states over time. While similar between Florida and Michigan, percentages are somewhat higher in Ohio and lower in Texas. The percentages of African Americans range from 35.5 in Texas 2001 to 55.5 in Ohio 2000.

The distribution of educational attainment is skewed toward the low end for all of the cohorts analyzed. The highest levels of educational attainment are observed in Michigan where more than a quarter of the 2000 and 2001 cohorts have received some formal education beyond high school.

For all of the four states analyzed, base period earnings declined over time in the cohorts examined. Nonetheless, given the modest monetary eligibility requirements discussed above, these figures suggest high rates of UI monetary eligibility for the TANF leaver cohorts. Average earnings levels for TANF leavers are similar in Florida and Texas, somewhat higher in Michigan, and somewhat lower in Ohio.

Data available on dependents of household heads indicates that the great majority of TANF leaver households include three persons with two children, including one under the age of six.

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Employment and earnings before and after TANF exit

Employment as a route to self-sufficiency is the emphasis of the PRWORA reforms. Employment patterns in the cohorts analyzed indicate that the great majority of TANF leavers have customary attachment to the workforce which is observed to increase following TANF exit.By definition, persons in our TANF exit cohorts must be working either in the quarter of TANF exit or the quarter immediately thereafter. For these cohorts, observed employment rates are usually highest in the quarter of exit, and are typically higher after exit than before. What is surprising is just how high employment rates are in the four years preceding TANF exit.

Employment rates are summarized in Table 5 at annual intervals for up to 4 years (16 calendar quarters) before and after the quarter of TANF exit (also see Figures 4a, 4b, and 4c). The table also lists the employment rates in the quarters immediately preceding and following the quarter of TANF exit. Employment rates in the quarter of TANF exit exceed 85 percent for nearly all cohorts.

Texas presents a notably distinct pattern in employment rates that is clearly visible in Figures 4a, 4b, and 4c. Peak employment rates tend to occur in the quarter before TANF exit, then decline thereafter. This pattern is most likely a result of the unique Texas earnings disregard rules for TANF recipients. As summarized in Table 1, in the first 4 months of receiving TANF cash assistance, up to $1,593 dollars can be earned before benefits fall to zero. In the fifth month, the breakeven level of earnings drops to $333. This emerges as a strong incentive for TANF exit.

Across all TANF leaver cohorts, employment rates gradually rise in the years preceding TANF exit, and then diminish in the years afterward. Part of the observed pattern in earlier years may be due to the rather young average age of persons in the analysis cohorts. The stronger labor force attachment observed after TANF exit may be due to maturation and accumulated work experience. However, the 1996 PRWORA reforms also introduced strong incentives for staying employed and off TANF.

One year after TANF exit, more than 60 percent are employed in each of the cohorts and two years later more than 57 percent showed employment income. Typically, at least half were working a year before TANF exit while at least 45 percent worked two years before leaving TANF.

Figure 4a.
Percentage of the 1997 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Figure 4b.
Percentage of the 2000 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Figure 4c.
Percentage of the 2001 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Average annual earnings were uniformly higher in years after TANF exit than before. Earnings summarized in Table 6 and Figures 5a, 5b, and 5c are reported in current dollars — not adjusted for inflation. Wage inflation averaged less than 3 percent per year from 1997 to 2003.⁽²⁾ In that period earnings increases in the TANF leaver cohorts averaged more than double the rate of wage inflation. The increase in observed earnings most likely resulted from an increase in hours worked per year after TANF exit compared to before.

As Table 6 shows for all cohorts, mean annual earnings among working TANF leavers continue to rise in the four years observed after the TANF exit quarter. However, mean earnings for each year after TANF exit in all cohorts are at rates near poverty thresholds for three-person households.⁽³⁾

Figure 5a.
Annual Earnings of the 1997 TANF Leaver Cohorts by Year Relative to TANF Exit

Figure 5b.
Annual Earnings of the 2000 TANF Leaver Cohorts by Year Relative to TANF Exit

Figure 5c.
Annual Earnings of the 2001 TANF Leaver Cohorts by Year Relative to TANF Exit

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Endnotes

(1) The UI base period is typically the first four of the five calendar quarters immediately preceding the quarter of UI application for benefits. For those who fail this first test, UI eligibility can be evaluated alternatively based on the four most recent calendar quarters.

(2) National Compensation Survey means across all occupations 1997 to 2003 (BLS 2008).

(3) Mean household sizes include one adult and two children with one child under age six. Three-person family poverty thresholds were $12,931 for 1997, $13,874 for 2000, and $14,949 for 2002 (Census 2007).

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