Families on TANF in Illinois:  Employment Assets and Liabilities

Chapter II.
Welfare and Employment Experiences

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Contents

Endnotes

The goal of state TANF programs is to provide temporary assistance to needy families while directing adults in those families to jobs so that their families can become self-sufficient. To promote this transition from welfare to work, the federal government has established minimum work participation rates for the TANF caseload in each state and a 60-month limit on assistance for families. Using the flexibility provided by PRWORA, states have taken a variety of approaches to encouraging TANF recipients to work. Illinois' approach includes both incentives and penalties. For instance, the state (1) stops the 60-month TANF "clock" for working families on assistance, (2) disregards 67 percent of earnings for an indefinite period, and (3) imposes a gradual sanction on families that do not comply with work requirements. As a result of these policies, the Illinois TANF caseload includes both working and nonworking families.

In this chapter, we describe the welfare and employment experiences of single-parent TANF recipients in Illinois. We examine both the amount of time they have spent on welfare and their current work experience, including the number of hours they work, the characteristics of their jobs, and the amount of money they earn. We also discuss their total household income and conclude with a summary of their circumstances.

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Welfare Experiences

To gain a general sense of the welfare experiences of single-parent cases that were on TANF in November 2001, this section describes the duration of assistance, sanction status, and time-limit status of the subject cases. As appropriate, it describes the characteristics and experiences of those cases, their adult heads, or their households.

Thirty-nine percent of single-parent TANF cases in Illinois have been on assistance continuously for more than two years, having received benefits in each of the past 25 months (Figure II. 1). This share is somewhat lower than the 47 percent reported from a study of the TANF population of the nation as a whole based on data from the 1999 National Survey of American Families (Zedlewski and Alderson 2001). Long-term recipients always comprise a substantial share of the caseload at any point in time, even while, over time, the majority of TANF cases may be of short duration.

Figure II.1 Percentage of Last 25 Months Received TANF. Figure II.2 Duration of Current Spell on TANF

A substantial portion (42 percent) of single-parent cases in Illinois have current TANF spells of a year or less (Figure II.2). Current spells on TANF are extremely short--six months or less--for 26 percent of recipients. Another 16 percent have current spells of 7 to 12 months. Some of the cases with current spells under one year are short-term recipients who need TANF to see them through a brief period, while some are "cyclers" who move on and off TANF over time. For example, we see in Figure II.1 that 30 percent of cases have received TANF for less than half of the past 25 months (or about 12 months), a lower share than those whose current spell is under a year in Figure II.2. Cyclers account for this difference. The median duration of the current TANF spell for all single-parent cases is 16 months.

In Illinois, as in most states, TANF recipients face sanctions, or reductions in their cash grant, for failure either to participate in a required activity or to cooperate with child support enforcement. Sanctions in Illinois become more severe as noncompliance persists. Initially, the cash grant is reduced by 50 percent; after three months of noncompliance, it is eliminated altogether (Illinois Department of Human Services 1999). With the third instance of noncompliance, the state immediately imposes a full-grant sanction that must remain in place for at least three months. Overall, 26 percent of TANF cases have experienced a sanction, with almost all attributable to failure to participate in a required activity (Figure II.3). Of the sanctioned cases, 9 percent have experienced a full-grant sanction (results not shown).

Figure II.3 TANF Sanctions. Figure II.4 Elasped Time on 60-month TANF Clock

In Illinois, any month in which the head of a single-parent case consistently works 30 or more hours per week, attends a postsecondary degree program full time, or provides full-time care for a related child under age 18 or a spouse because of a medical condition does not count toward the 60-month TANF time limit (Illinois Department of Human Services 2002).(1) The TANF clock has been stopped for 26 percent of single-parent cases.(2)

Stopping the clock rewards those who are working by indefinitely supplementing their wages as long as they continue to work at least 30 hours per week. For example, a recipient who has received cash assistance for 18 months and has worked 30 hours per week for 6 of those months would log not 18 but 12 months on her TANF benefits clock. Only three percent of TANF recipients in Illinois have more than 48 months on their benefits clock and, hence, less than one year during which they can receive TANF without working or attending school (Figure II.4).(3) Most recipients (58 percent) have logged no more than 24 months on their benefits clock. The median elapsed time for all single-parent cases is 20 months.

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Employment and Earnings

Since the enactment of PRWORA, large numbers of TANF recipients nationwide have entered employment. While some recipients who find work leave TANF, others remain, despite relatively substantial earnings, because of the generous earned-income disregards in some states. In this section, we examine the extent to which current TANF recipients in Illinois are employed. To assess whether those jobs could be springboards toward greater self-sufficiency, we also examine the characteristics of these jobs and recipients' earnings.

Employment

Thirty-nine percent of TANF recipients in Illinois are employed, more than three-quarters of whom work at least 30 hours per week (Figure II.5). The state's generous 67 percent earned-income disregard enables recipients to combine work and welfare up to an earnings level of about $1,100 per month for a family of three.(4) And as noted, the state turns off the 60-month benefits clock for recipients who work 30 or more hours per week. Given these two strong incentives, it is not surprising that Illinois TANF recipients combine work and welfare at a higher rate than is reported nationally. Results from the 1999 National Survey of American Families indicate that 32 percent of TANF recipients nationwide were working at the time of the survey (Zedlewski and Alderson 2001).

Figure II.5. Current Employment Status.

The 61 percent of TANF recipients who are not currently employed have a broad range of reasons for not working.(5) The principal reason is being pregnant or caring for a newborn (Table II.1). Other reasons for not working include physical or mental health problems, child care problems, and lack of education or work experience. Thirteen percent of unemployed recipients cited a poor local labor market--one that provides either no jobs or only low-wage jobs--as their principal reason for not working. Another 10 percent of recipients are not working because they are in education or training programs.

Table II.1
Principal Reason for Not Working by Case Heads Who Are Not Currently Working
  Percentage
Pregnant or Caring for a Newborn 17
Physical, Mental Health, or Substance Abuse Problem 14
No Jobs Available or Low Wages 13
Child Care Problem 11
Lack Education or Work Experience 11
In School or Training 10
Other Reasons 24
Source: 2001-02 survey of Illinois TANF cases.

Job Characteristics

The characteristics of the jobs held by recipients can influence job duration and advancement. Several studies have found that starting out in jobs in certain occupations that offer higher wages or fringe benefits are more likely to lead to sustained employment and job advancement (Strawn and Martinson 2000). In this section, we describe the characteristics of the primary current or most recent job held by TANF recipients who have ever worked for pay. We refer to these jobs interchangeably as the "most recent job" or "the current or most recent job" and consider whether their characteristics are such that they are conducive to progressing toward self-sufficiency. (6)

The jobs most recently held by TANF recipients in Illinois are concentrated in the same industries and occupations as those held by individuals who have recently left welfare in selected states, as documented by studies of TANF "leavers" (Richer, Savner, and Greenberg 2001). Nearly one in every three (29 percent) TANF recipients in Illinois works in the retail industry (Table II.2). In addition, just over half (53 percent) work in service industries. Among TANF recipients, the initial occupation (not just the industry) is an important determinant of long-term success in the labor market. Strawn and Martinson (2000) report that individuals who make the transition from welfare to work by starting out in sales positions tend to have shorter periods of employment and lower earnings growth. In Illinois, 17 percent of TANF recipients hold sales positions. Most recipients (54 percent) work in service occupations.

Table II.2
Industry and Occupation of Most Recent Job
Industry % Occupation %
Sales 29 Retail 17
Health Services 14 Administrative Support and Clerical 16
Social, Educational, and Other Nonprofit or Public Services 14 Food Services 14
Business Services and Utilities 13 Health Services 12
Personal Services 9 Grounds Maint. and Cleaning Services 10
Manufacturing 7 Personal Services 10
Hotels and Other Lodging Services 3 Other Services 8
Transit and Transportation 2 Production and Manufacturing 4
Recreation and Amusement 2 Technical 2
Other 7 Other 8
Source: 2001-02 survey of Illinois TANF case

More than half of recipients (56 percent) work a day shift in their most recent job (Figure II.6). A day shift is typically the most desirable and sustainable shift for single parents because it dovetails with more child care options and greater child care availability (Ross and Paulsell 1998). In addition, public transportation tends to be more widely available during daytime hours. Notwithstanding the advantages of a day shift, a substantial share of TANF recipients--about one-third--works either a night shift or an irregular shift, which can present challenges for arranging child care and transportation.

The current or most recent job for 59 percent of TANF recipients in Illinois is a full-time job, that is, at least 35 hours per week (Table II.3). Although this is a substantial portion of full-time workers on TANF, it is lower than the percentage of full-time workers among those who have left the welfare rolls. Loprest (2001) reports that, nationally, 68 percent of employed former recipients worked 35 hours or more per week at the time of the 1999 National Survey of American Families.

Figure II.6 Shift on Most Recent Job

Table II.3
Hours and Duration of Most Recent Job
Hours Worked Per Week
Less than 20 8%
20 to 34 33%
35 or more 59%
Average 34.2 hrs.
Median 35.0 hrs.
Months on Job
Average 11.9 mos.
Median 5.0 mos.
Temporary or Seasonal Job 28%
Source: 2001-02 survey of Illinois TANF cases.

The jobs most recently held by TANF recipients in Illinois tend not to last long; the median duration is just five months. One explanation for this short duration is that more than one in four of the most recent jobs is temporary or seasonal.

Despite some positive attributes, the quality of the most recent jobs held by TANF recipients is low in two important respects: the hourly rate of pay and fringe benefits. One in every five TANF recipients is paid less than the minimum wage of $5.15 per hour (Table II.4). A large proportion of these very low-wage workers provide child care or other personal services (e.g., housecleaning) in their own home or in the homes of their clients, and are often paid "under the table" on what appears to be a piecework basis. (7) These low wages may not lead to greater self-sufficiency and a movement off of welfare. For example, the median hourly rate of pay received by TANF recipients in Illinois on their most recent job is $6.50, which is about 10 percent lower than the median hourly wage among individuals who have left TANF across the nation, reported by Loprest (2001) at $7.15 based on the 1999 National Survey of American Families (or nearly 15 percent lower when Loprest's figure is adjusted to $7.60 per hour in 2001 dollars).

Table II.4
Compensation on Most Recent Job
Hourly Rate of Pay
Less than $5.15 20%
$5.15 to 6.00 25%
$6.01 to 8.00 34%
More than $8.00 22%
Average $7.12
Median $6.50
Fringe Benefits Available
Paid holidays 41%
Paid vacation 40%
Health insurance 34%
Paid sick leave 31%
Retirement plan 22%
Source: 2001-02 survey of Illinois TANF cases.

Extensive menus of fringe benefits are not available to most Illinois TANF recipients in their current or most recent job. Paid holidays and vacation time, the most common fringe benefits, are available to only two in every five TANF recipients at their most recent job (Table II.4). Health insurance and paid sick leave are available to only one-third of employed recipients, and a retirement plan is offered by less than one-quarter of the jobs most recently held by TANF recipients. Moreover, TANF recipients may not have participated in or received the fringe benefits, despite their availability, for such reasons as high co-payments or lack of longevity on the job to earn or qualify for them.

For TANF recipients to move from welfare to work, they must obtain jobs with characteristics that will facilitate their transition to self-sufficiency. We have selected the following four characteristics that define jobs with the potential to lead to greater self-sufficiency: a rate of pay higher than $8.00 per hour, a day shift, work that is not temporary or seasonal, and the availability of both paid leave (vacation and/or holidays) and health insurance. Only 6 percent of the jobs most recently held by TANF recipients in Illinois have all four of these desirable characteristics (results not shown). We emphasize that this estimate reflects the characteristics of the jobs held by individuals who were on TANF at a specific point in time--November 2001. It is probable that individuals who obtain jobs with these desirable characteristics move off the caseload fairly rapidly, so an analysis of the job characteristics of TANF recipients over time would likely yield a higher percentage of recipients who obtain such jobs.

Employment in jobs with the preceding desirable characteristics tends to be stable. Rangarajan, Schochet, and Chu (1998) report that TANF recipients with jobs that pay more than $8.00 per hour are employed for longer than are those with lower-paying jobs. Consistent with this earlier study, we found that TANF recipients in Illinois working in a job with the four desirable characteristics remain in that job for two months longer, on average, than recipients in other types of jobs. Given that the average duration of the most recent job is just under a year, the difference is relatively large (17 percent) in addition to being statistically significant.

About two-thirds (65 percent) of currently or previously employed TANF recipients believe that they have or had an opportunity, however small, for job promotion in their current or most recent job (Figure II.7). Almost all (92 percent) of the 6 percent of recipients whose most recent job has the characteristics conducive to greater self-sufficiency believe that they have the opportunity to advance.

Figure II.7 Opportunity for Advancement on Most Recent Job

Earnings

Two out of every five TANF case heads were employed in the most recent month. However, 28 percent of those with earnings earned $400 or less in that month (Table II.5), which is far less than they are permitted to earn under Illinois' generous earned-income disregard while remaining eligible for TANF. The median monthly earnings of employed case heads is $600. This survey-based finding is broadly supported by quarterly data from the Illinois Unemployment Insurance (UI) system. For 2000 and 2001, these data indicate that the median earnings of employed TANF recipients ranged from $1,392 to $1,658 per quarter, or $464 to $553 per month (results not shown). These median values of monthly earnings, whether based on the survey data or the UI data, are substantially lower than would be predicted on the basis of the median amount of work (35 hours per week, Table II.3) and the median rate of pay ($6.50 per hour, Table II.4) in the current or most recent job held by TANF recipients. This gap between actual and predicted earnings is consistent with the failure of TANF recipients to sustain employment at the median levels of work and pay for extended periods.

Table II.5
Distribution of Monthly Earnings by Employed Case Heads
Less than $400 28%
$400 to $799 42%
$800 to $1,199 23%
$1,200 or more 7%
Average $616
Median $600
Source: 2001-02 survey of Illinois TANF cases.

The two-year quarterly earnings histories of the heads of TANF cases in November 2001 show little progress toward self-sufficiency. Among all case heads, regardless of their employment status, the average earnings per quarter ranged from a low value of $632 in the third quarter of 2001 to a high of $851 in the fourth quarter of 2000 (Figure II.8). The pattern of quarterly averages does not show any consistent growth in earnings over time but mirrors instead the slight variations in quarterly employment rates. When we examine the earnings histories only of those case heads who worked in at least half of the eight quarters, we find the same pattern (results not shown); earnings fluctuate with employment rates without any discernable growth over time.

Figure II.8 Quarterly Earnings and Employment of All TANF Case Heads over the past Two Years

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Household Income

Because the heads of single-parent TANF cases have earnings that are, on average, low, they often rely on multiple sources of income to meet household expenses (Edin and Lein 1997). These sources may include the earnings of other members of the household and various forms of public assistance.

Two-fifths of TANF cases receive income from the earnings of the case heads, which have an average value of $616 per month (Table II.6). In addition, 21 percent of TANF cases are in households that receive income from the earnings of other household members averaging $927 per month. So, although few TANF cases receive income from the earnings of other household members, those that do, receive substantial amounts. Considering all household members, slightly more than half (54 percent) of TANF cases receive income from earnings, with an average monthly value of $817.

Table II.6
Sources and Monthly Amounts of Household Income
Income Source Has Source Average for Cases w/Source
Earnings
Case head 40% $616
Other HH members 21% $927
All HH members 54% $817
Public Assistance
TANF 86% $273
Food stamps 93% $317
SSI 15% $559
Other Sources
Child support 10% NA
All other 13% $244
Source: 2001-02 survey of Illinois TANF cases. HH: Households

Other studies of current and former TANF recipients have also found that people other than the case head may contribute large amounts of earned income to the household. For example, Kauff et al. (2002) found that in Iowa, 37 percent of one- and two-parent TANF cases that left welfare two years before the time of the survey received income from the earnings of other household members. The average amount of those earnings was $1,502 per month. Rangarajan and Johnson (2002) found that, in New Jersey, only 15 percent of one- and two-parent TANF cases received income from the earnings of the head's spouse or partner 40 months after going on assistance. However, at $1,383 per month, on average, those contributions were substantial for the cases that did receive them. Our focus on single-parent cases currently on assistance may account for finding lower, but still substantial, average earnings of other household members relative to the Iowa and New Jersey studies.

Given the eligibility criteria for public assistance programs, almost all of this study's subjects can be expected to have income from various forms of assistance in addition to TANF. Eighty-six percent receive a TANF cash grant with an average value of $273 (Table II.6). (8) Food stamps are an even more important source of household income for TANF cases. Ninety-three percent of cases receive food stamps that are valued, on average, at $317 per month. Only a small portion of TANF cases (15 percent) receive Supplemental Security Income (SSI), but they receive an average of $559 per month through that program. (9)

TANF cases may also receive income from many other sources, such as child support, unemployment benefits, alimony payments, and gifts from friends or relatives. Thirteen percent receive income from one or more such source; 10 percent receive it from child support alone. The average income received from these sources is $244 per month (Table II.6).

Even though more than half of TANF cases receive income from earnings, it is nevertheless true that most of the income received by TANF cases comes from public assistance. TANF, food stamps, and SSI account for 57 percent of the total household income received by TANF cases (Table II.7). Earnings by all household members account for 40 percent of total income. Other sources, including child support, account for only 3 percent of total household income.

For TANF cases in which the head has earnings, earnings from all household members are the primary source of total household income. In fact, the relative importance of earnings and public assistance is reversed for these cases relative to all TANF cases. Earnings account for 58 percent of total income, and public assistance for 39 percent (Table II.7).

Table II.7
Total Monthly Household Income
  All TANF Cases Cases in Which the Head Has Earnings
Amount (incl. zeros) Percent of Total Amount (incl. zeros) Percent of Total
Earnings $418 40% $749 58%
Public Assistance        
TANF $236 22% $150 12%
Food stamps $298 28% $272 21%
SSI $78 7% $83 6%
Other Sources $29 3% $28 2%
Total Income $1,058 100% $1,281 100%
Source: 2001-02 survey of Illinois TANF cases.

A comparison of monthly household income with Census Bureau poverty thresholds reveals that 93 percent of TANF cases are in households with an income below poverty, and 65 percent are in extremely poor households, that is, those with an income below 50 percent of poverty.(10) However, recipients with earnings do fare better than those without; workers are only half as likely to live in extreme poverty, and are twice as likely to live above the poverty line (Figures II.9 and II.10). We would not expect many TANF recipients to live above poverty, even with Illinois' generous earned-income disregard. The case head of a family of three in Cook County cannot earn more than $1,100 per month--an amount that is about equal to the poverty line--and still qualify for a TANF grant.

Figure II.9 Household Income Relative to the Poverty Level for Workers. Figure II.10 Household Income Relative to the Poverty Level for Nonworkers

Families have other resources available to them that are not reflected in this poverty analysis. The official poverty measure does not include food stamps, which, as shown in Table II.7, contributes nearly one-third of total household income for TANF recipients in Illinois. Working recipients can also benefit from the earned income tax credit (EITC). We did not measure the contributions of the EITC toward household income in this study, but in general, the extra boost it provides can be substantial. For example, families with one child receive refundable tax credits of up to 32 percent of their earnings, and families with two or more children receive credits of up to 40 percent (Center on Budget and Policy Priorities 2001).

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Summary

Illinois' generous earned-income disregard, combined with its provision that excludes months with employment from the 60-month limit on assistance, provide TANF recipients with the incentive to combine work and welfare. Indeed, two-fifths of the heads of single-parent TANF cases in Illinois are employed. Those who do hold jobs usually work full time, but half of these jobs last for five months or less. Despite their earnings, employed recipients still rely on public assistance for a substantial share of their household income. To become self-sufficient, these employed recipients would need jobs that pay higher hourly wages, provide fringe benefits, and are compatible with the available child care. Another group of recipients needs to gain a secure foothold in the labor market, as three out of every five heads of single-parent TANF cases are not currently working, and one in four has not worked in the past year. Most of these individuals face personal, logistical or situational challenges that make finding and keeping a job difficult--a topic we explore in the next chapter.

Endnotes

1. The TANF clock is stopped for up to 36 months for recipients who are enrolled in postsecondary degree programs only if they maintain a cumulative grade point average of at least 2.5 on a 4-point scale.

2. The TANF clock is also stopped for months in which the family has a severely disabled child in the home under a Home and Community-based Care Waiver, for recipients in the experimental group of the Employment Retention and Advancement project, and for a domestic violence exclusion.

3. Families may continue to receive assistance after they reach their 60-month limit without working or attending school if they request and qualify for an exception from the Illinois Department of Human Services.

4. Based on monthly allowances for an assistance unit that includes caretaker relatives and children (Illinois Department of Human Services 2002).

5. Only 3 percent of the heads of single-parent TANF cases in Illinois have never worked for pay. They are, of course, included among the 61 percent in Figure II.5 who are not currently employed.

6. If a TANF case head is currently employed, then the job described in this section is the principal current job. If a case head is not currently employed but has been employed in the past, then the job described is the most recent job. In the case of several "most recent jobs," then the principal job is the reference one.

7. The statistics on hourly wages reported in Table II.4 are based primarily on hourly wage rates reported directly by the participants in MPR's 2001-02 survey of TANF cases in Illinois. However, some of the survey respondents (51 cases) were unable to report an hourly wage but did report earnings and hours worked over a specific period. We used that information to calculate the hourly rates of pay received by these respondents. Of the 51 cases that were calculated in this way, 41 had wages below $5.15 per hour. Such calculated wage rates account for approximately half of the wages below $5.15 per hour reported in the table. Excluding these cases, 12 percent of all case heads directly reported wages below $5.15 per hour.

8. There are two reasons why some members of the sample for this study reported no income from TANF in the month before the survey interview. First, zero-benefit cases comprise 9 percent of the study population from which this sample was selected, as discussed in Chapter I. Second, some sample members may have left TANF in the brief interval between the time when they were their selected for the sample and when they were interviewed.

9. Presumably, the grantee was not receiving SSI at the time of the interview if they were still receiving TANF, rather it was other members of the household who were likely to have been receiving income from this source.

10. The poverty thresholds are the U.S. government's official yardstick for measuring poverty. The poverty thresholds do not take income from food stamps into account and, therefore, food stamps are excluded from this analysis. The U. S. Bureau of the Census updates the thresholds each year, taking into account the number of family members and their ages. The poverty thresholds have been designed to be compared with annual income. For the purpose of this report, we converted the threshold values for 2001 to monthly values, which we compared with monthly income. Monthly income is more volatile than annual income; consequently, the poverty statistics presented here may not accurately reflect the poverty status of TANF cases over the course of a year. In addition, we calculated the incidence of poverty by using household-based measures of size and income, whereas the poverty thresholds were designed to be based on family size and to be compared with family income.


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