Indicators of Welfare Dependence: Annual Report to Congress, 1997


Indicators of Welfare Dependence

Annual Report to Congress

October, 1997

U.S. Department of Health and Human Services

Executive Summary

The Welfare Indicators Act of 1994 (part of Public Law 103-432) directed the Secretary of Health and Human Services to study the most useful statistics for tracking and predicting dependence on three means-tested cash and nutritional assistance programs: Aid to Families with Dependent Children (AFDC), Food Stamps, and Supplemental Security Income (SSI). It also required the submission of annual reports on welfare receipt in the United States that track key indicators and predictors of welfare dependence. An Interim Report to Congress addressing the development of welfare indicators and predictors and assessing the data needed to report annually on the indicators and predictors was submitted a year ago. This report is the first of the annual reports required under the law.

Barely two months before the Interim Report was due, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) was signed into law on August 22, 1996, transforming large parts of the nation's welfare system. In addition to changes with far-reaching implications for the Food Stamp Program and the Supplemental Security Income (SSI) program for children, PRWORA established block grants for states to provide cash and other benefits to help needy families support their children while simultaneously requiring those families to make verifiable efforts to leave welfare for work.

The Interim Report

The bipartisan Advisory Board on Welfare Indicators established by the Welfare Indicators Act observed that the PRWORA's Temporary Assistance for Needy Families (TANF) program fundamentally changed the meaning of "dependence" by changing the framework for welfare policy and by providing states with the flexibility to define caseloads and benefits in extremely varied ways. In response, the Interim Report addressed the changing, but still evolving and uncertain, welfare environment in a number of ways.

  • The Interim Report adopted a working definition of dependence as a continuum, incorporating elements of the degree of reliance on means-tested benefits, the duration of receipt, and the behavior of the recipient. The dependence/self-sufficiency continuum ranges from: i) long-term receipt of income from welfare with no significant labor market involvement or training; to: ii) participation in workfare or work-related activities and/or combining income from public assistance with earnings; to iii) short-term episodes of receipt of means-tested assistance programs; to: iv) long-term independence from receipt of means-tested assistance programs.
  • To account for the varying degrees of dependence and different dimensions of a dependent family's condition, the report included an extensive list of indicators from a wide range of fields in an effort to present an accurate picture of the range of both dependence and the risk of dependence -- work and job readiness, poverty and deprivation, family structure, and parenting, as well as indicators of child achievement and health.
  • The Interim Report suggested that the correlation between welfare caseloads and changes in dependence would likely become less close over time as states implement the wide range of policy choices permitted under PRWORA. The report recognized that caseload increases and decreases are the result of some combination of social, economic, demographic, and policy factors, and as such, it noted that dependence is a multi-dimensional measure of how much and how long assistance is received, as well as whether the assistance supplements or supplants earnings.

At the time the Interim Report was prepared, the impacts of the PRWORA were still unknown, although no one doubted that changes in "welfare receipt" (as defined by the Welfare Indicators Act for purposes of the annual welfare indicators reports) would occur. States face a dramatically different set of choices, rules and incentives under the PRWORA, and while TANF caseloads may vary in size as a result of changes in the number of people who are employed, they could also vary because states choose to serve families with state funds, to provide services instead of cash, or to expand benefits to working families (thus expanding caseloads without expanding dependence). Care must be taken not to view welfare caseloads as a proxy for welfare dependence. The increased number of possible policy variants under the new welfare law highlights the need to present an accurate and dynamic picture of dependence.

Plan for the First Annual Report

This year's first annual report differs from the Interim Report in several important ways. While the Interim Report provided a wide-ranging list of indicators, this report highlights a few measures of dependence that were recommended for consideration by the Advisory Board. Although recognizing the difficulties inherent in defining and measuring dependence, the Advisory Board proposed the following definition that could be tracked over time:

A family is dependent on welfare if more than 50 percent of its total income in a one-year period comes from AFDC/TANF, Food Stamps and/or SSI, and this welfare income is not associated with work activities. Welfare dependence is the proportion of all families who are dependent on welfare.

The Advisory Board's recommended definition would count as work activities only unsubsidized and subsidized employment and work required to obtain benefits. This concept and measures of this definition, as well as a duration of receipt measure, are presented and discussed in Chapter I. A discussion of measures of deprivation is also included in Chapter I to ensure that dependence measures are not assessed in isolation.

Chapter II includes indicators of income and food assistance program participation and program-related measures of dependence. These indicators focus on recipients of cash and nutrition assistance, and reflect both the range and depth of dependence. Data relating recipients' level of welfare income, amount of earnings, duration of receipt, participation in the labor force while receiving assistance, and multiple program receipt are included, along with information on events associated with beginning and ending receipt of means-tested assistance. Trend data on these indicators are provided where available.

Data on risk factors that have been identified as associated with welfare utilization and dependence are provided in Chapter III. While the Advisory Board was in agreement that a smaller set of dependence indicators should be highlighted, they were also in agreement that, since the causes of welfare receipt and dependence are not clearly known, the report should include a larger set of risk factors associated with welfare receipt. Still this report reduces the overall number of predictors and risk factors by about 20 percent from the number included in the Interim Report. Most of the deleted indicators are measures of well-being, particularly child well-being, that are tracked in other publications of the Department of Health and Human Services. The risk factors in Chapter III are loosely organized into three categories: economic security measures, measures related to employment and barriers to employment, and measures of teen behavior, including nonmarital childbearing.

Chapter IV addresses some of the complexities of data reporting and collection under the Temporary Assistance for Needy Family (TANF) block grants. Since the 1996 welfare law fundamentally changed the nation's cash assistance programs, it is important to understand the policy and program context that may surround changes in welfare dependence over time. It is crucial to collect a sufficient level of detailed administrative data about the TANF program and its recipients and benefits to permit tracking trends in dependence and deprivation over time. The quality and level of detail of TANF administrative data takes on even greater importance in the context of this report's proposed primary indicator of welfare dependence. In addition, despite the fact that most national survey data are not representative at the state level, they are critical for capturing indicators of adult labor force participation, earnings, program participation, fertility and child well-being, as well as complementing caseload data for tracking changes in dependence.

Because welfare programs have changed substantially in the recent past and are continuing to change rapidly, Appendix A is included to give basic data on each of the three main welfare programs and their recipients over the past several years. Appendix A briefly describes the three programs covered by the Welfare Indicators Act and highlights some of the recent legislative changes that will affect participation and/or expenditures in those programs. It also includes information on the population and characteristics of individuals and families receiving AFDC/TANF, Food Stamps and SSI, and national and state data on program participation and expenditures trends.

Other Appendices provide more detailed information on several related subjects. Appendix B consists of a series of tables on poverty issues. Appendix C includes a comparison between the indicators and predictors included in this Annual Report and those recommended in the Interim Report. Additional data on nonmarital childbearing is included in Appendix D.