Implementation, Participation Patterns, Costs, and Two-Year Impacts of the Portland (Oregon) Welfare-to-Work Program: Executive Summary. Findings on Program Impacts

05/01/1998

A.  Impacts on Receipt of Education or Training Credentials

  • For those entering the program without a high school diploma or GED certificate, the program substantially increased the number who obtained a GED certificate or a trade license or certificate.  The increase in GED receipt rivals increases found for skills­building programs offering extensive, long­term education; the increase in trade license receipt exceeds that of any similar program studied.

Of individuals who entered Portland’s program without a high school diploma or GED certificate ("nongraduates"), 16 percent of program group members received a GED during the two years following random assignment compared to 5 percent of the control group, an 11 percentage point increase.  As mentioned earlier, many nongraduates attended basic education classes as part of the program.  It should be noted, however, that case managers tended not to refer people with very low skills levels to basic education class.  The program also increased the receipt of a trade license or certificate for nongraduates by 12 percentage points.

B.  Impacts on Employment and Earnings

  • Over two years, Portland’s program substantially increased employment and produced unusually large increases in earnings relative to what would have happened in the absence of a mandatory welfare­to­work program.

As shown in Table 2, over two years of follow­up, 72 percent of program group members were employed compared to 61 percent of control group members, a difference of 11 percentage points.  This impact represents the effect of the program in promoting paid work among sample members who would not have worked on their own.  Said another way, more than one out of every four welfare recipients who normally would not have worked in an unsubsidized job during the two­year follow­up period did so as a result of the program.  The employment gains persisted through the follow­up period:  in the last quarter of the follow­up period, 46 percent of program group members worked for pay compared to 35 percent of control group members, an increase of 11 percentage points.

Table 2: Impacts on Employment, Earnings, and AFDC

Program group members earned, on average, $7,133 over the two­year period, and control group members earned $5,291.  (These averages include those who did and did not work during the follow­up period.)  This difference of $1,842, a 35 percent increase above the control group average, is the largest earnings impact measured among the programs studied as part of the NEWWS Evaluation (two­year impacts have been found in 8 of the other 10 programs and range from $367 to $1,276), and it approaches the magnitude of the largest earnings impact attained by a large­scale mandatory welfare­to­work initiative (the Riverside GAIN program of the late 1980s increased two­year earnings by $2,103, or 56 percent).

In Portland, just over one­half of the earnings impact resulted from job finding (increases in employment levels), about one­quarter came from increased employment duration (program group members finding jobs sooner and/or finding jobs that last longer than do control group members), and one­seventh resulted from increased earnings on the job (higher hourly wages, more hours of work per week, and/or more weeks of work in a quarter).6  In other words, better job quality (the combination of longer employment duration and higher earnings on the job) accounted for nearly 40 percent of the total impact on earnings.  This result was relatively uncommon for welfare­to­work programs of the 1980s and has not been found for all employment­focused programs of the 1990s.

  • The earnings gains began immediately after program entry and remained strong throughout the follow­up period.

The quarterly average earnings for the program and control groups are plotted in the upper panel of Figure 2.  The strong early impact is similar to that found for the three work first programs studied as part of the NEWWS Evaluation.  However, in contrast to the work first programs in Atlanta, Grand Rapids, and Riverside, the earnings gains in Portland did not diminish during the follow­up period (the impacts in the work first programs peaked between one and one and a half years after random assignment, and then grew smaller as increasing numbers of control group members got jobs).  In Portland, the quarterly impact increased throughout most of the two years.  Program group members earned an average of $1,155 in quarter 9, $309 (37 percent) more than the control group.

  • Program group members in Portland got better jobs, on average, than control group members:  the program substantially increased full­time employment and average hourly pay and increased the proportion of people with employer­provided health insurance.

Survey results provide further evidence that the program increased job quality.  At the end of two years, 40 percent of program group members were working at full­time jobs (providing at least 30 hours of work) compared to 27 percent of control group members, an increase of 13 percentage points.  Twenty­four percent of program group members had employer­provided health benefits at the end of two years compared to 14 percent of control group members, a 10 percentage point increase.  (These results include zeros for those not working at the end of two years.)

Figure 2: Average Quarterly Earnings and AFDC Payments for Program and Control Group Members.

Portland’s program achieved these gains by helping more people find work, but also by helping program group members find jobs at higher pay and with more benefits than control group members found on their own initiative.  Program group members employed at the end of two years averaged $7.34 per hour in wages, $0.86 above the average wage levels earned by employed control group members — the biggest gain of any program in the NEWWS Evaluation.  Employed program group members were also more likely to be working full time and receiving health benefits from their employers.  These results suggest that the program’s emphasis on waiting for "good" jobs paid off.

C.  Impacts on AFDC Receipt and Payments

  • The program produced substantial decreases in AFDC receipt and payments over the two­year follow­up period.  AFDC savings occurred immediately after program entry and continued throughout the follow­up period.

As shown in Table 2, over the two­year follow­up period, the program group received $1,196 less in AFDC payments than the control group, a 17 percent reduction.  This impact on AFDC is among the largest found in the 11 NEWWS Evaluation programs and is similar in magnitude to the decrease produced by the 1980s Riverside GAIN program ($1,399, or 14 percent).  Portland’s AFDC reduction resulted almost exclusively from program group members receiving AFDC for fewer months than control group members, as opposed to lower monthly grants for those on assistance.

As the lower panel of Figure 2 illustrates, the impact on AFDC payments remained large throughout the follow­up period.  By the end of the follow­up period, only 41 percent of program group members were receiving welfare compared to 53 percent of control group members, a decrease of 12 percentage points.

D.  Impacts for Subgroups and Three­Year Impacts for an Early Cohort

  • Portland’s program produced substantial impacts for a broad cross section of the caseload, both recipients with relatively few barriers to employment and those typically considered very hard to place.  Few programs have attained the level of consistency of impacts attained by the Portland program.

Table 3 shows cumulative two­year earnings and AFDC payment information for high school graduates and nongraduates, as well as the most disadvantaged sample members — as mentioned earlier, a subgroup of nongraduates who did not work for pay in the year prior to program entry and had received AFDC for more than two years prior to program entry.  Earnings and AFDC payments for control group members reveal how each subgroup would have fared without the program intervention.  Graduates in the control group had the highest average earnings and the lowest average AFDC payments, while the most disadvantaged control group members had the lowest earnings and highest AFDC payments.  Portland’s program substantially increased earnings and decreased AFDC payments for all three groups, and in each case earnings gains were larger than AFDC losses.7

Table 3: Impact on Earnings and AFDC for Subgroups.

Earnings and AFDC impacts were produced for all three subgroups during the first year of follow­up and remained strong through the end of the second year (quarterly trends by subgroup are not illustrated here).  However, impacts for graduates were most immediate, achieving statistical significance in the second quarter of follow­up.  Impacts for nongraduates and the most disadvantaged first became statistically significant, in the third and fourth quarters, respectively.  These differences likely reflect the fact that a higher proportion of graduates were first assigned to job search, which has been found to produce more immediate impacts than other activities.  Also, it is typically easier for graduates than nongraduates to find jobs (especially "good" jobs).

  • Impact results for an early cohort, for whom more follow­up is available, suggest that the strong employment, earnings, and AFDC impacts will persist and possibly grow during the third year of follow­up.

Three­year employment, earnings, and AFDC payment data are available for individuals who entered the program during the first year of random assignment.  For this early cohort, the program group earned an average of $1,217 more than the control group in the second year of follow­up and $1,402 more in the third year; the early cohort program group received an average of $737 less in AFDC payments than the control group in the second year of follow­up and $756 less in the third year.

E.  Impacts on Measured Income

  • Measured over the two­year follow­up period, average combined income from earnings, AFDC, and Food Stamps was not substantially higher for program group members than for control group members.  However, more positive results at the end of the follow­up period suggest that the program group may become financially better off in the future.

Over the two­year follow­up period, although earnings gains ($1,842) exceeded AFDC losses ($1,196) by $646, program group members also lost $456 in Food Stamp benefits.  The average two­year combined income from earnings, AFDC, and Food Stamp benefits (calculated using administrative records) for program group members was $16,886 compared to a combined income for control group members of $16,696.  The resulting net gain of $191 (a 1 percent increase) is not statistically significant.

In the second year of follow­up, the program moved a small portion of program group members out of poverty (measured using combined income, as defined above).  Twenty­one percent of program group members had a combined income at or above the federal poverty level compared to 17 percent of control group members.  However, the program also moved a small portion of program group members below 50 percent of the poverty level (33 percent of program group members had a combined income below 50 percent of the poverty level compared to 31 percent of control group members).

Program group/control group differences in combined income grew larger over time and first achieved statistical significance at the end of two years; in the last quarter of follow­up, program group members’ average combined income from earnings, AFDC, and Food Stamps totaled $2,051, $80 higher than the average combined income for control group members.  The analysis also draws on client survey data that include a much wider range of sources for estimating income, including regular or odd jobs, AFDC, Food Stamps, Supplemental Security Income, unemployment insurance, and child support (not including Earned Income Tax Credit [EITC] receipt or other tax credits available to low­income families in Oregon).  These data show that average individual and household income in the last month of follow­up was higher for program group members than for control group members, although the increases are not statistically significant.  Similar impacts were found when average EITC receipt and out­of­pocket child care payments were included to estimate total net individual and household income.

The increase in income measured at the end of the two years suggests that program group income may be higher than control group income in the third year of follow­up.  Three­year findings for the early cohort offer additional evidence:  for the early cohort, the impact on combined income from earnings, AFDC, and Food Stamps (calculated using administrative records) in the third year of follow­up ($369) surpassed that of the second year ($215 and not statistically significant).

F.  Impacts on Total Health Insurance Coverage

  • The program’s success in moving large numbers of people off welfare and into the labor market may have had an unintended negative consequence:  although the program increased the proportion of people with employer­provided health insurance at the end of the two­year follow­up period, some people who left AFDC (and automatic Medicaid coverage) for work did not find alternative sources of health insurance.  Overall, program group members and their children incurred a small, not statistically significant, reduction in health insurance coverage.

At random assignment, all program and control group members had health care coverage because they were receiving AFDC and thus were automatically covered under Medicaid.  Two years after program entry, coverage rates had decreased as some people had left welfare and did not replace their Medicaid coverage with coverage from employers or other sources.  At the end of the follow­up period, 81 percent of program group members and their children had health care coverage from some source compared to 86 percent of control group members and their children.  This 5 percentage point difference is not statistically significant, but is just beyond the statistical significance benchmark applied to the other impacts in this report.

The decrease was generated by those who left AFDC (and automatic Medicaid coverage) for work.  As mentioned above, the program increased the proportion of people with employer­provided health coverage, but some people in the program group moved into jobs that did not provide health insurance.  Some received coverage from another source, such as Transitional Medicaid or the Oregon Health Plan (the statewide initiative that offers health care coverage for low­income families).  However, some people found jobs that did not provide health insurance and did not obtain alternative coverage.