Between 1994 and 1999, the welfare caseload fell by almost 50 percent. In other words, about two million fewer families were receiving welfare in 1999 than five years earlier. To some observers, this trend is evidence that welfare reform has been a success. To others, it raises a host of new questions and concerns and suggests that the 1996 law was only the first step in the process of reforming welfare.
One of the primary concerns has been about families who have left welfare. Who are these families, and how are they faring? Are most of them working? If so, are they working at jobs that pay enough to lift them out of poverty, or have many of them fallen further into poverty since leaving welfare?
The dramatic fall in the number of families receiving welfare has also raised concerns about the changing nature of the caseload. One key question is whether the welfare caseload has come to comprise primarily the hardest-to-employ recipients. Who are the families who are still on welfare? Why have they not left welfare when so many other families have? Do they face especially severe circumstances that may prevent them from going to work?
A fair amount of research has been conducted over the past several years to address these questions, although most of it focuses only on people who have left welfare (Office of the Assistant Secretary for Planning and Evaluation, 2001; Brauner and Loprest, 1999). In general, the research shows that most leavers are working. There is little evidence that many leavers have fallen further into poverty, but most are still poor. Much of the research on leavers focuses on people who “ever left” welfare at some point in the recent past, which includes a fair number who may have returned to welfare fairly quickly. In contrast, the research on the caseload finds that people who are still on welfare do, on average, face more barriers to employment than those who have left. In this case, the caseload, or “stayers,” is defined as all people who were receiving welfare at a point in time, regardless of whether they recently started receiving benefits or will receive benefits for only a few months.
This report looks at the changing nature of the caseload from a slightly different perspective, by examining the characteristics and circumstances of three groups: people who leave welfare and stay off for at least a year (leavers), people who stay on welfare persistently (stayers), and people who intermittently cycle on and off the rolls (cyclers). Many of the “leavers” in other studies returned to welfare fairly quickly. Would the conclusions about who leavers are and how they fare differ if the focus were on a group that left welfare and stayed off? Similarly, persistent stayers may be a more policy-relevant group than the entire caseload at a point in time, since they are the ones who will be left on the rolls in the long run. There has also been little research on the people who cycle on and off welfare.
This report uses a unique data set consisting of over 30,000 people who were targeted for a variety of welfare-to-work programs over the past decade. The programs were each evaluated using a random assignment design, in which some families were assigned into the new program being tested and others were assigned into the existing welfare system in the state at the time of the evaluation. The programs include three key components—mandatory participation in employment or education activities, enhanced financial incentives, and time limits—used alone and in combination. Together, they cover the range of policies that states now have adopted as part of their new welfare programs. By using data from these welfare-to-work programs and dividing the caseload into stayers, leavers, and cyclers, the following key questions can be addressed:
Leavers, stayers, and cyclers
- What are the characteristics and potential employment barriers of people who leave welfare long term? How do they differ from people who stay persistently on welfare and from people who cycle on and off?
What is the economic status of nonworking leavers relative to working leavers?
- What are the characteristics and potential employment barriers of people who leave welfare without apparent work? How do nonworking leavers compare with leavers who work?
What is the economic status of nonworking leavers relative to working leavers?
- Who are the people who stay on welfare persistently, despite being subject to a welfare-to-work program? Compared with people who stayed on welfare under the old system, are they more disadvantaged, and do they face more barriers to employment?
- Leavers differed from stayers in a variety of expected ways: They were older, more educated, and had fewer children than stayers. They also faced fewer barriers to employment; they were less likely to report child care problems and were more likely to have had recent work experience.
Cyclers looked very similar to leavers in terms of demographic characteristics and, on average, faced fewer potential barriers to employment. Part of the reason for this finding is that many of the people who are defined as cyclers had only one or two very short spells of welfare during the observation period.
Although each of the groups had low incomes, leavers and cyclers had somewhat higher incomes than stayers and were much less likely to have income below the poverty line. However, leavers and cyclers were more likely to report facing material hardships, particularly problems in accessing health care.
The results were consistent across each of the welfare-to-work programs. The time-limit programs, however, had two types of leavers: people who left welfarebeforereaching their time limit and people who left welfare because of reaching their time limit. In one program, time-limit leavers were relatively more disadvantaged and had lower incomes than other leavers. This pattern did not occur in the other time-limit program, because extensions were granted to families who had reached their time limit and did not have sufficient earnings. Thus, the way in which the time limit is administered affects who leaves welfare and how they fare.
- About one-third of welfare leavers in these programs did not work in the months immediately following their welfare exit. Compared with people who did work, nonworkers had lower education levels, reported more barriers to employment, and were much less likely to have had recent work experience.
At the time of the follow-up surveys, nonworking leavers had similar incomes as working leavers. Although fewer nonworkers reported income from earnings, more of them had income from other sources, and more had returned to welfare and Food Stamps. There is little evidence that many nonworking leavers left welfare for marriage or cohabitation.
The results were consistent across each of the welfare-to-work programs. In the programs with the most generous financial incentives, however, there were significant income differences between nonworkers and workers, largely because of the relatively high incomes of the working leavers. The reason for this difference is the generous earned income disregards, under which recipients could earn higher amounts before becoming ineligible for benefits.
- With respect to demographic characteristics, stayers in each of the welfare-to-work programs (or the program group) looked fairly similar to stayers under the traditional AFDC system (or the control group). Stayers in the program groups faced fewer potential employment barriers than stayers in the control groups, although these differences were fairly small.
In the programs with the most generous financial incentives, the program and control groups differed in two ways. First, stayers in the program groups were more likely to have worked while on welfare, because the earnings disregards allowed more of them to work and still qualify for benefits. Second, because stayers in the program groups were more likely to have worked and because they received more generous welfare benefits when they did work, they had higher incomes than stayers in the control groups.