Moving People from Welfare to Work. Lessons from the National Evaluation of Welfare-to-Work Strategies.. Net Impacts: How effective are different types of welfare-to-work programs?

07/01/2002

  • All 11 NEWWS programs increased single parents' employment and earnings and decreased their welfare receipt and payments relative to the levels found in the programs' absence.

As noted earlier, over the five-year follow-up period, approximately three-quarters of control group members in NEWWS found jobs, and more than half left the welfare rolls. Nearly all the programs improved on these statistics, causing people to work during more quarters of the follow-up period and to earn more than they would have in the absence of a program (for a discussion and illustration of the components that make up earnings impacts, see Box 2). Moreover, all the programs decreased the average number of months that people received welfare and the average number of welfare dollars they received over the five years.

The program and control group earnings levels that form the basis of the earnings impacts are shown in Figure 4. In the figure, the two groups' five-year earnings are split by program type. As can be seen, average earnings for program group members (the black bars) in all four types of programs were higher than those for control group members (the white bars).

Most of the programs increased earnings during the second and third years of the follow-up period. Their effects generally diminished, however, during the fourth and fifth years and were not statistically significant for most programs by the very end of the fifth year. Only the Portland and Riverside LFA programs continued to produce statistically significant earnings impacts at the end of the fifth year. It should be noted that, in a few sites, a small proportion of control group members (a subset of those on welfare) in a few programs received program services toward the end of the five-year follow-up period.5 Extensive analyses indicated that the effect of this on the impacts in the fourth and fifth years was probably small. Most of the programs' effects on earnings would likely have diminished in the later years even if no control group members had been exposed to the programs late in the study.

Notably, only a minority of program group members experienced stable employment over the five years. As an example, from 60 percent to 80 percent of program group members were unemployed for at least one quarter during the fifth year, and this situation was only slightly better than that of control group members in the same year. In addition, even after five years, most people were earning relatively low wages -- between $7 and $8 per hour -- and 70 percent to 85 percent earned less than $10,000 in the fifth year, outcomes that were not much different from those for the control groups.

The average welfare payments received by the program and control groups over the five years, which form the basis of the welfare impacts, are shown in Figure 5. Again, the results are split by program type. In all four types of programs, average welfare payments received by program group members (the black bars) were lower than those for control group members (the white bars). Most of the programs reduced five-year welfare payments relative to control group levels by 15 percent or more. All the programs also reduced the number of months that people received welfare, by 2 months to 6 months over the five-year (60-month) follow-up period. The welfare impacts were more persistent than the earnings impacts: Whereas only a few programs continued to affect earnings in the fifth year, most of the programs continued to generate welfare savings at the end of the same year.

Over five years, program group members in all 11 programs spent less time on food stamps and received smaller average food stamp payments than did control group members in the same sites. Food stamp impacts were generally smaller than welfare payment impacts, however, because some program group members continued to receive food stamps after they left welfare (as they were entitled to, provided that their earnings did not exceed a certain cutoff).

Box 2
What Makes Up Impacts on Earnings?

A welfare-to-work program's impacts on earnings are likely to consist of several components. First, a program can result in more people becoming employed than would normally have been the case (an impact on job finding). Second, among people who would have become employed in any case, a program can shorten the time that passes until they find a job (an impact on time to first job), lengthen the time they stay in a job (an impact on employment stability), or raise wage rates (an impact on earnings on the job).

The graph below shows the relative contributions of job finding, time to first job, employment stability, and earnings on the job to the five-year earnings impacts of four of the NEWWS programs (the black bars). Each impact was made up of a different configuration of these four contributing factors.

The graph shows the relative contributions of job finding, time to first job, employment stability, and earnings on the job to the five-year earnings impacts of four of the NEWWS programs.

SOURCE: Freeman,2000, upadte to reflect data collected over five years.

 


Figure 4.
Earnings over Five Years, by Program Type:
Program Group Members Earned More than Control Group Members

Earnings over Five Years, by Program Type: Program Group Members Earned More than Control Group Members.

SOURCE: Hamilton et al., 2001

NOTES: Earnings for the program and control groups were averaged across programs within each program type.
The Riverside LFA program results include both graudates and nongraduates.
Asterisks(*) denote statistical signficance levels: * = 10 percent; ** = 5 percent; *** = 1 percent.


Figure 5.
Welfare Payments over Five years, by Program Type:
Program Group Received Less Welfare than Control Group Members

Welfare Payments over Five years, by Program Type:  Program Group Received Less Welfare than Control Group Members.

SOURCE: Hamilton et al.,,2001

NOTES: Welfare payments for the program and control groups were averaged across programs within each program type.
The Riverside LFA program results include both graudates and nongraduates.
Asterisks(*) denote statistical signficance levels: * = 10 percent; ** = 5 percent; *** = 1 percent.


  • At best, the NEWWS programs led to only small increases in the low levels of income that would be expected in the absence of the programs, and some of them actually decreased income.

In NEWWS, income was calculated as the sum of earnings, welfare payments, food stamps, and the EIC minus payroll taxes. Although the programs helped people become more self-sufficient in that a larger share of their income came from earnings as opposed to welfare or food stamps, in dollar terms the decreases in welfare and food stamps (and increases in payroll taxes) largely offset the increases in earnings and the EIC. In three programs (including Portland), the five-year income of program group members was from 3 percent to 5 percent higher than that of control group members, but these impacts were slightly shy of being statistically significant by the standard used in the evaluation. Four programs had negative impacts on five-year income, decreasing it by 2 percent to 6 percent (these four impacts were all within or just slightly outside the statistical significance range). The programs that had positive impacts and those that had negative impacts range included both employment- and education-focused programs. Only one of the 11 NEWWS programs affected income in the fifth year.

Failure to increase income is not particular to the welfare-to-work programs studied in NEWWS. Results from most programs operated in the 1980s and early 1990s were similar: Even when programs increased earnings, they seldom increased income much. These findings underscore the limited ability of traditional welfare-to-work programs to improve families' material well-being.