Studies of Welfare Populations: Data Collection and Research Issues. Employment, Earnings and Income Status After Leaving

06/01/2002

A major goal of welfare reform was to increase employment and earnings of the low income and welfare populations. In this section, we examine common employment and earnings outcomes reported in studies of welfare leavers and stratify these outcomes by the past welfare receipt and past employment histories of the caseload. Employment rates, earnings, income, and a measure of dependency are reported in this section.

Employment Rates

The employment rates of welfare leavers and stayers are reported in Table 13-12, first on a quarter-by-quarter basis and overall for up to five quarters after each case left welfare, or since July 1996 for stayers. The table shows that two-thirds of the leavers were employed in the quarter in which they exited welfare while only one-third of stayers were employed in the third quarter of July 1996. Employment rates of leavers fell slightly after exit, but remained fairly consistent at just over 60 percent. The employment rates of stayers, however, grew over time (except in the third quarter after exit), until nearly half the stayers were employed in the fifth quarter after the exit period. The last column shows the percentage who were ever employed since leaving. Overall, of those who stayed on welfare, 65 percent of them were employed for at least one quarter. This is in comparison to 77 percent of leavers who were ever employed after leaving welfare.

TABLE 13-12
Quarterly and Overall Employment Rates of Welfare Leavers and Stayers
  % Who Left Welfare Percent Employed by Quarter After Initial Exit (or since 3rd quarter 1996 for stayers)
Exit Quarter 1st Quarter Postexit 2nd Quarter Postexit 3rd Quarter Postexit 4th Quarter Postexit 5th Quarter PostExit Ever Employed
S L S L S L S L S L S L S L
Overall 48.1 33.3 65.6 37.9 63.0 43.5 61.2 41.3 61.1 45.3 61.4 49.3 61.3 64.8 76.6
By past welfare receipt history (7/89 to 7/95)
Short-termer 61.1 34.3 63.6 40.3 60.9 45.0 59.6 43.3 59.7 47.3 59.6 51.5 58.7 67.0 74.4
Long-termer 37.4 32.2 65.8 36.2 63.6 42.2 61.6 39.9 60.9 44.0 61.2 48.0 61.7 63.1 76.7
Cycler 62.2 38.4 69.2 43.5 66.1 48.2 64.1 46.5 64.5 49.0 65.7 53.1 65.9 70.5 81.3
By past earnings history: % of quarters with earnings (1/89 to 7/95)
Never worked 34.2 14.5 31.0 18.6 29.7 22.7 29.1 23.1 29.9 26.2 30.1 29.9 30.2 40.0 41.6
0 < x <= 25% 42.6 31.3 58.6 35.0 54.4 41.4 52.9 38.5 52.1 42.4 52.4 47.0 52.3 65.4 70.9
25 < x <= 50% 52.9 44.4 72.8 50.7 70.4 56.0 68.3 52.1 68.4 57.6 68.8 61.4 68.6 78.3 85.3
50 < x <= 75% 60.8 49.7 79.8 54.8 77.8 61.3 75.5 60.0 75.1 63.7 76.0 66.9 75.6 82.4 89.7
More than 75% 72.5 65.7 88.9 70.4 87.5 76.2 85.7 73.9 85.8 75.8 85.0 79.7 85.3 91.4 95.0

Cancian et al. (1999) found that 82 percent of leavers were ever employed within a year after leaving and found quarter-by-quarter employment rates of between 72 and 75 percent.(10) Acs and Loprest found that employment rates in the first quarter after exit across 11 welfare leaver studies ranged between 47 and 64 percent. They also found that between 62 and 75 percent ever worked after leaving welfare, although the 11 studies reviewed followed the leavers for different lengths of time.

That the employment rates of leavers do not rise over time may be a point of concern if the 40 percent who are not working are looking for work and not finding it, or if all leavers are having a hard time keeping jobs and are cycling between employment and unemployment. The 40 percent who are not working also could be relying on the income of a partner or spouse and not actively looking for work or not working for other reasons that cannot be uncovered with these data.

Employment rates by work history status vary widely. Those with the most work experience are nearly three times as likely to be employed as those with no work experience. A clear pattern between work experience and employment status emerges; those with more work experience are more likely to be employed. This is true for both leavers and stayers and in each quarter after the exit period. It is also the case that the group with no work experience is the least likely to work after exit. This group is disproportionately composed of legal immigrants, who may be less likely to work in jobs covered by the UI system, and cases without an eligible adult. When no eligible adults are in the AFDC case, reported earnings are those of an adult who lives with the child but who is not part of the AFDC case and who typically has been either sanctioned from AFDC or has a disability and receives SSI. Overall, although only about 40 percent of those who have never worked prior to the exit period were ever employed after the exit period, employment in the exit period was nearly universal for those with the most work experience, as 95 percent of leavers and 91 percent of stayers were ever employed.

Cancian et al. (1999) stratify the percentage of quarters worked in the postexit period by work experience in the 2 years prior to the exit period and also find wide variations in employment. These employment rates vary as expected; that is, those who worked the least in the preexit period also worked the least in the postexit period and those who worked the most in the preexit period worked the most in the postexit period. Those who had not worked in the 2 years prior to exit worked 56 percent of the quarters in the postexit period and those who worked every quarter in the 2 years prior to exit worked 93 percent of the quarters in the postexit period. If prior work experience is a determinant of the likelihood a leaver finds a job (and it seems to be), then we would expect that a caseload composed of those with more work experience to have better employment rates after leaving than a caseload composed of those with little work experience. Results here suggest how widely those employment rates may vary.

Differences in employment rates by past welfare receipt history are not as wide. However, the differences are somewhat surprising. Cyclers consistently have the highest employment rates. Long-termers have the next highest employment rates, and short-termers have the lowest employment rates, although they are usually very near the rates of long-termers. It is not so surprising that cyclers have the highest employment rates, because this group moves on and off welfare more frequently and may have employment experience from the times off welfare. It is somewhat surprising that long-termers have higher employment rates than short-termers, since long-termers had the least employment experience, as reported in Table 13-6. However, these descriptive statistics do not account for age, which is probably positively associated with being a long-termer and with higher employment rates.

Although Cancian et al. (1999) only tracked welfare receipt prior to the exit period for 2 years, they found similar results. For leavers who returned to welfare (they did not report employment rates for all leavers), employment rates of those who had received AFDC for 7-18 months before the exit period, 65 percent were employed. This is relative to 62 percent of those who had only received AFDC for 6 months prior to the exit period, and 63 percent of those who had received AFDC for more than 18 months before the exit period. For continuous leavers, Cancian et al. (1999) found that those who had received AFDC for more than 18 months had employment rates of 73 percent, but that those who received welfare between zero and 18 months prior to the exit period all had similar employment rates at 76 percent.

Earnings

The success of former welfare recipients in staying off welfare also depends on how much they can earn while working. Table 13-13 shows mean and median quarterly earnings of welfare leavers and stayers over the first four quarters after exiting welfare, or since the beginning of the third quarter of 1996 for stayers. Overall, the mean quarterly earnings of leavers in the first year after exit was $1,642 and the median was $1,311.(11) This translates into roughly $6,000 per year (using the median), which is still considerably below the poverty line for a family consisting of a mother and two children, which was $12,278 in 1996 and $12,641 in 1995. The mean quarterly earnings of stayers is $786 and the median is $199.

TABLE 13-13
Mean and Median Quarterly Earnings Over the Year Following Exit
  Mean and Median Quarterly Earnings in theYear After Exiting Welfare(or since July 1996 for stayers)
Stayers All Leavers
Overall
Mean 786.1 1,642.1
Median 199.0 1,311.0
By past welfare receipt history (7/89 to 7/95)
Short-termer    
Mean 870.8 1,616.2
Median 284.8 1,266.0
Long-termer
Mean 741.0 1,657.0
Median 157.6 1,330.0
Cycler    
Mean 889.5 1,662.9
Median 325.7 1,373.5
By past earnings history: Percent of quarters with earnings (1/89 to 7/95)
Never worked
Mean 420.9 777.2
Median 0 0
0 < x <= 25%
Mean 673.1 1,293.1
Median 148.7 743.5
25 < x <= 50%
Mean 1,010.7 1,796.5
Median 577.2 1,565.1
50 < x <= 75%
Mean 1,219.6 2,086.2
Median 853.8 2,018.2
More than 75% of qtrs
Mean 1,783.7 2,656.8
Median 1,552.8 2,537.9

Breaking the caseload down by past welfare receipt, we see only small differences in earnings across short-termers, long-termers, and cyclers. Cyclers have the highest mean and median earnings ($1,663 for the mean and $1,374 for the median), which is in contrast to findings from survey data in Moffitt (this volume: Chapter 14), which found that cyclers had the lowest earnings off welfare compared to short-term and long-term welfare recipients. As Table 13-13 shows, long-termers earn nearly as much as cyclers on average ($1,657 for the mean and $1,330 for the median). Short-termers have the lowest earnings ($1,616 for the mean and $1,266 for the median). Stevens (2000) found that short-termers had the highest earnings over the decade for which earnings were observed, long-termers had the lowest earnings off welfare, and cyclers had earnings between the two groups. Stevens also notes that all three types of recipients have earnings that are well below a reasonable self-sufficiency level.

Interestingly, of those who stay on welfare, long-termers have the lowest quarterly earnings of the three groups. The long-termers who leave welfare may be decidedly better off than the long-termers who stay on welfare in terms of employment and earnings potential.

Breaking the caseload down by past work experience again shows a clear distinction in earnings between those with no work experience and those with much work experience. For both leavers and stayers, those with no work experience had the lowest earnings. In fact, most were not working or at least not in jobs covered by UI, as the median earnings of this group are zero. On the other hand, those leavers who worked more than 75 percent of the quarters prior to the exit period had fairly high earnings ($2,657 for the mean and $2,538 for the median). In general, those with more experience had higher quarterly earnings.

Table 13-14 shows the same statistics, except that quarterly earnings are averaged only over quarters in which earnings were reported in the UI system (missing quarters were not counted as zeros). The mean quarterly earnings of leavers over quarters in which they were employed are $2,387 and the median was $2,226. This translates to around $9,500 per year, which is still below the poverty threshold for a family of three. The earnings of stayers are also much higher when we exclude those who do not have UI earnings reports. Overall, counting only the quarters in which stayers were employed, the mean quarterly earnings were $1,678 and the median was $1,450.

TABLE 13-14
Mean and Median Quarterly Earnings Over the Year Following Exit Only in Quarters When Leaver Worked
  Mean and Median quarterly earnings in the year after exiting welfare (or since July 1996 for stayers).
Stayers All Leavers
Overall
Mean 1,678.1 2,386.5
Median 1,449.8 2,225.8
By past welfare receipt history (7/89 to 7/95)    
Short-termer    
Mean 1,803.3 2,414.0
Median 1,559.2 2,244.4
Long-termer    
Mean 1,628.0 2,402.8
Median 1,411.8 2,271.0
Cycler    
Mean 1,701.7 2,295.2
Median 1,413.9 2,096.6
By past earnings history: Percent of quarters with earnings (1/89 to 7/95)
Never worked
Mean 1,611.3 2,175.3
Median 1,386.4 1,977.8
0 < x <= 25%
Mean 1,484.7 2,100.7
Median 1,240.0 1,880.6
25 < x <= 50%
Mean 1,733.0 2,348.5
Median 1,515.4 2,191.5
50 < x <= 75%
Mean 1,930.3 2,548.6
Median 1,713.4 2,396.8
More than 75% of qtrs
Mean 2,350.3 2,966.1
Median 2,109.3 2,782.3

Cancian et al. (1999) also report median earnings across quarters worked after leaving welfare. Overall they find a median for all leavers of $2,417, which is higher than the median found here.(12) Findings from 11 leaver studies show mean quarterly earnings over the first year of between $2,300 and $3,600 (calculations based on data presented in Acs and Loprest, this volume: Chapter 12). Results from Wisconsin reported in this study are in the lower range of those found in Acs and Loprest. It is not clear if differences are due to regional variations in earnings, caseload composition differences across studies, or methodological differences.

Counting only quarters in which leavers worked, short-termers had the highest mean quarterly earnings ($2,414 for short-termers compared to $2,403 for long-termers and $2,295 for cyclers), but long-termers had the highest median quarterly earnings ($2,271 compared to $2,244 for short-termers and $2,097 for cyclers). The differences in earnings between long-termers and short-termers in quarters during which they worked (Table 13-14) are smaller than the differences across all quarters when disappearers are included (Table 13-13). Cancian et al. (1999) break out median quarterly earnings by the number of months of welfare receipt for 2 years prior to the exit period. In doing so, they find that those who had more months of benefit receipt in the preexit period had the highest median quarterly earnings. We find a similar result for median quarterly earnings of welfare leavers, but little difference between short-termers and long-termers. For mean quarterly earnings, short-termers had greater earnings. Earnings across past work history again show that those with more work experience have higher earnings. However, those who had never worked prior to the exit period had slightly higher earnings than those who had worked less than 25 percent of the time (a median of $1,978 for the never worked category compared to $1,881 for the more than zero but less than 25 percent category). Again, this group of leavers who have never worked seems to be an odd collection, as they have slightly higher earnings than other leavers who have a bit more work experience. Otherwise, the table shows that for both leavers and stayers, work experience before the exit period is associated with higher earnings after the exit period, and the differences are substantial.(13)

Income

Table 13-15 shows total income calculated on a quarterly basis as the sum of earnings, AFDC/TANF benefits, and food stamps benefits for leavers and stayers. This does not include any income from other household members, any income unreported to the UI system, nor any nonearned income. Mean and median quarterly income for leavers and stayers across past welfare and work receipt are examined in this table.

TABLE 13-15
Mean and Median Quarterly Income Over the Year Following Exit
(income = AFDC benefits + food stamps + earnings in first four quarters after exit)
  Mean and median quarterly income in the year after exiting welfare (or since July 1996 for stayers).
Stayers Leavers
Overall
Mean 2,301.5 2,003.6
Median 2,184.6 1,864.0
By past welfare receipt history (7/89 to 7/95)
Short termer
Mean 2,224.9 1,894.8
Median 2,072.8 1,720.8
Long termer
Mean 2,339.7 2,088.7
Median 2,240.3 1,988.2
Cycler
Mean 2,224.5 2,037.1
Median 2,070.7 1,903.0
By past earnings history: Percent of quarters with earnings (1/89 to 7/95)
Never worked
Mean 2,062.4 1,119.1
Median 1,914.9 509.5
0 < x <= 25%
Mean 2,260.6 1,702.8
Median 2,176.7 1,434.8
25 < x <= 50%
Mean 2,433.9 2,170.4
Median 2,328.1 2,065.2
50 < x <= 75%
Mean 2,498.9 2,393.7
Median 2,343.7 2,391.2
More than 75% of qtrs
Mean 2,958.5 2,963.6
Median 2,728.8 2,918.1

Overall, stayers had higher income levels than leavers in the first year following exit. The median overall income of stayers was $2,185 compared to $1,864 for leavers, which is a 17-percent difference. Although stayers had lower earnings than leavers, stayers were more likely to receive AFDC/TANF and food stamps benefits than leavers. These benefits appear to be making the difference in overall income levels.

Long-termers had the highest median incomes over all leavers ($1,988). Median incomes of cyclers ($1,903) were only slightly lower than incomes of long-termers. Short-termers had the lowest overall median income ($1,721). Long-termers had higher average earnings than short-termers and also were slightly more likely to return to welfare. This probably explains the even wider difference in total incomes (as compared to differences in earnings) between these groups. Moffitt and Roff (2000) found that dependency leavers had lower household incomes than nondependency leavers, but that they received more income from child support and food stamps but less from earnings and income of other household members (data for this study were collected through surveys so measures of household income were collected).

The more work experience prior to the exit period, the higher the mean and median incomes of leavers and stayers were. Interestingly, leavers with the most work experience had higher overall mean and median incomes than stayers. This is the only subgroup for which leavers' incomes were higher than stayers' incomes. The earnings of this group of leavers were quite high and make up for the difference in benefit receipt of stayers with similar work experience.

Dependency

Table 13-16 attempts to measure dependency for leavers and stayers. The measure of dependency used in this case is the ratio of earnings to total income in the first year after leaving, or since July 1996 for stayers. Earnings over the year are summed and divided by total income (earnings + AFDC + food stamps) in the year to get an earnings-to-total-income ratio. Those with higher ratios are less dependent on government assistance.

Overall, the mean earnings-to-income ratio (ETI ratio) for leavers was nearly 70 percent compared to only 26 percent for stayers. This is a striking difference but not surprising given that stayers continued to receive benefits during the exit period, had lower overall earnings, and were more likely to receive food stamps throughout the year after the exit period. Looking at the subgroups of leavers by welfare receipt history, as expected, short-termers had the highest ETI ratios (73 percent) and long-termers have the lowest (66 percent), which is about a 10 percent difference. Cyclers are between long-termers and short-termers, with a mean ETI ratio of 70 percent.

TABLE 13-16
Dependency After Leaving Welfare: Mean Ratio of Earnings to Total Income in the First Year After Exit by Leaver Status
  Mean Ratio of Earnings to Income Over the First Year After Initial Exit (from 3rd quarter 1996 to 3rd quarter 1997 for stayers)
Stayers Leavers
Overall 0.26 (0.31) 0.69 (0.37)
By past welfare receipt history (7/89 to 7/95)
Short-termer 0.30 (0.33) 0.73 (0.36)
Long-termer 0.24 (0.29) 0.66 (0.38)
Cycler 0.31 (0.32) 0.70 (0.35)
By past earnings history: Percent of quarters with earnings (1/89 to 7/95)
Never worked 0.14 (0.25) 0.44 (0.44)
0 < x <= 25% 0.23 (0.29) 0.62 (0.39)
25 < x <= 50% 0.34 (0.31) 0.73 (0.34)
50 < x <= 75% 0.40 (0.32) 0.80 (0.29)
More than 75% of qtrs 0.52 (0.31) 0.85 (0.23)
Note: Earnings from UI wage records. Total income=earnings+TANF benefits+food stamps.
Standard deviations reported in parentheses.

ETI ratios vary significantly by past work experience. Again, those with the most work experience had higher ETI ratios (85 percent for those with the most work experience compared to 44 percent for those with no work experience). Also notable is the difference between leavers and stayers that had worked more than 75 percent of the quarters prior to the exit period. The difference in the ETI ratio of these two groups is very wide as only half of the incomes of the group of stayers with the most work experience came from earnings, while 85 percent of income from leavers with similar work experience came from earnings. Comparing stayers to leavers, only the group with no work experience had worse dependency ratios than even the group of stayers with the most work experience.

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