Since PRWORA established TANF in 1996 as the main federally funded program for cash assistance to needy families, the number of TANF recipients has declined dramatically. Approximately 73 percent of TANF leavers experience unemployment within three years of their exit. Between 18 and 43 percent of newly unemployed TANF leavers apply for UI benefits.(1)
Among TANF leavers applying for UI, more than 90 percent had sufficient prior earnings to qualify for UI benefits in Florida, Michigan, and Texas. In Ohio a strict employment requirement results in monetary eligibility rates of about 60 percent.
For TANF leavers who apply for UI, between 31 and 47 percent qualify for UI based on the circumstances of their job separation. Among UI applicants, TANF leavers had much higher rates of voluntary quits and discharges for cause than did other UI applicants. Among TANF leavers who apply for UI, between 30 and 65 percent ultimately receive benefits. The rate of UI receipt among TANF leavers increases with the time since TANF exit that application for benefits occurs. TANF leavers who apply for UI in the first year after exit have lower beneficiary rates than those who apply in the second or third year after TANF exit. Longer employment after TANF exit means higher earnings to qualify for UI.
Among TANF leavers who become unemployed and apply for UI, receipt of UI benefits reduces the rate of return to TANF. Across all cohorts, the mean rate of return to TANF among UI applicants who do not become UI beneficiaries is 52.6 percent and is the highest among TANF leaver groups. Rates of return to TANF by UI beneficiaries (mean 41.2 percent) and TANF leavers who do not apply for UI after becoming unemployed (mean 41.8 percent) are both significantly lower (Table 14). Pooling data across states on samples of TANF leavers who become unemployed, UI benefit receipt was associated with a reduction in the mean rate of return to TANF of 11.4 percentage points or about 22 percent from the 52.6 percent mean rate of TANF return to TANF among UI applicants who do not receive benefits.
Among TANF leavers who experience unemployment, those who qualify for and draw UI benefits receive income replacement at rates much higher than the income support provided by TANF. Across the analysis cohorts, the ratio of UI-to-TANF ranges from 2.0 to 4.6 with a mean of about 3.6 across all cohorts. While UI receipt reduces the rate of return to TANF, controlling for observable characteristics, higher benefit levels of UI relative to TANF have only a modest association with a reduction in rate of return to TANF. Nonetheless, the example of Ohio merits further investigation. The ratio of monthly UI to monthly TANF is much lower in Ohio. While the observed rate of return to TANF in Ohio is no higher than the other states, the rate of initial exit from TANF appears to be lower. We have identified the weeks of work component of the Ohio UI monetary eligibility test as the main cause of lower UI eligibility rates, the lower relative generosity of UI-to-TANF also merits investigation as a factor influencing movement to self-sufficiency.
The numbers of TANF recipients declined since 1996 with rates of decline faster before the year 2000 than after. Counts of UI recipients tended to rise in the quarters leading up to the start of 2002 then gradually declined.(2) There is no identifiable link between aggregate declines in TANF recipients and trends in total UI recipients at the state level. The numbers of TANF leavers who are UI beneficiaries has remained steady in the years since 1996. Over that period, the share of UI beneficiaries who lost high paying jobs has increased, meaning that the share of all UI beneficiaries who were TANF recipients has declined.
Aggregate analysis may not be sufficient to understand fully if a trend toward declining numbers of TANF recipients was reinforced by the availability of UI benefits. The person-level analysis identifies an important role for UI in supporting TANF leavers. The significantly larger scale of the UI program makes it difficult to establish a clear statistical relationship between total TANF caseloads and numbers of UI beneficiaries at the aggregate level.
(1) Application rates among TANF leavers may be influenced by state rules requiring UI application to re-qualify for TANF cash assistance.
(2) The UI counts include all beneficiaries in the states, and are not limited to TANF leavers.