UI as a Safety Net for Former TANF Recipients. Employment and earnings before and after TANF exit

03/01/2008

Employment as a route to self-sufficiency is the emphasis of the PRWORA reforms. Employment patterns in the cohorts analyzed indicate that the great majority of TANF leavers have customary attachment to the workforce which is observed to increase following TANF exit.By definition, persons in our TANF exit cohorts must be working either in the quarter of TANF exit or the quarter immediately thereafter. For these cohorts, observed employment rates are usually highest in the quarter of exit, and are typically higher after exit than before. What is surprising is just how high employment rates are in the four years preceding TANF exit.

Employment rates are summarized in Table 5 at annual intervals for up to 4 years (16 calendar quarters) before and after the quarter of TANF exit (also see Figures 4a, 4b, and 4c). The table also lists the employment rates in the quarters immediately preceding and following the quarter of TANF exit. Employment rates in the quarter of TANF exit exceed 85 percent for nearly all cohorts.

 

Table 5.
Employment Rates (percent) in Calendar Quarters Before and After Quarter of TANF Exit
  1997 Cohorts 2000 Cohorts 2001 Cohorts 2003
Texas
All
Cohorts
Florida Texas Florida Michigan Ohio Texas Florida Michigan Ohio Texas
Qtr Relative to Exit
-16 36.2   40.8   39.1 40.2 48.4   45.9 44.3 50.3 43.0
-12 41.2   49.6 41.2 44.8 46.3 56.3 56.8 52.8 49.7 55.0 48.9
-8 45.3 45.4 57.5 57.5 52.0 50.2 61.9 62.9 59.3 52.9 54.1 52.9
-4 50.5 45.3 59.0 60.8 57.2 47.7 60.5 63.1 61.6 50.8 47.5 53.3
-1 76.3 86.5 73.9 80.9 76.0 86.0 75.6 79.9 72.8 87.0 83.8 80.9
Exit Quarter 86.6 88.2 85.8 88.8 88.1 85.7 87.0 87.8 86.7 84.9 82.9 86.6
1 88.3 77.3 86.6 84.0 85.0 74.1 84.9 83.1 83.5 72.9 70.1 79.9
4 79.1 69.5 73.1 66.8 67.4 64.1 70.7 67.4 66.0 62.9 62.1 67.8
8 74.2 67.2 66.7 60.8 61.0 58.3 63.3 59.9 61.5 57.3 60.5 63.0
12 73.2 65.3 61.1 56.3 58.0 54.5   57.5   56.1 59.5 60.7
16 68.3     54.0   53.8           59.0
 
Sample Size 51,276 94,662 29,873 42,883 59,881 50,229 23,706 36,934 50,823 55,259 60,901 556,427

Texas presents a notably distinct pattern in employment rates that is clearly visible in Figures 4a, 4b, and 4c. Peak employment rates tend to occur in the quarter before TANF exit, then decline thereafter. This pattern is most likely a result of the unique Texas earnings disregard rules for TANF recipients. As summarized in Table 1, in the first 4 months of receiving TANF cash assistance, up to $1,593 dollars can be earned before benefits fall to zero. In the fifth month, the breakeven level of earnings drops to $333. This emerges as a strong incentive for TANF exit.

Across all TANF leaver cohorts, employment rates gradually rise in the years preceding TANF exit, and then diminish in the years afterward. Part of the observed pattern in earlier years may be due to the rather young average age of persons in the analysis cohorts. The stronger labor force attachment observed after TANF exit may be due to maturation and accumulated work experience. However, the 1996 PRWORA reforms also introduced strong incentives for staying employed and off TANF.

One year after TANF exit, more than 60 percent are employed in each of the cohorts and two years later more than 57 percent showed employment income. Typically, at least half were working a year before TANF exit while at least 45 percent worked two years before leaving TANF.

Figure 4a.
Percentage of the 1997 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Figure 4. Percentage of the 1997 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit. See text for explanation of chart.

Figure 4b.
Percentage of the 2000 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Figure 4b. Percentage of the 2000 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit. See text for explanation.

Figure 4c.
Percentage of the 2001 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit

Figure 4c. Percentage of the 2001 TANF Leaver Cohorts Who Are Employed in the Indicated Quarter Relative to TANF Exit. See text for explanation.

Average annual earnings were uniformly higher in years after TANF exit than before. Earnings summarized in Table 6 and Figures 5a, 5b, and 5c are reported in current dollars — not adjusted for inflation. Wage inflation averaged less than 3 percent per year from 1997 to 2003.(2) In that period earnings increases in the TANF leaver cohorts averaged more than double the rate of wage inflation. The increase in observed earnings most likely resulted from an increase in hours worked per year after TANF exit compared to before.

As Table 6 shows for all cohorts, mean annual earnings among working TANF leavers continue to rise in the four years observed after the TANF exit quarter. However, mean earnings for each year after TANF exit in all cohorts are at rates near poverty thresholds for three-person households.(3)

 

Table 6.
Earnings (in current dollars, not adjusted for inflation) Before and After TANF Exit
  1997 Cohorts 2000 Cohorts 2001 Cohorts 2003
Texas
All
Cohorts
Florida Texas Florida Michigan Ohio Texas Florida Michigan Ohio Texas
Year Relative to Exit
-4 8,101   9,098   7,769 8,010 10,183   8,852 8,417 10,180 8,721
-3 8,151   9,633 8,205 8,426 8,376 10,763 9,662 9,546 8,734 10,559 9,108
-2 8,087 7,337 9,951 8,748 8,728 8,277 11,063 10,085 9,384 8,776 9,906 8,842
-1 7,456 6,544 8,527 8,213 7,709 7,248 9,188 8,627 8,103 7,581 7,808 7,687
Exit Quarter
+1 10,747 10,295 11,986 11,612 10,979 11,018 15,144 11,965 11,079 11,049 11,522 11,266
+2 12,067 11,699 13,045 12,973 12,230 11,986 20,140 13,376 12,464 12,020 12,919 12,693
+3 13,262 13,137 13,800 13,957 13,268 12,778   14,324   12,856 14,421 13,464
+4 14,110     14,858 13,828 13,534           14,043
 
Sample Size 51,276 94,662 29,873 42,883 59,881 50,229 23,706 36,934 50,823 55,259 60,901 556,427

Figure 5a.
Annual Earnings of the 1997 TANF Leaver Cohorts by Year Relative to TANF Exit

Figure 5a. Annual Earnings of the 1997 TANF Leaver Cohorts by Year Relative to TANF Exit. See text for explanation.

Figure 5b.
Annual Earnings of the 2000 TANF Leaver Cohorts by Year Relative to TANF Exit

Figure 5b. Annual Earnings of the 2000 TANF Leaver Cohorts by Year Relative to TANF Exit. See text for explanation.

Figure 5c.
Annual Earnings of the 2001 TANF Leaver Cohorts by Year Relative to TANF Exit

Figure 5c. Annual Earnings of the 2001 TANF Leaver Cohorts by Year Relative to TANF Exit. See text for explanation.

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