Welfare Reform, Success or Failure? It Worked

March 15, 2006

The following article has been republished with the permission of APHSA.

It has been 10 years since the welfare reform law was signed by President Clinton amid predictions of disaster from the left. Information reported by states, by the U.S. Census Bureau, and by researchers yields a coherent picture of the broad effects of the 1996 reforms.

Observational research conducted by Irene Lurie and her colleagues at the State University of New York shows that welfare case workers now consistently implement state policies designed to discourage families from relying on welfare by mandating employment-related activities and then by ensuring that clients participate in these activities. These changes constitute a revolution in social policy.

What has been the effect of these major changes? Welfare caseloads began declining in the spring of 1994 and picked up steam after the federal legislation was enacted in 1996. Between 1994 and 2004, the caseload declined about 60 percent, a decline that is without precedent. The percentage of U.S. children on welfare is now lower than it has been since at least 1970.

But are the mothers who leave (oravoid) welfare able to find work? More than 40 studies conducted by states since 1996 show that about 60 percent of the adults leaving welfare are employed at any given moment and that, over a period of several months, about 80 percent hold at least one job. Even more impressive, national data from the Census Bureau show that between 1993 and 2000, the percentage of low-income, single mothers with a job grew from 58 percent to nearly 75 percent, an increase of almost 30 percent. Moreover, employment among never-married mothers, the most disadvantaged and least-educated subgroup of single mothers, grew from 44 percent to 66 percent, an increase of 50 percent, over the same period. Again, these sweeping changes are unprecedented.

What about income? Census Bureau data show that in 1993, earnings accounted forabout 30 percent of the income of low-income mother-headed families while welfare payments accounted for nearly 55 percent. By 2000, this pattern had reversed: earnings had leaped by an astounding 136 percent to constitute almost 57 percent of income while welfare income had plummeted by nearly half to constitute only about 23 percent of income. Equally important, with earnings leading the way, the total income of these low-income families increased by more than 25 percent over the period (in constant dollars).

Not surprisingly, between 1994 and 2000, child poverty fell every year and reached levels not seen since 1978. In addition, by 2000, the poverty rate of black children was the lowest it had ever been.

Critics point out that unemployment by single mothers has risen since the mild recession of 2001 and that child poverty has now increased for four consecutive years. Although unemployment has increased, there were 1.3 million more never-married mothers employed in 2002 than in 1993 before the economic expansion and the exodus from welfare reform. Moreover, even after four years of increases, the child poverty rate in 2004 was still 20 percent lower than in 1993.

Although welfare reform is a major cause of these felicitous outcomes, at least two additional factors are important. First, the economy of the 1990s was exceptionally strong and produced a net increase of 16 million jobs. Second, in the decade leading up to the welfare reform law and in the welfare reform law itself, Congress enacted a series of expansions in social programs — including child care, the child tax credit, Medicaid, the standard deduction and the personal exemption in the tax code, and the Earned Income Tax Credit — that were designed to help low-income families that work.

Clearly, federal social policy requiring work backed by sanctions and time limits while granting states the flexibility to design their own work programs produced better results than the previous policy of providing welfare benefits while expecting little in return. It is better to cajole mothers to take low-wage jobs and supplement their income rather than to allow them to languish on welfare. Above all, experience with welfare reform since 1996 shows conclusively that most low-income families are capable of finding and holding jobs while, with government support, increasing the financial well-being of their children. Welfare reform has been a triumph for the federal government and the states — and even more for single mothers.