Welfare Reform Worked

Ron Haskins and Peter H. Schuck

The primary election campaign has intensified a justified concern about inequality in America: People at the top are rising much faster than everyone else. Even low-income Americans consider relatively high levels of inequality acceptable if they have a decent opportunity to improve their condition. But because they may work fewer hours and at stagnant wages, their gains are very limited.

Among the poor, surprisingly, never-married mothers have gained the most in recent decades. Their story shows the best way to reduce poverty and inequality: by encouraging individuals to work more and by supplementing their earnings with tax credits, child-care subsidies and other benefits for low-income working parents.

Until the mid-1990s, never-married mothers seldom worked outside the home, had poverty rates of over 60% and were at least five times more likely than married-couple families to be poor. Then in 1996, congressional Republicans and President Clinton collaborated on a welfare reform law requiring adults on welfare, including never-married mothers, to work.

When Clinton signed the law, many of his strongest political supporters reviled him for entering into “a pact with the devil.” They predicted that poor women and their children deprived of welfare would die in the streets. Any employment gains, they insisted, would vanish in the first economic downturn.

The data refute these dire predictions. In fact, according to Census Bureau data, between 1996 and 2000, the percentage of never-married mothers in jobs increased by about a third (to 66%), while the poverty rate for these mothers and their children declined by about a third (to 40%). For the poorest of the poor, this large an improvement based on their own efforts was unprecedented. Since then, two recessions have reduced these gains somewhat; their employment rate is down to 58.7% (still better than for women generally) and their poverty rate is up to 49.3%.

Yet even in the worst recession since the Depression, more are employed and they are less poor than they were before the 1996 law. In fact, researchers Bruce Meyer of the University of Chicago and James Sullivan of Notre Dame have found that if all the work-based benefits given to low-income workers were included — such benefits are mostly ignored by the official poverty measure — the incomes of these mothers and children would be even higher and their poverty rate even lower.

The reasons for this policy success are clear, suggesting some lessons for the future. The 1996 law created strong incentives, both positive and negative, for the most uneducated, untrained and unpromising welfare recipients to join the workforce. As shown by their high employment rates, poor mothers responded to these incentives even more resourcefully than most policymakers had expected despite their often chaotic domestic circumstances. The federal law meshed well with many experimental state and local welfare-to-work programs, helping states pay for job search and readiness, health insurance, child care and other vital work support services.

Most politicians did not cave in to the intentionally inflammatory “dying in the streets” rhetoric; instead, they figured that the program could hardly be worse than the status quo of welfare dependency and that many of the poorest of the poor would end up better off. Both Congress and the states resisted the temptation to cut and run once the recipients’ situations improved; the governments largely maintained their efforts over time, mindful of how fragile these gains could be. Knowing the failures of many earlier welfare-to-work programs designed to reduce welfare dependency, government tried something new and stuck with it. Even today, virtually every state still runs a strong welfare-to-work program, in part because the programs are relatively inexpensive.

The gains from the 1996 welfare reform and other work-related subsidies are certainly no cause for smugness. Even after 15 years, the law’s incentives have not yet lifted all mothers and their children out of poverty — not by a long shot. After all, many who have benefited from the program are stuck in low-wage jobs, and others still don’t work at all. Many are so disabled that no program or personal desire to work will enable them to hold decently paying jobs. Still, the never-married mothers — and single mothers more generally — have clearly improved their and their children’s living standards and prospects, and interview studies show that they express pride in these gains and in their status as workers. Over time, they may be able to progress further as they accumulate job skills, experience and work habits, and as the economy improves.

Entrenched, multi-generational poverty is arguably America’s greatest domestic enemy today. Our first priority should be figuring out how to reduce it permanently by increasing work and human capital among the poor. Welfare reform shows what is possible. This is not only just; it is also the only enduring way to reduce poverty and inequality.