This study could not have been completed without the generous assistance
of the Department of Health and Human Services in providing data and program
The Effects of Welfare Policy and the Economic
Expansion on Welfare Caseloads: An Update
This study investigates the causes behind recent changes in welfare
caseloads, updating a 1997 CEA report of caseload change.
The fall in welfare caseloads has been unprecedented, wide-spread,
and continuous, and employment of welfare recipients has increased. 14.1
million people received welfare in January 1993, and this number had fallen to
7.3 million by March 1999, according to estimates released today (August 3,
1999). In 31 states the caseload is less than half of what it was when
President Clinton took office, and all states have experienced double-digit
percentage declines. For 22 states, the percent drop during 1998 was larger
than during 1997 (from January to December). Previous analyses by the
Department of Health and Human Services show that the percentage of welfare
recipients working tripled between 1992 and 1997, and an estimated 1.5 million
adults who were on welfare in 1997 were working in 1998.
The 1996 legislation has been a key contributor to the recent
declines. PRWORA produced a dramatic change in welfare policy: work and
self-sufficiency became a primary goal; state and local governments were given
much greater control of their programs; and states experimented with a host of
program designs. The evidence suggests that these changes caused a large drop
in welfare participation, a drop that is independent of the effects of the
strong labor market. The estimates imply that TANF has accounted for roughly
one-third of the reduction from 1996 to 1998, the last year of data analyzed in
this study. In the earlier years, 1993-1996, most of the decline was due to the
strong labor market, while welfare waivers played a smaller yet important role.
The strong labor market has made work opportunities relatively
more attractive, drawing people off welfare and into jobs. The unemployment
rate has not declined as much in the post-TANF period as it did in the 1993-96
waiver period. As a result, the share of the decline in the caseload that is
attributable to improvements in the labor market was much higher in the 1993-96
period (roughly 26 to 36 percent) than in the 1996-98 period (8 to 10 percent).
Past increases in the minimum wage have made work more attractive
and, as a result, caused welfare participation to decline.The estimates
imply that about 10 percent of the caseload decline was due to increases in
state and federal minimum wages.
The specific program design adopted by a state can affect its
caseload declines. The study examines the effects of a number of specific
policies, including family caps, earnings disregards, time limits, work
exemptions, and work sanctions on the size of the caseload.
The large sustained declines in caseloads provide one piece of evidence
about the effectiveness of welfare reform efforts. However, there are multiple
indicators of the impact of welfare reform, including changes in work and
earnings among welfare leavers, in marriage rates and out-of-wedlock
pregnancies, and in poverty rates. The Clinton Administration is collecting and
tracking information on all of these measures in order to fully assess the
impact of welfare reform.