Wednesday, April 4, 2012

Has the 1996 Welfare Reform Been Reversed?

Copyright, The New York Times Company
Changes in food stamps and unemployment insurance have helped reverse the economic effects of the much-debated welfare reform law of 1996.

In previous posts I have showed how women who are heads of households and spouses have had different labor market experiences since 2007 depending on their marital status. Employment rates fell more for unmarried women, largely because they returned to work more slowly after layoffs than married women did.

I suggested that safety-net program expansions were an important reason for the different experiences of unmarried women, because they reduce the reward for working, especially among unmarried women.

The chart below puts these changes in a broad historical perspective. I used annual tables from the Bureau of Labor Statistics on employment among women by marital status for all women 16 and over (the tables are not separated for heads of households and spouses, as I did for my 2007-10 analysis).

Source: Bureau of Labor StatisticsEmployment rate of unmarried women relative to rate among married women, with percentage difference expressed in decimals. In 2010, for example, 49 percent of unmarried women were employed, compared with 57 percent of married women.

From 1980 through the mid-1990s, the fraction of unmarried women who worked increased less than the fraction of married women working, which is why the series shown in the chart declines over that time frame. Then, coincident with 1996 federal legislation reforming welfare, the trend sharply reversed itself.

Some main components of the 1996 welfare reform were to require that a significant fraction of welfare recipients be working and to limit the amount of time that households could receive welfare. (Welfare was called Aid for Dependent Children before the law, and Temporary Assistance for Needy Families since its enactment.) One intention of the reform was to give welfare participants more incentives to work and maintain their own living standards.

Economists expected that the reforms would increase work among unmarried women, who had been disproportionately represented among the welfare caseloads.

But as Rebecca M. Blank, now the deputy secretary of commerce, wrote in a review of welfare studies published in 2002 about the “stunning changes in behavior” she found: “Nobody of any political persuasion predicted or would have believed possible the magnitude of change that occurred in the behavior of low-income single-parent families” in the 1990s. Some of those changes were clearly consequences of the welfare rule changes.

Although the welfare program per se has not changed much since 2007, a number of safety-net programs have changed, and changed in the direction of significantly reducing the reward for working among unmarried women who are heads of households.

In this sense, the 1996 welfare reform was reversed over the last couple of years; while the 1996 law increased the reward for working, the recent expansions have reduced it.

The farm bill of 2002 began a gentle push in the direction of more help for the poor – and a lesser reward for work – as it provided for state-level expansions of the food stamp program, a program less affected than welfare was by the 1996 work requirements.

The more drastic changes occurred in 2008 and 2009 when the food stamp program was expanded again (twice), and unemployment insurance was expanded in several dimensions. It was at these times that unmarried women began again to lose ground to married women in terms of their propensities to be employed.

Policy experts still debate whether the 1996 welfare reforms were a good idea. For those who prefer an approach that offers more help to the poor even if it provides fewer incentives to work, the good news is that several pieces of legislation since 2007 have expanded the social safety net and effectively reversed the 1996 law.

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