Liberal Lessons from Welfare Reform
When Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996, the liberal community was almost unanimous in urging President Clinton to veto it. Even people like myself, who had supported Clinton's earlier efforts to "end welfare as we know it," thought that PRWORA went too far. Fortunately for the poor, the first five years of welfare reform inflicted far less economic pain than we had expected.
Now the Bush administration wants even tougher work requirements. Once again, most liberal Democrats think it is a mistake to worry about making every last single mother work when we have not yet ensured that those who already work can provide for their children. Once again, I agree: The administration's proposals are dreadful. But the people who claimed that PRWORA would cause a lot of suffering no longer have much credibility with middle-of-the-road legislators, who see welfare reform as an extraordinary success. If we want to regain credibility, we need to admit that welfare reform turned out better than we expected and figure out why that was the case. The usual explanation is simply that the economy did better than anyone expected, but that is only part of the story.
The traditional liberal position on single mothers was always "more is always better." More meant not only that the government should provide more resources but also that it should impose fewer restrictions on the recipients. The electorate has never accepted this view. Most Americans favor generous programs for people who are doing their best to help themselves. But when the government helps people who seem lazy or irresponsible, Americans tend to see this as rewarding vice. So the less a program asks of its beneficiaries, the less likely Americans are to support it. America's pre-1996 welfare program, Aid to Families with Dependent Children (AFDC), was a perfect example of how this logic plays out politically. It asked almost nothing of single mothers, and it gave them almost no money in return. As a result, everyone hated it.
Nonetheless, welfare-reform efforts achieved relatively little during the 1970s and 1980s. Welfare-rights groups were against requiring single mothers to work, and the liberal wing of the Democratic Party was reluctant to offend these groups, partly for fear of seeming racist. The labor market was soft, centrists feared that single mothers would not be able to find work in the private sector, and the right was against spending public money to provide jobs. Ambitious politicians came to see welfare reform as the Vietnam of domestic policy: a quagmire to be avoided at almost any cost. And because the welfare rolls were roughly constant from 1975 to 1989, the problem just simmered.
In 1991, with the welfare rolls rising rapidly, Bill Clinton decided that running against AFDC would be a good way to position himself as a "new" Democrat. As president, he set up a task force to propose a new system. By then the Democratic Party was deeply divided on welfare. Some supported a fundamental change, usually because they thought the only way to get more support for single mothers was to insist that the mother go to work. But many traditional liberals remained skeptical about serious work requirements. They saw the least-competent recipients as incapable of doing almost anything, and they could not imagine a system that drew a clear line between those who could work and those who could not. Clinton's 1994 proposals therefore needed Republican support to pass. By then the Republicans were more interested in humiliating Clinton than in reforming welfare, so his relatively generous version of welfare reform was stillborn.
After the Republicans gained control of Congress, they crafted a series of more draconian welfare-reform bills, which most liberals opposed. But after vetoing two such bills, Clinton signed the third. PRWORA replaced AFDC with Temporary Assistance for Needy Families (TANF). Under TANF, states could redesign welfare in almost any way they wanted, setting their own eligibility rules, work requirements, and time limits. TANF did establish federal time limits, but if states wanted to get around those limits they could do so by shuffling funds between programs.
The 1996 legislation was also a powerful symbolic statement. It made clear that America was no longer committed, even in principle, to supporting women who wanted to be full-time mothers. Anyone who wants to have children must either work or find a partner who will work. (The disabled are an exception, but "disability" is quite narrowly defined.) Single mothers judged capable of working can get short-term cash assistance from the government, but they cannot expect long-term assistance unless they have a job, and they cannot expect the government to find them one.
When this legislation was adopted, its opponents made four predictions:
What actually happened was rather different.
When PRWORA passed, skeptics argued that there would not be enough jobs to go around. The proportion of single mothers who had worked at some point during the year rose from 73 percent in 1995 to 84 percent in 2000, while the proportion who had worked throughout the year rose from 48 percent to 60 percent. These were unprecedented increases: Nothing similar had happened during any earlier boom, and nothing similar happened among married mothers in the late 1990s.
PRWORA's critics often attribute these gains to the unusually tight labor market between mid-1997 and mid-2001. Some have suggested that unemployment among single mothers will rise sharply now that the labor market has gone soft. Some rise is inevitable in a recession, but the proportion of single mothers with jobs will not return to its 1995 level unless the recession gets much, much worse.
The unemployment rate for single mothers is normally about twice the rate for the labor force as a whole. In March 2001, for example, the overall unemployment rate was 4.3 percent but the rate for single mothers was 8.1 percent. The overall unemployment rate reached 6 percent in April 2002, so the rate for single mothers was probably just under 12 percent. That is surely causing a lot of suffering. But the fraction of single mothers with jobs is still far higher than it was before PRWORA.
The critics were right when they said that not all those who leave welfare would find work. Between 1994 and 2000, welfare receipt among single mothers fell from 32 percent to 15 percent, a 17-point drop; employment among single mothers, meanwhile, rose only 11 or 12 points. The question, though, is how many single mothers who wanted jobs failed to find them. The chart shows that the unemployment rate for single mothers fell between 1995 and 2000, which hardly suggests that the labor market was awash in single mothers unable to find work. Of course, workers only get counted as unemployed if they say they are currently looking for work. Some who left welfare presumably had looked earlier, found nothing, grown discouraged, and stopped looking.
When PRWORA was being debated, its opponents often argued that even if single mothers found work they would seldom earn enough to support themselves. If single mothers had to depend entirely on their own wages, this would often have been true. But most single mothers have multiple sources of income, and their economic status has clearly improved since 1996.
The official federal poverty rate among single mothers was 43 percent at the end of the 1980s expansion, 42 percent when PRWORA passed, and 33 percent in 2000. The drop among black single mothers was even larger. Poverty has probably risen over the past 18 months, but the rate for 2001 is almost certain to be lower than the rate for 1996. If the overall unemployment rate stays near 6 percent, single mothers are unlikely to experience as much material hardship in this recession as they did in the last one. A severe recession could be another story.
Even before the current recession began, the Center on Budget and Policy Priorities had reported that the poorest single mothers were doing worse than they had before PRWORA passed. But census data on the poorest of the poor are problematic for a variety of technical reasons. Such data should never be trusted unless they are consistent with other evidence. If deep poverty had really increased between 1995 and 2000, for example, one would have expected more single mothers to move in with relatives. Census surveys showed no such increase. Likewise, an increase in deep poverty should have meant that more single mothers had trouble feeding their families. Yet the Agriculture Department's annual reports on its food-security surveys showed a fairly steady decline in the proportion of single mothers reporting food shortages, hunger, and related problems. My own work with Joseph Swingle and Scott Winship shows the same thing.
So why were the prophets of doom wrong? One answer is that almost everyone underestimated the extent to which government support for the poor was being redirected to people with jobs. Soon after Clinton took office in 1993, he persuaded Congress to expand the Earned Income Tax Credit (EITC). Today the EITC distributes more money to working parents than AFDC ever gave to mothers who stayed at home. For a minimum-wage worker with two children, the EITC means a 40 percent increase in annual earnings. More aggressive child-support enforcement has increased some working mothers' incomes even further. Extending Medicaid coverage to some of the working poor has also reduced some mothers' out-of-pocket medical spending, although much remains to be done in this regard.
TANF also gave states block grants that did not shrink as the welfare rolls shrank and allowed states to use these grants for child-care subsidies, which made it much easier for single mothers to survive on what they earned in low-wage jobs. Unfortunately, these subsidies are now in jeopardy, partly because the recession is putting pressure on state budgets and partly because the administration wants to force states to use their TANF money in other ways.
The net result of these changes is that the old "welfare state" is becoming what one might call a "wage-subsidy state," in which government assistance is tied to employment. By asking more of those who get government largesse, the new wage-subsidy system has substantially reduced political hostility to public spending on the poor. This is especially true at the state level. (In Washington the hard right is still riding high, and the Democrats remain reluctant to oppose the Bush administration even when it tries to limit states' ability to run welfare.)
But what about mothers who left welfare and did not find regular work? Many of these women are clearly struggling, but they are doing better than most of PRWORA's critics expected. They have not benefited from welfare reform, but it has been hard to find much evidence that their position deteriorated, at least prior to last September.
One reason PRWORA's critics were too pessimistic about such mothers' prospects may have been that they were fooled by their own linguistic conventions. When we describe people as welfare mothers, we inevitably begin to see them mainly as people who get a check from the government every month. In reality, however, this check is hardly ever large enough to support the recipient's family. In their book Making Ends Meet, Kathryn Edin and Laura Lein reported that welfare checks typically covered about 40 percent of the recipient's expenses. Some of the rest came from food stamps; most of it came from relatives, boyfriends, and working off the books. Edin and Lein's data were gathered in the early 1990s, but the same pattern probably holds today.
When times are good, family members can be more generous and a mother has a better chance of finding off-the-books work. Boyfriends also earn more in good times, which may be one reason why more single mothers reported live-in boyfriends during the late 1990s. The value of an economic boom to a single mother depends, however, on current norms about how money should be spent. When incomes rose in the late 1980s, a lot of the money that flowed into poor neighborhoods ended up in drug dealers' pockets. When incomes rose in the late 1990s, expenditures on drugs were apparently falling, so more of the new money was available for food, rent, and fixing the TV.
The idea that sending checks to unmarried mothers will encourage unwed motherhood and divorce has always seemed self-evident to most Americans. But back in 1996 it was hard to find much statistical evidence for this view. Single parenthood was becoming more common in all rich countries, regardless of how they organized their welfare system. And while welfare benefits varied a lot from one American state to the next, neither the proportion of children born out of wedlock nor the proportion of older children living with an unmarried mother appeared to correlate with benefit levels. When welfare reform was being debated in the mid-1990s, I do not recall hearing a single reputable scholar argue that changing the welfare system was likely to have much effect on marriage rates. I certainly expected no such effect. Even Charles Murray, who believed that welfare had played a role in the spread of single-parent families, felt that something more draconian than PRWORA would be needed to reverse the trend.
Since 1996 both the scholarly consensus and the facts on the ground have changed. Recent research suggests that welfare policy may, in fact, exert some effect on family structure. Furthermore, the spread of single-parent families has stopped. The proportion of mothers raising children without a husband had increased steadily between 1960 and 1996 (from 11 percent to 28 percent). But after March 1997, the proportion began to fall. By March 2001 it was down to 26.6 percent. That was hardly a revolution, but it cut the number of single mothers by half a million.
The proportion of children born to unmarried mothers is still inching up, but the increase since 1995 has been tiny. A study by Richard Bavier of the U.S. Office of Management and Budget suggests that women who have children out of wedlock are now marrying in greater numbers. We do not know whether these mothers are marrying their child's father or someone else. That is important, because children who grow up with a stepfather fare no better in adolescence or early adulthood than children who grow up with a single mother, even though the stepfather's presence substantially increases their family's income.
When PRWORA passed, its critics (including me) worried about how it would affect children. In material terms, children are now a little better off than they were in 1996. Children's psychological well-being is probably more important, but it is also harder to measure. A single mother who works full time obviously has less time for her children, and exhaustion may make her more irritable or more punitive. But the long-term effects of a single mother working remain uncertain and controversial. A lot probably depends on what the mother's job is really like, what it pays, and how flexible it is to family needs.
When mothers enter the labor market, however, their children's child-care arrangements become less stable. Government subsidies appear and disappear unpredictably. The women who provide child care for unskilled working mothers are often unreliable. Mothers often have to take either temporary jobs or jobs with unpredictable hours, and they usually have to change their child-care arrangements when their hours change. Children hate this kind of instability. Whether it causes long-term damage, however, remains unclear.
On balance, welfare reform has turned out far better than most liberals expected. Most Americans now see it as one of the great successes of the 1990s. Instead of remaining wedded to the idea that PRWORA was a bad idea because it was a supported by the lunatic right, liberals need to rethink. My own conclusions are three:
Someday, of course, Congress may also show renewed interest in problem solving. At the moment, however, most states' approach to helping poor families is more pragmatic than Washington's, and the new emphasis on helping low-wage workers has created a significantly better system than we had in 1996.
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