Panel Paper: Is Welfare Reform Still Effective?

Saturday, November 10, 2012 : 2:45 PM
Salon D (Radisson Plaza Lord Baltimore Hotel)

*Names in bold indicate Presenter

George Falco, NYS Office of Temporary& Disability Assistance and Jihyun Shin, NYS office of Temporary&Disability Assis

Reforms of welfare and closely related programs profoundly changed government response to economically needy children and families in the U.S.  Since the start of reform (1996), leading social scientists have examined the impact of these policy changes on the economic well-being of children and families.  Estimates of the impact of reforms on the work rates of single mothers – the  primary focus of the policy changes -- have been surprisingly large.  Estimates o f the impact on official poverty rates have been smaller, but still sizeable. 

A reexamination of the effectiveness s of reform is especially appropriate for the upcoming conference in D.C.  First, TANF and related PRWORA programs are scheduled for reauthorization in the Congress that will convenes in January 2013.  Second, a weakness of even the best econometric estimates to date is that the post reform period contains no serious economic downturn.  As noted by Blank and others, similar findings during an economic recession would increase confidence that the estimated changes in work behavior are not dependent on unusually strong job prospects.  The post-reform period now includes a major economic downturn.  Third, at least one prominent organization in the policy debate recently testified before Congress that virtually all the post-reform increase in employment of single mothers has been lost. 

We use CPS data for NYS for the period 1981 to 2010 and  difference in difference strategy to estimate the impact of reform on work and poverty rates of single mothers.  We control for personal and family characteristics that might affect work or poverty outcomes.  We use several different logistic regression specifications to test the sensitivity of results to plausible changes in the regression model -- e.g., both single women without children and married mothers  as counterfactuals. 

In brief we find that:

  • Estimates of impact of reform on work rates of single mothers were statistically significant and large for each of the post-reform periods. 
  • Impacts on work increased steadily after reform, rising to about 20 percentage points during the 2001 to 2003 period, and remaining constant at a slightly lower level for the two final periods specified. 
  • Estimates of the impact of reform on the official poverty rates of single mothers (in percentage points) were statistically significant but considerably smaller for each of the post reform periods -- between a quarter and a half of the of the percentage point impacts on work. 

The last part of our paper uses food security data to explore a plausible alternative explanation for the post-reform decrease in official poverty rate not addressed using the above data and methods – i.e., increases in reported income after reform are due to changes in willingness of single mothers to report income.  We also use CPS and administrative data on near cash benefits and refundable tax credits to examine whether not accounting for changes in such benefits may have over or underestimated the impact of reform on economic well being. 

We conclude that estimated impacts of reform in NYS remain strong.