Welfare to Work in the U.S.: A Model for Other Nations?

The 1996 welfare reform legislation establishing the Temporary Assistance for Needy Families (TANF) program marks a significant change in U.S. social and economic policy. This legislation represents the ascendance of the view that individuals and families need to be self-reliant and that collective support for individual well-being should be minimized. We first describe the major provisions of TANF, providing some background on its differences from prior policy targeted at needy families. Then we catalogue the wide variety of economic changes that are implicit in the new law, stressing those related to changed property rights, fiscal relations among jurisdictions, and economic incentives facing families. Third, we illustrate the form of state reforms that are likely to develop in response to the federal policy change by describing the actions of the state of Wisconsin, which has taken the lead in implementing the new policy. We conclude with a list of yet unanswered questions that will ultimately determine just how far this policy change will slide the nation along the efficiency-equity tradeoff function, away from the equity axis. The answer to these questions will influence the attraction the U.S. reform might hold as a model for other nations concerned with their own safety net programs for poor people.

The “Inability to Be Self-Reliant” as an Indicator of Poverty: Trends in the United States, 1975–1995

The trend in national policy over the past two decades has emphasized self-reliance and a reduced role of government in society. Given this ideological shift, the official poverty measure, which is based on the premise that all families should have sufficient income from either their own efforts or government support to boost them above a family-size-specific threshold, appears now to have less policy relevance than in prior years. In this paper we present a new concept of poverty, the inability to be self-reliant, which is based on the ability of a family, using its own resources, to support a level of consumption in excess of needs. This concept closely parallels the “capability poverty” measure that has been proposed by Amartya Sen. We use this measure to examine the size and composition of the poor population from 1975 to 1995. We find that poverty in terms of self-reliance increased more rapidly over the 1975–95 period than did official poverty. We find that families commonly thought to be the most impoverished—those headed by minorities, single women with children, and individuals with low levels of education—have the highest levels of self-reliance poverty. However, these groups have also experienced the smallest increases in this poverty measure. Families largely thought to be economically secure, specifically those headed by whites, men, married couples, and highly educated individuals, while having the lowest levels of self-reliance poverty, have also experienced the largest increases in that measure. We speculate that the trends in self-reliance poverty stem largely from underlying trends in the U.S. economy, in particular the relative decline of wage rates among whites and men, and the rapidly expanding college-educated group.

The Effect of Labor Market Changes from the Early 1970s to the Late 1980s on Youth Wage, Earnings, and Household Economic Position

While overall employment in the United States has risen in the last 30 years, the employment and earnings prospects for youths have fallen relative to those for older workers. This deterioration in youth labor market conditions has been most pronounced for low-skilled youths, high school dropouts, and those with low IQs. Using data from national longitudinal studies of young men, young women, and youths, this paper examines a number of aspects of the labor market outcomes of youths entering the labor market at two different times. The first group entered the robust labor market of the late 1960s, while the second group entered the deteriorated labor market of the mid-1980s. Consistent with previous research, this paper finds an improvement over the two periods in levels of employment and earnings for high-skilled youths, with a corresponding deterioration for lower-skilled youths. The paper presents a unique analysis of the growth trajectories of earnings and employment for high- and low-skilled youths in the two cohorts. We find substantial within-cohort growth for high-skilled youths in both cohorts (as well an improvement in household economic circumstances), with a corresponding deterioration in earnings, employment, and household economic circumstances for lower-skilled youths, especially those in the later cohort.

Macroeconomic Performance and the Poverty Rate: A Return to Normalcy?

Since the mid-1980s, several important studies have established the statistical relationship between the poverty rate and overall economic performance. Most of these studies focused on the apparent break in this relationship beginning in the late 1970s or early 1980s. In this paper, we present the results of our study of the relationships reported in these studies, using annual time-series data on macroeconomic variables such as the unemployment rate and per capita GDP growth from 1959 through 1997. Like these earlier studies, we too find that economic performance seems to have had a smaller antipoverty effect during the 1970s and 1980s than it did in earlier years. However, our estimates suggest that the weakened growth-poverty relationship may have been an aberration of this period, and that the “normal” relationship of the 1960s has again been reestablished in the 1990s. This is true even after accounting for changes in earnings inequality over the entire period.

The Clinton welfare reform plan: Will it end poverty as we know it

The central elements in President Clinton's proposal to reform the welfare system are: increasing the earned income tax credit, improving the child support system, educating and training the poor, and limiting the amount of time people can receive assistance. The authors commend the first two components of the president's plan but question the likely effectiveness of the last two: even with the education, training, and child care programs that the president has proposed, few welfare recipients will be able to command wages that would lift them out of poverty, and successful education and training programs would cost more than the government appears willing to spend. They recommend that the president consider giving tax credits to, and subsidizing the wages paid by, employers who hire low-wage workers and assist young people and poor families to save for future opportunities. In their view, poverty will not be alleviated by only getting tough on welfare recipients; instead, labor market interventions should be adopted so as to expand opportunities for low-wage, low-skilled workers.

The Utilization of U.S. male labor, 1975-1992: Estimates of foregone work hours

The percentage of working-age men in the United States who were fully active in the labor market decreased over the 1975-1992 period ("fully active" means working 2080 hours in a year). Similarly, the extent to which men were less than fully active increased. When one considers the number of hours by which men fell short of the 2080 norm in 1992, it was as if 20 percent of them did not work at all in that year, up from 18 percent in 1975. However, because the least-productive workers were the ones most likely to be less than fully active and the most-productive were the ones least likely to be less than fully active, total productivity-weighted work hours did not fall by this large an amount. If men failed to work 2080 hours in a year, most likely it was because they did not work at all; men most often did not work at all because they could find no jobs. Data were from Current Population Surveys.

The Intergenerational Effects of Early Childbearing

Since World War II, the average age at which women experience their first birth has drifted up, but since 1986 there has been a resurgence of births to teenagers. Just as early fertility appears to adversely affect the life chances of the teen mother, it may also have negative effects on her children. We hypothesize that when the children of teen mothers are young adults, they will tend to have lower education, and will be more likely to be economically inactive, to have children when they are teens, and to have children out of wedlock when they are teens. In this paper, we present several models designed to reveal the impact that being born to a teenage mother has on children's chances for success as young adults. Our findings indicate that the children of mothers who first gave birth as teens are adversely affected as young adults.

Recent trends in U.S. male work and wage patterns: An overview

This paper brings together figures on recent trends in the labor market activity and wages of working-age men in the United States over the 1967-1992 period. The data, which come from Current Population Surveys, reveal several important developments. Year-long joblessness, the percentage of men failing to participate in the labor force, and the proportion who were unemployed rose throughout the period. Part-time employment as a percentage of all forms of employment was also higher at the end of the period than at the beginning, and the average hours worked by full-time workers increased slightly. Finally, median and mean wages fell. None of the trends was due to changes in the racial, educational, and age composition of the male work force; in fact, if the racial/educational/age composition had remained the same over the period, labor market activity would have declined even further.

Do Teens Make Rational Choices? The Case of Teen Nonmarital Childbearing

With emphasis on the role of economic incentives, we explore the determinants of a woman’s choice of whether or not to give birth as an unmarried teenager. Our data are taken from the Panel Study of Income Dynamics. Guided by a simple utility-maximization model, we represent the income possibilities available to teenaged women if they do and do not give birth out of wedlock. We estimate these choice-conditioned income possibilities through a two-stage probit procedure, relying on the observed incomes of a secondary sample of somewhat older women. The response of the young women in our primary sample to these income expectations is measured after controlling for the effects of a variety of other factors, including the characteristics of the girl’s family, the social and economic environment in which she lives (including such policy-related factors as expenditures by states on family planning programs and education), and her own prior choices. We use the estimated structural parameters from our model to simulate the effects of a variety of policy interventions on the probability of becoming an unmarried teen mother. Our estimations provide evidence that income expectations have a persistent influence on the childbearing decision. They also provide evidence that the provision of public family planning expenditures and increases in parental education could reduce the prevalence of teen nonmarital births.