Children and Welfare Reform: Analysis and Recommendations

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Children do best when they grow up in low-conflict families, with parents who are married to each other and who earn enough to meet their family's needs. The evidence on this is strong and widely accepted. (1) The challenge for our nation's welfare system is to determine how best to help children in families that do not have the support of both parents and that do not have enough income. About half the children born in the 1980s will spend some time in a single-parent family before age 18. (2) More than one-third will spend some of their childhood living in poverty. (3)

The federal welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, sought to reduce the number of children growing up in poor, single-parent families by promoting marriage and requiring mothers to move from welfare to work. This journal issue examines not only whether the programs implemented since reform accomplished these goals, but also whether they benefited children. Such an examination is especially timely as Congress begins to debate reauthorization of the federal welfare reform law (which expires in September 2002) and as an economic downturn changes the prospects for families striving for greater self-sufficiency.

This article reviews the main themes of the journal issue by summarizing what the new social policy landscape looks like for children, how low-income children are faring in this new landscape, and how welfare programs and related support services might be restructured to better promote children's well-being. The 1996 law essentially transformed U.S. welfare programs into employment programs. Riding the wave of a strong economy, these new programs successfully moved many mothers from welfare to work, and improved many children's lives as a result--many, but not all. Even in very prosperous times, some families were unable to overcome their barriers to employment, and many families who found employment still needed additional supports to help make ends meet. As the economy weakens, the need for supports is likely to grow.

Reauthorization of the federal welfare reform law offers a critical opportunity to reexamine the goals of reform. If the ultimate goal of promoting work and marriage is not just to end families' dependence on government benefits, but also to improve disadvantaged children's chances for success in life, then more attention must be paid to structuring programs for low-income families in ways that promote positive child development and wellbeing. This is important not only for the children themselves, but for all of society, as we all pay the costs of educational failure, increased crime and violence, and reduced worker productivity--costs that inevitably result when children fail to get the nurturing and supports they need to achieve their potential.

The New Social Policy Landscape since Reform

Passage of the federal welfare reform law in 1996 brought many changes to the broad array of programs serving low-income children and their families, as detailed in the article by Greenberg and colleagues in this journal issue. Prior to reform, all children in poor families that met state eligibility criteria were entitled to assistance under the Aid to Families with Dependent Children (AFDC) program, although many states set the threshold so low that only the poorest families qualified. The federal government reimbursed states for at least half the cost of providing this assistance, with no cap on expenditures. AFDC receipt also assured ready access to other benefits, such as Medicaid and food stamps. Families who participated in AFDC-related work programs were provided with child care assistance, (4) but these programs were often underfunded and involved only a fraction of eligible families. Most mothers receiving AFDC payments stayed home and cared for their children themselves.

Program structures, priorities, and funding streams all changed dramatically with passage of the 1996 law. The AFDC program was replaced with a block grant to the states called Temporary Assistance for Needy Families (TANF). Funding levels for TANF were based on states' historical expenditures under AFDC. Families' entitlement to assistance ended, and the links between cash assistance and other benefits and services were severed. Instead, the law gave states increased flexibility to design their own welfare programs and support services for low-income families. At the same time, the law's focus, as indicated by its title, was to increase parental responsibility and work, and a major theme was to move families off welfare and into employment. Thus, families receiving TANF cash assistance had to meet several important new rules, such as more stringent work requirements, sanctions for noncompliance, and time limits. The law also increased funding for child care to facilitate mothers' employment, and strengthened the child support enforcement program to help ensure that fathers would contribute to the support of their children.

Two other key themes in the 1996 law were promoting marriage and reducing out-of-wedlock births. Provisions of the law that addressed these goals focused primarily on allowing more liberal eligibility criteria for two-parent families and imposing more stringent requirements on unmarried minor teen parents. The law also called on the U.S. Department of Health and Human Services to establish a strategy for preventing out-of-wedlock teen pregnancies, and provided new funding for abstinence education and bonuses for states with the highest reductions in out-of-wedlock births.

The law changed benefits and services for low-income children in other ways as well. For example, it restructured two significant funding streams for prevention of child maltreatment and services to reunify families split apart by child abuse or neglect, potentially reducing the total amount of funding for such programs. The law also modified the definition of childhood disability, restricting children's eligibility for assistance from the Supplemental Security Income (SSI) program. An estimated 100,000 children lost their eligibility under the new definition in 1996, (5) and another 70,000 adolescents lost benefits when eligibility redeterminations were conducted between 1997 and 2000. (6) Finally, the law restricted legal immigrants' eligibility for many services and benefits, including cash assistance, food stamps, and Medicaid. Some restrictions on legal immigrants have since been lifted, but most remain ineligible for food stamps, and those entering the country after passage of the law are ineligible for nearly all federal benefits for five years. (7)

The changes that resulted from the 1996 law could affect poor children in many ways, both directly and indirectly. For the most part, however, the underlying premise of the law was that children would benefit from seeing their parents leave welfare and go to work. In fact, as noted in the article by Chase-Lansdale and Pittman in this journal issue, many lawmakers expected the promotion of job preparation, work, and marriage to improve parenting practices and child well-being, as well as reduce dependence on government benefits. It appears, however, that the links between reform efforts, improved parenting, and positive child outcomes are not as simple or straightforward as envisioned.

How Low-Income Children Are Faring

Overall, low-income families have fared well since reform, both economically and structurally. Poverty rates have declined, and fewer children are being raised in single-mother households. The primary goal of the 1996 law was to end families' dependence on government benefits, and efforts to address this goal have been very successful. Bolstered by the strong economy of the 1990s and policies that help "make work pay," such as the earned income tax credit (EITC) and expanded health insurance programs for low-income children, (8) many families moved off welfare and into jobs. In August 1996, 4.4 million families were receiving cash assistance. As of September 2000, the number of families receiving cash assistance had declined by half, to just 2.2 million. (9)

The dire predictions made by some critics when the law was passed--that the number of homeless and destitute families would skyrocket, and that there would be a massive migration of children from welfare to foster care--have not materialized. (10) Yet even in a strong economy, many families who left welfare were struggling, and many remaining on the rolls faced serious barriers to employment. What can be gleaned from the research about how low-income children are faring since welfare reform in terms of their economic wellbeing, family structure, and daily life experiences is summarized below.

Economic Well-Being and Its Implications

Welfare reform policies clearly have helped many poor families take advantage of economic opportunities over the past five years and move successfully from welfare to work. More than half the families no longer receiving cash assistance are working, and the combination of earnings and other work supports has boosted the incomes of most single-mother families. Poverty rates declined from 14% in 1996 to 11% in 2000, and child poverty rates also have fallen, from 21% to 16%. (11)

Recent findings from evaluations of welfare-to-work demonstration programs point to the importance of increasing family economic resources to improve children's outcomes. Although these demonstrations were implemented before reform, they included many features similar to those enacted in the 1996 law, such as work requirements, time limits, and financial incentives to work. Results show that, for the most part, families' participation in these programs had no widespread impacts on children. When impacts were found, some were positive and some were negative, but most were weak. Even when programs resulted in more positive impacts, the children in these families still lagged behind national norms for positive child development. Nevertheless, some patterns have emerged that reinforce the theory that increasing families' employment and income is good for children.

As discussed in the article by Zaslow and colleagues in this journal issue, children in families participating in programs that increased employment and income tended to do better in school and have fewer behavioral problems than children in families not participating in the programs. (12) Positive impacts were found most often among school-age children. Programs with the most positive impacts on children were those that increased families' employment and income through earnings supplements without a mandatory work requirement, such as in an early version of the Minnesota Family Investment Program. (13)

In addition to having positive impacts on children, programs that increased both employment and income through incentives without a mandatory work requirement also had small but significant impacts on the parenting practices of mothers who participated. (See the article by Chase-Lansdale and Pittman.) Compared with nonparticipant mothers and those required to work 30 hours a week, long-term recipient mothers participating in these programs had lower levels of depression and harsh parenting. These mothers were also more likely to marry if single, more likely to stay married if married, and less likely to experience domestic violence. According to Chase-Lansdale and Pittman, the critical factor leading to these positive impacts appears to be that the mothers could work less than full time and still benefit from income gains compared with mothers not participating.

When programs helped families gain jobs but did not increase their income, the evaluations of the pre-reform welfare-to-work demonstrations found few impacts on children. The impacts that did occur were mixed. Children in participant families tended to score higher on assessments of their cognitive skills, but also to receive more reports of behavioral problems, compared with children in families not participating in the programs. (14) When programs resulted in families making no economic progress or experiencing a setback, the effects on children tended to be negative across all types of outcome measures.

Thus, when families move from welfare to work without an increase in income, the impacts on children are less likely to be positive. Unfortunately, this is likely to be the case for many families leaving welfare since reform. As described in the article by Zedlewski in this journal issue, many families leaving welfare for work enter low-paying jobs with no employer-provided benefits, and about 40% of families that have left welfare are not working. Economic resources have declined among many of the poorest families due to the loss of benefits such as welfare and food stamps. Census Bureau data show that between 1995 and 1997, total annual resources for the poorest 10% of single-mother families declined by $814, on average, from $5,687 to $4,873; among the next poorest 10%, resources declined by $319, from $11,584 to $11,265. (15)

The decline in economic resources among poor families is especially sobering because it occurred during a period of sustained economic growth. Following the attack on the World Trade Center on September 11, 2001, jobs have been disappearing rapidly in manufacturing, services, and transportation--especially low-wage jobs, the types of jobs that welfare recipients would likely fill. During October and November 2001, more than one million jobs were lost, and according to the U.S. Bureau of Labor Statistics, the increase in the jobless rate has been particularly severe for blue-collar workers. (16) Thus, until the economy rebounds, many more poor families are likely to experience declines in their economic resources.

Family Structure

Family structures for low-income children appear to be changing for the better, although any link to welfare reform policies is dubious, as noted in the commentary by Haskins in this journal issue. Between 1995 and 2000, the percentage of children living with both …