The landmark Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, often referred to as welfare reform, ended entitlement to welfare benefits under Aid to Families with Dependent Children (AFDC) and replaced the AFDC program with Temporary Assistance for Needy Families (TANF) block grants to states. Features of the legislation were time limits on cash assistance, work requirements as a condition for receiving benefits, and increased state latitude in establishing eligibility and program rules. Among the broad goals of PRWORA were to reduce dependence on government benefits by promoting work, encouraging marriage, and reducing non-marital childbearing.
Much research has evaluated the effects of welfare reform on employment, welfare caseloads, marital status, or fertility--outcomes that the reforms were intended to affect. Overall, the evidence indicates that welfare reform increased employment and decreased welfare caseloads, but had weak or mixed effects on family structure. Few studies have investigated the effects of welfare reform on behaviors, such as illicit drug use, that economic theory suggests may be affected by the policy shift. Exploiting changes in welfare policy across states and over time and comparing relevant population subgroups within an econometric difference-indifferences (DD) framework, we estimate the effects of welfare reform on adult women's illicit drug use from 1992 to 2002, the period during which welfare reform unfolded. The analyses are based on multiple data sets, each offering unique strengths and measuring a different drug-related outcome. We investigate self-reported illicit drug use (from the National Household Surveys on Drug Abuse and National Surveys on Drug Use and Health), drug-related prison admissions (from the National Corrections Reporting Program [NCRP]), drug-related arrests (from Federal Bureau of Investigation [FBI] Uniform Crime Reports), and drug-related emergency department episodes (from the Drug Abuse Warning Network [DAWN]). The results, which are robust across different model specifications, comparison groups, and data sets that capture a range of drug-related outcomes reported by different entities, indicate that welfare reform led to declines in illicit drug use among women at risk of relying on welfare.
A. Illicit Drug Use
Illicit drug use results in substantial costs to families and communities that include healthcare utilization, reduced productivity and unemployment, and criminal justice expenditures. Although illicit drug use declined substantially in the United States during the 1980s and 1990s, it has increased since then and represents an important public health problem and policy issue. In 1979, 14.1% of the U.S. population aged 12 and older reported using illicit drugs in the past 30 days; that figure decreased to 6.3% in 1998, with the sharpest drop occurring between 1985 and 1990 (Office of National Drug Control Policy 2002). Since then, there has been a notable upward trend. Between 1992 and 2002, the period during which welfare reform unfolded, adult drug use increased by about 30%. (1) The cost to society of illicit drug use has been estimated at $181 billion annually (Office of National Drug Control Policy 2004).
B. Welfare Reform
Although welfare reform is often dated to the landmark 1996 PRWORA legislation, reforms actually started taking place in the early 1990s when the Clinton Administration greatly expanded the use and scope of "welfare waivers" to allow states to carry out experimental or pilot changes to their AFDC programs, with random assignment required for evaluation. Waivers were approved in 43 states, ranging from modest demonstration projects to broad-based statewide programs, and constituted the first phase of welfare reform. Some waivers increased the amount of earnings that recipients were allowed to keep while maintaining welfare eligibility; others expanded work requirements to larger groups, established term limits for cash assistance, permitted states to issue sanctions to recipients who failed to meet work requirements, or allowed states to eliminate increases in benefits to families who had additional children while on welfare. …