Oct. 22 was Welfare to Work Works in Oklahoma Day. On that day,
Gov. Frank Keating honored 10 of the thousands of Oklahomans who
have recently left the welfare system. According to the Oklahoma
Department of Human Services, welfare caseloads have dropped 25
percent in the past year alone. Oklahoma now pays just $4 million a
month in cash welfare checks to about 16,000 families. That's down
from a high of $14 million a month going out to more than 48,000
families in October of 1992.
The fall in Oklahoma's welfare rolls is part of a national trend.
According to the President's Council of Economic Advisors, only 7.3
million people received welfare in March, down from 14.1 million
welfare recipients in January of 1993.
The fall in welfare caseloads has been unprecedented, widespread,
and continuous, and employment of welfare recipients has increased,
said the council (for more information, see "The Effects of Welfare
Policy and the Economic Expansion on Welfare Caseloads: An Update"
Of course, a strong economy is at least partly responsible for
the decline in welfare rolls. After all, the unemployment rate is at
a 30-year low B just 4.2 percent. But, more importantly, in recent
years, there have been enormous changes in many of the tax and
welfare programs that affect low-income Americans. In particular,
tax and welfare reforms have combined to greatly increase the
incentive for single mothers to enter the work force.
That's a big change from the welfare policies of the 1980s. From
1982-96, the federal Aid to Families with Dependent Children (AFDC)
program was characterized by a 100 percent earnings "tax" B welfare
recipients typically lost a dollar of benefits for each dollar of
income that they earned. And it was easy for a welfare recipient to
lose Medicaid and housing benefits if she earned "too much." All in
all, welfare recipients faced significant work disincentives. Not
surprisingly, one study of 1988-93 Census data found that only about
20 percent of single mothers who were on AFDC continuously during
the year had any labor earnings. It was as if the so-called "War on
Poverty" had become a "War on Work."
More recently, however, policy-makers have placed greater
emphasis on the importance of work as a way to break the cycle of
poverty. With the passage of the Personal Responsibility and Work
Opportunity Act of 1996 (PROWORA), Temporary Assistance for Needy
Families (TANF) has replaced AFDC, and most states have now
eliminated the 100 percent earnings "tax." PROWORA also increased
federal child care assistance for low and moderate-income families.
Other government programs also became more work friendly. In
particular, Medicaid was expanded in ways that primarily helped the
working poor. For example, between 1984-95, the number of children
receiving Medicaid increased 77 percent, and the number of covered
adults with dependent children increased 36 percent. Also, since
1984, the federal government has significantly expanded the earned
income tax credit, a refundable tax credit that goes primarily to
working families with children. In 1999, for example, a family with
two or more children is entitled to a refundable earned income tax
credit of up to $3,816. The credit is computed as 40 percent of the
first $9,540 of earned income, so welfare recipients can reap a
large reward for working B even at a minimum-wage job.
In addition, a number of states have adopted their own earned
income tax credits for working families with children. The Wisconsin
earned income tax credit, for example, is set at 4 percent of the
federal credit for families with one child, 14 percent for families
with two children, and 43 percent for families with three or more