Family economic resources in the post-reform era

Future of Children

Volumn 12, Issue 1, 2002, Pages 121-145

  Zedlewski, Sheila Rafferty ^a  

^a URBAN INSTITUTE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC ASPECT; GOVERNMENT; HUMAN; LAW; POVERTY; REVIEW; WELFARE; WELLBEING; CHILD; CHILD WELFARE; ECONOMICS; EMPLOYMENT; FAMILY; HEALTH CARE PLANNING; INCOME; LEGAL ASPECT; ORGANIZATION AND MANAGEMENT; SOCIAL CARE; UNITED STATES;

CHILD; CHILD WELFARE; EMPLOYMENT; FAMILY; HEALTH PLANNING; HUMANS; INCOME; PUBLIC ASSISTANCE; UNITED STATES;

EID: 0036886599     PISSN: 10548289     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (81)

1. Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Public Law 104-193. Section 101, 110 Stat. 2110, August 22, 1996.
2. Mayer, S. Trends in the economic well-being and life chances of America's children. In Consequences of growing up poor. G. Duncan and J. Brooks-Gunn, eds. New York: Russell Sage Foundation, 1997, pp. 49-69.
3. See also Brooks-Gunn, J., and Duncan, G. The effects of poverty on children. The Future of Children (Summer/Fall 1997) 7(2):55-71.
4. McLanahan, S., and Sandefur, G. Growing up with a single parent: What hurts, what helps. Cambridge, MA: Harvard University Press, 1994. This study was based on data from the Panel Study of Income Dynamics (PSID). Surveys confirm that income accounts for about half of the difference in key educational outcomes between children in single- and two-parent families.
5. In fact, the study, also using PSID data, showed that most of the other factors thought to affect child well-being-such as low parental education, single-motherhood, and teen pregnancy-are closely related to issues of income. See Duncan, G., Brooks-Gunn, J., Smith, J.R., and Yeung, W.J. Does childhood poverty affect the life chances of children? American Sociological Review (June 1998) 63:406-23.
6. Research does not consistently support or refute the contention that income from welfare is less beneficial to children than other forms of income because it carries a stigma. Many studies have found no relation between welfare receipt and children's cognitive and social development once other factors are taken into account. See, for example, Haveman, R., and Wolfe, B. The determinants of children's attainments. Journal of Economic Literature (1995) 33(4):1829-78;
7. and Yoshikawa, H. Welfare dynamics, support services, mothers' earnings, and child cognitive development: Implications for contemporary welfare reform. Child Development (1999) 70:779-801. Other studies show that transitions into welfare are associated with more behavioral problems in children, but this effect also may be associated with other accompanying transitions (such as a loss of job or parents' separation).
8. See, for example, Smith, J.R., and Brooks-Gunn, J. Development effects of natural transitions in welfare receipt. Paper presented at a research briefing of the National Academy of Sciences, Board on Children and Family. Washington, DC. December 5-6, 1994.
9. Mayer, S. What money can't buy: The effect of parental income on children's outcomes. Cambridge, MA: Harvard University Press, 1997.
10. Rector, R., and Fagan, P. How welfare harms kids. Backgrounder No. 1084. Washington, DC: Heritage Foundation, June 5, 1996.
11. Morris, P., Huston, A., Duncan, G., et al. How welfare and work policies affect children: A synthesis of research. New York: Manpower Demonstration Research Corp., March 2001. Together, these 5 studies examined the effects of 11 different employment-based welfare and antipoverty programs aimed primarily at single-parent families. All the evaluations used rigorous random-assignment research designs. Program effects are essentially measured as the difference between outcomes for families in a program group with new benefits and rules, and families in a control group with benefits and rules previously in place.
12. The study did caution, however, that the improvements in child well-being were modest when considered in the context of these children's high levels of disadvantage. The study also concluded that programs that increased parental employment without increasing income had few effects on children. (For a detailed analysis of these and other studies, see the article by Zaslow and colleagues in this journal issue.)
13. Two of the experimental programs that increased parental work and economic resources increased both adolescent problem behaviors and decreased adolescent school achievement. One possible reason for these findings is that adolescent development may be more strongly influenced by the affection, supervision, role modeling, and mentoring from parents than by increased economic resources. But some researchers question whether outcomes would have been positive for adolescents if more age-appropriate enrichment activities had been available. See Duncan, G., and Chase-Lansdale, P.L. Welfare reform and children's well-being. In The new world of welfare. R.M. Blank and R. Haskins, eds. Washington, DC: Brookings Institution Press, 2001, pp. 391-417.
14. Only one experimental study has assessed the impacts on very young children of programs that increased parental employment and economic resources. In this study, the program showed no effects on achievement and behavior for children ages three to five. See Morris, P., and Michalopoulos, C. The Self-Sufficiency Project at 36 months: Effects on children of a program that increased parental employment and income. Ottawa, Ontario: Social Research and Demonstration Corp., 2000. Other studies have shown that very young children may be more vulnerable than older children to negative effects from employment-induced separation from their mother. See note 10, Duncan and Chase-Lansdale.
15. For a full description of this measure, see Citro, C.F., and Michael, R.T., eds. Measuring poverty: A new approach. Washington, DC: National Academy Press, 1995.
16. See also Betson, D., and Michael, R. Why so many children are poor. The Future of Children (Summer/Fall 1997) 7(2):25-39.
17. Edin, K., and Lein, L. Making ends meet. New York: Russell Sage Foundation, 1997.
18. Bernstein, J., Broeht, S., and Spade-Aquilar, M. How much is enough? Basic family budgets for working families. Washington, DC: Economic Policy Institute, 2000.
19. This idea originated with Victor Fuchs in the 1960s and has been used as an alternative measure of income adequacy since then. See Fuchs, V.R. Redefining poverty and redistributing income. The Public Interest (Summer 1967) 8:88-95.
20. See the U.S. Department of Labor Web site at http://www.dol.gov/dol/esa/ public/whd_org.htm. Note that the majority of workers not covered by the FLSA are executive, administrative, or professional employees.
21. The 10 states with higher minimum wages are Alaska, California, Connecticut, Delaware, Hawaii, Massachusetts, Oregon, Rhode Island, Vermont, and Washington.
22. Turner, M. Does the minimum wage help or hurt low-wage workers? In The low-wage labor market. Washington, DC: U.S. Department of Health and Human Services, December, 1999, p. 84.
23. The percent relative to poverty uses a poverty threshold for a single parent with two children. The amount of credit a family is eligible for does not depend on marital status, which leads to potential "marriage penalties" for people who would each qualify for the EITC while single but qualify for only one credit as a couple if they marry. See Wheaton, L. Low-income families and the marriage tax. Policy brief. Washington, DC: Urban Institute, September 1998.
24. Johnson, N. A hand up: How state earned income tax credits help working families escape poverty in 2000. Washington, DC: Center on Budget and Policy Priorities, 2000.
25. Ten states (Colorado, Kansas, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Vermont, and Wisconsin) and the District of Columbia offer refundable EITCs ranging from 10% to 34% of the federal credit (for a family of two), with most falling at the low end of this range. Four states have EITCs that are not refundable (Illinois, Iowa, Oregon, and Rhode Island). These nonrefundable credits also tend to be less generous, falling around 5% of the federal credit in all states except Rhode Island, which has a 26% credit. For an in-depth discussion of state EITCs, see Maag, E., and Rogers, D. The new federalism and state tax policies toward the working poor. Assessing the New Federalism Occasional Paper No. 38. Washington, DC: Urban Institute, 2000.
26. States must maintain specific levels of funding for their TANF programs under a state maintenance-of-effort (MOE) requirement. For more details, see the article by Greenberg and colleagues in this journal issue.
27. Greenstein, R. The changes the new tax law makes in refundable tax credits for low-income working families. Washington, DC: Center for Budget and Policy Priorities, June 18, 2001.
28. Rowe, G. The Welfare Rules Databook: State TANF policies as of July 1999. Assessing the New Federalism. Washington, DC: Urban Institute, 2000, table L.4.
29. Four states (Idaho, Illinois, Oklahoma, and Wyoming) and the District of Columbia reduced maximum TANF benefit levels between 1996 and 1999, and 12 states (Maine, Maryland, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Oregon, Utah, Vermont, West Virginia, and Wisconsin) increased their maximum benefit levels. See note 24, Rowe.
30. Center on Law and Social Policy and the Center on Budget and Policy Priorities. The state policy documentation project. Washington, DC: CLASP and CBPP, June 2000. Available online at http://www.spdp.org.
31. See note 24, Rowe, table I.C.1, p. 46.
32. Restricted assets include Individual Development Accounts (IDAs), authorized by federal welfare legislation that allows states to create community-based IDA programs with TANF block grant funds and to disregard all money saved in IDAs in determining eligibility for all means-tested government assistance. All deposits into IDAs are limited to earned income. See Sherraden, M., Johnson, L., Clancy, M., et al. Saving patterns in IDA programs: Downpayments on the American Dream Policy Demonstration -A national demonstration of Individual Development Accounts. St. Louis: Center for Social Development, Washington University, January 2000.
33. See the article by Greenberg and colleagues in this journal issue for a detailed discussion of how federal welfare reform legislation changed these programs.
34. This calculation assumes the maximum child care cost deduction for children older than age two, and no excess shelter costs. For a full description of the food stamp program, see Zedlewski, S.R. Former welfare families continue to leave the food stamp program. Assessing the New Federalism Discussion Paper 01-05. Washington, DC: Urban Institute, March 2001.
35. U.S. House of Representatives, Committee on Ways and Means. 2000 green book: Background material and data on programs within the jurisdiction of the Committee on Ways and Means. Washington, DC: U.S. Government Printing Office, October 2000, p. 932, tables 15-27.
36. Technically, these two programs were "delinked" by federal welfare reform, but states have generally maintained eligibility for adults on TANF.
37. The basic rule is that states can set a SCHIP eligibility threshold that is 50 percentage points above the level used in their Medicaid program. See note 31, U.S. House of Representatives, Committee on Ways and Means, p. 931.
38. See note 31, U.S. House of Representatives, Committee on Ways and Means, p. 464.
39. See note 31, U.S. House of Representatives, Committee on Ways and Means, pp. 481-84.
40. For example, some members of the Democratic Leadership Council have advocated providing the EITC to all taxpayers, regardless of their income.
41. In Minnesota, for example, the state EITC plateaus at two income levels to soften the effect of the federal credit phaseout. For families with two or more children, the credit rises from $840 (22% of the federal) to $1,222 (41% of the federal) when earnings increase from $14,600 to $17,600, and is completely phased out once a family's earnings reach $30,600. See note 21, Maag and Rogers, for a complete description of how state EITCs work.
42. Primus, W., Rawlings, L., Larin, K., and Porter, K. The initial impacts of welfare reform on the economic well-being of single mother families. Washington, DC: Center on Budget and Policy Priorities, August 1999.
43. These analyses used three alternative methods (difference-in-difference, regression models, and residual analyses) to assess changes in income. Results are not directly comparable with those of the Center on Budget and Policy Priorities and others because they use a cash income measure of poverty. See Schoeni, R., and Blank, R. What has welfare reform accomplished? Impacts on welfare participation, employment, income, poverty, and family structure. Santa Monica, CA: RAND and the Gerald R. Ford School of Public Policy, University of Michigan, February 2000.
44. See note 39, Schoeni and Blank, p. 26.
45. Haskins, R. Effects of welfare reform on family income and poverty. In The new world of welfare. R. Blank and R. Haskins, eds. Washington, DC: Brookings Institute Press, 2001, pp. 103-36.
46. Most low-income single parents who are employed already work a substantial amount. For example, 68% of former welfare recipients who were working in 1999 worked full time (35 hours per week or more). See Loprest, P. How are families that left welfare doing? A comparison of early and recent welfare leavers. Assessing the New Federalism, Policy Brief No. B-36. Washington, DC: Urban Institute, 2001.
47. The relative contributions of a strong economy, welfare reform, and other federal policies to the increase in single mothers' work and earnings are as yet unclear. However, the evidence to date suggests that all three factors matter. For example, one study attributed one-third of the increase in employment of single mothers between 1992 and 1996 to the expansion of the federal EITC. See Council of Economic Advisors. The economic report of the president. Washington, DC: U.S. Government Printing Office, February 1999. See also note 39, Schoeni and Blank. They provide the first study designed to estimate the direct impact of welfare policy changes on work behavior, earnings levels, and income. The authors found that welfare waivers increased labor market involvement among less-skilled women, but the 1996 federal reforms had little additional impact on work behavior after controlling for economic forces. That is, ongoing increases in work in the post-1995 period were driven by the economic expansion.
48. U.S. Census Bureau. Statistical abstract of the United States, 2000: The national data book. Washington, DC: U.S. Census Bureau, 2000, table 653. Unemployment rates also decreased sharply in 1998 for single mothers with younger and older children, to 17% and 12%, respectively.
49. Between 1992 and 1997 the percentage of adult welfare recipients who participated in work activities tripled, and between 1997 and 1999 the state-reported work participation rate for TANF recipients increased from 28% to 38%. See Administration for Children and Families, Office of Planning, Research, and Evaluation. Temporary Assistance for Needy Families: Third annual report to Congress. Washington, DC: U.S. Department of Health and Human Services, August 2000.
50. According to the National Survey of America's Families, some 33% of adult TANF recipients had earnings at some point during 1999, compared with 22% in 1997. See Zedlewski, S., and Alderson, D. Do families on welfare in the post-TANF era differ from their pre-TANF counterparts? Assessing the New Federalism Discussion Paper 01-03. Washington, DC: Urban Institute, 2001.
51. Loprest, P. Families who left welfare: Who are they and how are they doing? Assessing the New Federalism Discussion Paper 99-02. Washington, DC: Urban Institute, 1999; see also note 42, Loprest.
52. The eight states are Arizona, Florida, Georgia, Illinois, Missouri, New York, Washington, and Wisconsin. See Acs, G., and Loprest, P. Initial synthesis report of the findings from ASPE's leaver grants. Washington, DC: Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, January 2001. Note that leaver studies typically report employment rates for single-parent families rather than family employment rates that include employment among spouses and partners.
53. See note 47, Loprest, and note 42, Loprest. As Loprest points out, however, we can only estimate how monthly earnings translate into annual income. Some adults may work fewer hours over the year or work only a portion of the months in a year, leading to lower annual income than the monthly levels suggest.
54. This is due in part to the fact that, unlike the Urban Institute study, the states included only the earnings of the former recipients themselves, excluding earnings from other adults in the household.
55. Cancian, M., Haveman, R., Kaplan, T., and Wolfe, B. Post-exit earnings and benefit receipt among those who left AFDC in Wisconsin. Madison, WI: Institute for Research on Poverty, 1998.
56. Eligibility is estimated from surveys including all families, whether or not they file income taxes, compared to families who did claim this tax credit.
57. Another study indicates that participation may be particularly low for Hispanics, however. See Phillips, K. Who knows about the Earned Income Tax Credit? Policy Brief B-27. Washington, DC: Urban Institute, January 2001.
58. The IRS worries more about families who are not eligible receiving tax credits than about nonparticipation. A variety of studies place the error rate in the EITC around 15% to 33%. See Liebman, J. Who are the ineligible EITC recipients? Cambridge, MA: Harvard University Press, October, 1995.
59. See note 30, Zedlewski.
60. See note 48, Acs and Loprest, table v.3.
61. Garrett, B., and Holahan, J. Welfare leavers, Medicaid coverage, and private health insurance. Assessing the New Federalism Series, No. B-13. Washington DC: Urban Institute, March 2000.
62. Giannarelli, L., and Barsimantov, J. Child care expenses of America's families. Assessing the New Federalism Occasional Paper No. 40. Washington, DC: Urban Institute, 2000.
63. See note 47, Loprest.
64. Loprest, P. How are families who left welfare doing over time? A comparison of two cohorts of welfare leavers. In Economic policy review. New York: The New York Federal Reserve, September 2001, pp. 9-19.
65. Layzer, J. Child care funding: How much is needed and is there enough? Statement presented at the Brookings Institute Forum. Washington, DC. June 13, 2001.
66. Sorensen, E., and Zibman, C. Child support offers some protection against poverty. Assessing the New Federalism Series, No. B-10. Washington, DC: Urban Institute, 2000.
67. About 70% of poor children eligible for child support were not receiving it in 1996. See note 62, Sorensen and Zibman, p. 4.
68. Brauner, S., and Loprest, P. Where are they now? What states' studies of people who left welfare tell us. Assessing the New Federalism Series, No. A-32. Washington, DC: Urban Institute, May 1999, table 8.
69. Sorensen, E., and Halpern, A. Child support enforcement is working better than we think. New Federalism: Issues and Options for States, No. A-31. Washington, DC: Urban Institute, 1999.
70. Between 1993 and 1999, child support for single mothers in the bottom fifth of the income distribution increased, on average, only from $253 to $365 (both figures measured in 1999 dollars). See note 41, Haskins.
71. Sorensen, E., and Zibman, C. Poor dads who don't pay child support: Deadbeats or disadvantaged? Assessing the New Federalism Series, B-30. Washington, DC: Urban Institute, 2001.
72. Meyers, M. How welfare offices undermine welfare reform. The American Prospect (June 19-July 3, 2000) 11(15):40-45.
73. Greenstein, R., and Guyer, J. Supporting work through Medicaid and food stamps. In The new world of welfare. R. Blank and R. Haskins, eds. Washington, DC: Brookings Institute Press, 2001, pp. 335-68.
74. Lowe, E.T. A status report on hunger and homelessness in America's cities 2000: A 25-city survey. Washington, DC: U.S. Conference of Mayors, December 2000.
75. As long as the family has an employed adult. See Greenberg, M., and Savner, S. The final TANF regulations. Washington, DC: Center for Law and Social Policy, May 1999.
76. For descriptions of these and many other strategies states use to support families, see Sweeney, E., Schott, L., Lazere, E., et al. Windows of opportunity: Strategies to support families receiving welfare and other low-income families in the next stage of welfare reform. Washington, DC: Center on Budget and Policy Priorities, January 2000.
77. Massing, M. Ending poverty as we know it. The American Prospect (June 19-July 3, 2000) 11(15):30-38.
78. Child care subsidies are funded either as direct TANF or MOE expenditures or through allowable transfers from the TANF black grant to the Child Care Development Fund. See the article by Greenberg and colleagues in this journal issue for further details.
79. For examples of states pursuing this strategy, see Mitchell, A., Stoney, L., and Dichter, H. Financing child care in the United States. Philadelphia: Ewing Marion Kauffman Foundation, 2001.
80. In 1995, on average, households with incomes below 50% of the area median income spent more than half of their income on housing or lived in severely substandard housing. See U.S. Department of Housing and Urban Development. Rental housing assistance-the crisis continues: The 1997 report to Congress on worst case housing needs. Washington, DC: DHUD, 1998.
81. In six states (Connecticut, Kentucky, Maryland, Minnesota, New Jersey, and North Carolina), the programs are statewide, but in California, the programs are located in just two counties: Los Angeles and San Mateo. In Connecticut, the program is limited to working families that lose TANF benefits due to the state's 21-month time limit. See Sard, B., and Lubell, J. The increasing use of TANF and state matching funds to provide housing assistance to families moving from welfare to work. Washington, DC: Center on Budget and Policy Priorities, February 2000.