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The New Welfare: Diversion, Sanctions, Time Limits

Lawrence M. Mead
Department of Politics
New York University

The Old Welfare

Rolls were:

  • High and rising.
  • Driven by social and economic forces.
  • Restrained marginally by work requirements.

Work programs had more influence on work levels than on dependency.

The New Welfare

Rolls are:

  • Rapidly falling.
  • Driven impotantly by policy changes.
  • Especially work requirements.

Work programs have more effect on dependency than on work levels.

The Recent Caseload Fall

Since its peak in March 1994, the federal caseload has fallen sharply:

  • From 14.4 million to under 10 million.
  • 31 percent decline.

Some states have fallen even more:

  • Wisconsin: 72 percent decline, from Jan. 1987 to Oct. 1997

The Probable Causes

1. A favorable economy.
2. Declines in coverage and real benefits.
3. Tougher work tests, producing:

  • Higher work levels
  • Diversion
  • Sanctions

4. Time limits.

I concentrate here on work effects and time limits.

Work Levels Have Risen

Reported work when recipients leave welfare has risen (some was unreported).

The share of poor single mothers who report any work rose from 44 to 52 percent between 1993 and 1996.

But only about half of those leaving welfare have earnings.

Diversion: The Largest Effect of Work Requirements

The diverted: Eligibles who fail to seek welfare or complete applications.

Diversion is driven by political dynamics and diversion programs.

Wisconsin: Diversion has almost ended welfare in some smaller counties.

  • Fond du Lac in Jan. 1987: 1,172 cases.
  • Fond du Lac in Oct. 1997: 99 cases.

Sanctions: Less Important So Far

Sanctions connote conflict with programs and rejection of recipients.

Actually, most sanctions:

  • Arise from nonparticipation
  • Are a form of diversion.

Incidence in existing programs is generally low.

But incidence may rise under TANF.

Effects of Sanctions on Recipients Appear Slight (I)

GAO study of benefit termination from sanctions or time limits in 33 states:

  • 18-49% of cases terminated returned to rolls.
  • Of cases terminated in IA, MA, and WI:

--75% had benefits from other programs.
--Of cases not returning to rolls:
        43-48% received wages, pensions, or child support.
        23-32% had earnings

Effects of Sanctions (II)

Iowa’s Limited Benefit Plan terminated benefits for some recipients

Mathematica study of economic effects:

  • Of cases cut from AFDC, 53% got a job and 47% did not.
  • 40% of cases cut increased their income, 49% reduced it, and 11% had no change.
  • On average, monthly income rose $13.

Effects of Sanctions (III)

Edin and Lein, Making Ends Meet:

  • The average welfare mother draws
  • --64% of her income from welfare.
    --15% from work, mostly unreported.
    --17% from friends and relatives.
    --4% from charity.

  • But mothers who relied on work or contacts at all realized $200 or more.
  • So mothers leaving welfare can expand these other sources of income.

Effects of Sanctions (IV)

Hardship to date appears uncommon:

  • IA, MA: Surveys found little hardship.
  • MI: Survey found more danger.
  • WI: Homelessness has risen, but by much less than caseload has fallen.

Noneconomic effects are unclear.

Further research is underway:

  • Urban Institute/Casey survey in 12 states.
  • Hudson Institute survey in Milwaukee.

Time Limits Are Unimportant To Date

The TANF time limits are still 4 years off.

Only FL and WI have reached time limits:

  • In theory, remaining cases were entitled to transitional benefits at that point.
  • But due to diversion and sanctions, very few cases reached the limits.

So diversion and sanctions matter more.

Conclusions

Work requirements have more power to drive caseloads down than we thought.

But much of the effect is due to diversion, not higher work levels.

Dependency may fall without much effect on the other problems of the poor.

In a rich society, welfare has limited leverage over lifestyle.

Paternalism is needed to realize the potential of reform.


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