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Federal welfare reform: State-level strategies

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Federal welfare reform: State-level strategies

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FEDERAL WELFARE REFORM:
STATE-LEVEL STRATEGIES
by
Michelle Steffanie Silver
A Thesis Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
MASTER OF ARTS
(Economics)
August 1997
01997 Michelle Steffanie Silver
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UMI Number: 1387830
C o p y r ig h t 1997 b y
S i l v e r , M i c h e l l e S t e f f a n i e
All rights reserved.
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UNIVERSITY C F S O U T H E R N C A L IFO R N IA
THE GRADUATE SCHOOL
UNIVERSITY PARK
LOS ANGELES. CALIFORNIA 90007
This thesis, 'written by
_______________
under the direction o f h%£. Thesis Com m ittee,
and approved by a ll its members, has been p re
sented to and accepted by the D ean o f T h e
Graduate School, in p a rtia l fu lfillm en t of the
requirements fo r the degree of
Mas.ter..o^..Ar.t.a^.„E.aQn.o.iDi.cs._______
June 4 , 1997
Dean
THESIS; COMMITTEE
7
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For my family,
proofreading geniuses
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ACKNOWLEDGMENTS
Special thanks to the following friends and colleagues
who have been generous with their time, expertise, and
encouragement: Dr. Timothy Cason, Dr. Harrison Cheng
(Chair), Dr. Elaine Bell Kaplan, Dr. A.H. Studenmund, and
Dr. Nancy Bolton.
h i
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COHTEHT8
Abstract............................. vii
Introduction......................... l
Chapter l: Theoretical Analysis...... 5
Chapter 2: Regression Analysis....... 28
Chapter 2 Appendix: Implications of the
JOB8EARCH Variable.............. 73
Chapter 2 Appendix Two: Subgroup
Regression Analysis............. 82
Chapter 3: The Future of State-Level
Welfare...................... 93
Conclusion.......................... ill
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TABLES AND FIGURES
Table
1 The Seven States in the Study and
Their JOBS Programs.............. 33
2 Selected Characteristics of the
Research Sample.................. 40
3 Comparison Between Selected Dependent
Variable and Alternative Dependent
Variables........................ 49
4 Definitions of Variables for the
First Regression................. 56
5 Data for Variables for the
First Regression................. 58
6 Definition for Variables for the
Second Regression................ 64
7 Data for New Variable for the
Second Regression................ 65
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TABLES AND FIGURES(continued)
8 Components of the JOBSEARCH
Variable......................... 75
9 Data for the Subgroup Analysis... 83
Figure
1 Simplified Depiction of the GAIN
Program Model.......... 22
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ABSTRACT
The Personal Responsibility and Work Reconciliation Act
of 1996 (H.R. 3734, "welfare reform") eliminates AFDC and
requires states to reduce welfare spending drastically or
face severe financial penalties. New and existing welfare-
to-work programs must prepare recipients to exit welfare
rolls quickly. This paper focuses on single mothers with
dependent children (AFDC-FG), the majority of welfare
caseloads in the United States.
Analysis of eight years of welfare in seven states
shows that mandatory education as a condition of benefit
receipt is strongly influential on the ability of a welfare
program to reduce the amount of welfare money needed by
participants within just three years. Education and
training is the solution to welfare reform. Mandatory
participation in employment-related activities is useless,
and should be abandoned.
State-level welfare reform must be completed quickly,
and must mandate education for recipients, or states will
face financial ruin.
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INTRODUCTION
Since the Social Security Act of 1935, the United
States has been a welfare state. Federal entitlement to
benefits for any and all citizens in need has been the norm
since the enactment of the New Deal. The passage of the
Personal Responsibility and Work Reconciliation Act of 1996
(welfare reform) has radically altered the landscape of
welfare in the United States. The New Deal's safety net has
been revoked, replaced by a program that is no longer a
viable alternative to employment. Responding to this
revolutionary change, state governments are scrambling. No
state wishes to find itself carrying the burden of its
welfare population without federal funds. This problem is
particularly urgent in California, where one-fifth of the
nation's welfare population lives.
In the context of the new welfare climate, state-level
reformers looking to replace their current laws are asking
themselves some long-delayed questions: What makes welfare
work? What should welfare be, if not a lifetime safety net?
And finally, what is the ultimate goal of a welfare program?
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Economists have long concerned themselves with the answers
to these questions; states would be wise to explore the
answers that economics has provided.
The first section of this paper does just that. When
the goal of a welfare program is to convert its participants
from welfare dependence to self-sufficiency, as it must be
in the wake of the federal welfare reform, economic theory
has much to contribute. Employment and welfare theory, when
applied to the case of the single mothers that comprise the
majority of America's welfare population, postulates that
single mothers on welfare are unemployable due to
deteriorated or inadequate skill levels. They are less-
desirable employees, who can neither pass hiring exams or
probationary work periods, according to theory. A large
body of thought has also evolved in economics regarding the
unemployable, and this theoretical structure can be applied
to the case of the modern single mother on welfare. This,
then, is the hypothesis of this paper: that a program of
education, particularly including job training, is the
solution, so that these women can learn or relearn the
skills they need to maintain jobs that will allow them to
exit welfare. Education is the answer.
There is excellent theoretical support for the use of
education as a state's primary response to federal welfare
2
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reform. The second section of this paper supplies the
empirical support. An econometric analysis of the data from
the past eight years of welfare in seven states shows that
an independent variable representing education and training
is strongly influential on the ability of a welfare program
to reduce the amount of welfare money needed by participants
within just three years. Both classroom education and job-
skill-specific training have a significant effect.
Together, the first two sections of the paper show that
enforced job training for all welfare recipients enables a
state to decrease the size of state welfare rolls without
impacting the county welfare burden. The state of
California provides an excellent example for other states.
Following the changes in California welfare law mandated by
the federal reform, both the Governor and State Controller
have proposed welfare reform plans for California (CalTAP
and WORC, respectively). By viewing the components of each
reform plan through the prism of the first two sections of
this paper, it is possible to predict which elements will be
successful in bringing California, and other states,
affordably into compliance with federal law. The third
section of this paper does just that.
Federal law requires that states reform their welfare
practices. Would-be reformers have proposed a great variety
3
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of possible solutions with little heed for their economic
outcomes. This scattershot approach is no way to rebuild
state law; what is needed is some system of analysis to
provide an orderly transition from old to new. By using
economic theory to propose a plan to reform state—level
welfare, and econometrics to test that plan, this paper
provides a useful tool for welfare reformers in California
and elsewhere.
4
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CHAPTER ONE:
THEORETICAL ANALYSIS
The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (H.R. 3734, "welfare reform"),
mandates that the percentage of a state's welfare households
that must be moved off aid and into work activities
increases from 25% by July 1, 1997, to 50% in 2002.1
Welfare recipients who are denied aid and remain unemployed
must turn to their local county General Relief funds, which
certainly cannot afford to absorb 25 to 50% of a state's
welfare caseload. State-level welfare has many categories
of welfare recipients; this paper will focus on the single
mother with dependent children, the majority of welfare
caseloads in the United States. In the state of California,
which is home to 21% of the nation's AFDC recipients,2 the
typical Aid to Families With Dependent Children (AFDC)
family is composed of a single mother with two young
1 Kathleen Connell, W.O.R.C. Force Work Opportunity Response
Commission, p. l.
2 Kathleen Connell, Controller's Quarterly, p. 5.
5
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children (designated AFDC—FG) . This is also true in general
across the country. A study of welfare reform is most
meaningful when studied in the context of these women.
Any effort by states to meet this federally mandated
deadline must address and remove the obstacles to employment
faced by these women. It is imperative to a state's fiscal
health that these women move from AFDC to work, not from
AFDC to General Relief. Of primary importance is the reason
why these women are dependent on welfare. A review of the
California situation, which features the majority of these
caseloads, sheds insight on these caseloads nationwide. The
three major reasons in California are: 1) inability to find
and keep a job that pays a salary over the poverty line; 2)
the desire to not work, and, 3) failure to receive child
support.
Some of these obstacles are forthright. Some women are
able to find and keep jobs, but cannot earn enough money to
support themselves. The Earned Income Tax Credit (EITC) is
already in place to address this. For example, a woman with
an after-tax income of $10,925 is eligible for a $3,482
EITC,3 potentially enough to keep a woman self-supporting.
However, fewer than 45% of women polled in California in
3 Jean Ross, "How Can We Make Welfare Reform Work for
California?," Controller's Quarterly, p. 10.
6
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19934 had ever heard of this incentive. A simple solution
is the use of education to widen awareness of the EITC.
Failure to receive timely child support payments is
also a major cause of welfare dependence.5 Instead of two
parents supporting a child, the child is supported by a
partnership between the mother and the state. Forcing
fathers to bear the cost of their children will greatly
relieve the state's welfare burden. The Family Support Act
of 1988 requires states to step up child support
collections, but clearly little progress has been made.6
The extra funding needed to insure enforcement of the Family
Support Act will be more than offset by the reduction in the
number of welfare recipients, as AFDC single mothers get off
of welfare. Of course, the effects of this enforcement may
not be widely felt right away. In many cases, fathers do
not pay child support because they themselves are
unemployed. Forcing employed fathers to pay helps now.
More and more unemployed fathers will end their welfare
dependency in the same way that unemployed mothers will,
however. As these men become self-supporting, it is crucial
that they are then required to share the expense of their
4 James Riccio, et al., GAIN: Benefits. Costs and Three-Year
Impacts of a Welfare-to-Work Program, p. 191.
5 Barbara R. Bergmann, The Economic Emergence of Women, p.
246.
6 Mark Robert Rank, Living on the Edge, p. 19.
7
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children. However, researchers have found that in a
majority of cases, fathers could pay. A study by Martha
Hill of divorced couples showed that only in 10 percent of
the cases where the mother was in poverty was the father
also in poverty.7
Another commonly held belief about welfare mothers is
that they do not want to work. This is untrue. In fact,
only a small percentage (0.4%)8 with children over the age
of six genuinely want a "free ride." Mandatory
participation requirements, made as a condition of receiving
AFDC benefits, are an effective tool. A woman who is
performing community service 35 hours a week in exchange for
her benefits may soon come to prefer employment.
7 Martha S. Hill, What Absent Fathers Do and Could Provide,
pp. 10 and 2 0.
8 Rank, op. cit., p. 187. In a survey of 33,000 welfare
recipients in six California counties (see pp. 16-17 of this
paper), an average of 43% were not working and not looking
for a part-time or full-time job. Only 1% of this subgroup
(0.4% of the 33,000 total) answered that they "Did not want
to work now." The other 99% of the subgroup selected
answers such as ill health, pregnancy, or school attendance.
8
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Since most single mothers on welfare wish to work and
are seeking work,9 they are dependent on welfare because
they are unable to find or keep a job, even though they may
strongly desire to do so. Other people are able to seek,
obtain, and maintain employment, while these women are
consistently unable to surmount these obstacles. A woman
who can do these things is a woman who does not need
welfare. Thus, their failure to achieve the employment
goals they set for themselves is alarming. The
characteristics of these women closely match characteristics
that employment theory has found to be inferior in the job
market (an example: a prolonged absence from the
workplace).10 When viewed through the prism of employment
theory, it is clear that these women are unemployable.
Unemployable means that a person is unable to find
appropriate job openings, beat out other candidates in an
interview process, pass the probationary period of hire,
earn a salary higher than the poverty line, and retain the
9 In the study cited in the previous footnote, 60% of 33,000
person welfare recipient sample were either working or
seeking work. As previously mentioned, only 1% of the rest
of the recipients didn't seek work because they didn't want
to work; the rest were prevented from seeking work due to
obstacles such the as failure of their child care support
systems.
10 James J. Heckman and George J. Borjas, "Does unemployment
cause future unemployment? Definitions, questions and
answers from a continuous time model of heterogeneity and
state dependence," Economica. vol. 47, no. 187, August 1980.
9
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job long enough to create a stable employment history.11
This chain of success breaks down at virtually every link
for welfare mothers.
Unemployment, welfare receipt, and absence from work
due to motherhood all compromise a person's ability to find
job offers. There is theoretical support for each of these
three factors causing harm; all three are present in welfare
mothers. A welfare mother is, by definition, out of the
workforce, and a parent. It has been shown that the
aggregate probability of ending a career interruption that
begins at childbirth diminishes rapidly with the length of
the interruption.12 As time out of work increases, wages
fall. For all women, the longer they are "full-time moms"
instead of employees, the less likely they are to go back to
work.13 This is an issue of preference, but also of
opportunity. Absence from the workforce causes a person's
skills to become dated. She is less likely to seek work,
and the deterioration of her skills makes her less likely to
qualify for a job when she does seek work. Absence from the
professional community also excludes her from the hiring
network, where job openings are passed by word of mouth and
11 John M. Barron, et al., "Job matching and on-the-job
training," Journal of Labor Economics, vol. 7, no. l, 1989.
12 William E. Even, "Career interruptions following
childbirth," Journal of Labor Economics, vol. 5, no.2, 1987.
13 Ibid.
10
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hiring is often done from within.14 Some of these women do
not know how to find job openings, according to Barbara R.
Bergmann, because they are new to the labor market.15
Welfare mothers as a group are at a disadvantage when
performing job search: having a child under the age of four
is negatively associated with the chances of employment for
female household heads.16
The "scar theory" of unemployment postulates that
workers who have been unemployed are altered by their
experience of unemployment.17 The experience of
unemployment and its duration can even cause workers to drop
out of the labor force. The unemployment experience alters
one's future probability of being employed because
individuals lose valuable work experience while they are
unemployed, and because they are marked as "losers” by
potential employers. The combination of unemployment,
motherhood, and exclusion from job search networks can be
devastating.
Tara Vishwanath, "Job search, stigma effect, and escape
rate from unemployment," Journal of Labor Economics, vol.7,
no. 4, 1989.
15 Bergmann, og. cit.. p. 2 2.
16 Rank, op. cit.. p. 125.
17 Heckman and Borjas, loc. cit.
11
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Welfare mothers are at a disadvantage when they attempt
to find job openings. When a welfare mother does discover
the opportunity to apply for a job, she is often not the
superior applicant. Many of these women do not have even a
high school diploma.18 There is a strong employer
preference for job candidates who are skilled and have
stable work histories. Few welfare mothers possess these,
let alone the ability to present themselves successfully in
an interview.
Awareness of this disadvantage compounds the problem.
Welfare mothers, knowing that they are unlikely to pass
screening tests, are less likely to apply for the best jobs.
A common hiring tool that employers use is known as "job
screening," which discourages low ability job applicants.19
Frequently, employers use a wage-tenure profile as a means
of discouraging workers that they believe are likely to quit
or be relatively unproductive, if hired, from applying to
the firm.20 Perhaps in some employers there is a belief
that welfare mothers are not appropriate candidates for
employment in their businesses; thorough screening processes
18 Riccio, GAIN, p. 18.
19 Barron, loc. cit.
20 Joseph G. Altonji and Robert A. Shakoto, "Do wages rise
with job seniority?", Review of Economics Studies. LIV,
1987.
12
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may reveal a candidate's status as a welfare mother and
prevent her from receiving a job offer.
The longer a person is unemployed, the less an employer
wants to hire him or her. Often, employers stigmatize
welfare mothers for their excessive unemployment; employers
view lengthy unemployment as signaling low productivity.
For this reason, welfare mothers are less likely to be
hired.21
Should a welfare mother discover a job opening, it is
likely that she will feel discouraged from applying, either
by the employer or by her own self-doubt. She is unlikely
to pass screening tests. Should she advance to direct
competition with other candidates in the interview process,
she is unlikely to be the best-qualified applicant.
A probationary period of supervised employment, which
is common for many new hires, is a tool that allows an
employer to "gamble” on a welfare mother. Traditionally,
the probationary worker is paid significantly less than the
permanent worker. When the probationary period is over and
the worker is hired on a permanent basis the salary level is
increased.22 Many welfare mothers can't afford to exit
21 Vishwanath, loc. cit.
22 Barron, loc. cit.
13
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welfare on the reduced salary of a probationary worker,
especially since their wages are already so low.
Another method of hiring is to hire multiple people for
a probationary period of employment, and dismiss all but the
most productive. In this extremely competitive environment,
work is simply a continuation of the interview process.23
Again, the lower-skilled welfare mother is less likely to be
the candidate chosen for retention at the end of the
probationary period. Some problems she may have include
lack of skills, especially workplace "soft skills." Women
who are successful in the workplace are able to meet job
challenges effectively (i.e., a child care network already
in place in case of emergency) , while unemployed women often
have not mastered the challenges of life as an employee.
Illness is not devastating for employees with proven track
records and company health insurance; illness makes already
inferior job candidates virtually unemployable.24 The
interview process and its accompanying probationary period
demands that a candidate perform at her best. Welfare
mothers are unlikely to possess the wide array of necessary
skills and support systems, and are therefore unlikely to be
hired permanently.
23 Ibid.
24 Bergmann, op. cit. . p. 253.
14
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Many welfare mothers have successfully completed the
probationary period, only to find that their wages are not
high enough to keep them out of poverty, and off of welfare.
The three factors which determine the wage a person earns in
a job are "person quality," "job quality," and "match
quality.25" Welfare mothers score poorly in all three
areas. "Person quality" is shorthand for a person's
performance as an employee. These women generally lack
employee and job skills. "Job quality" is certain to be
poor for these women, because their lack of skills plus
their damaging employment history bar them from better jobs.
Finally, it is unlikely that much care was taken to "match"
the woman and her "job": she is low-skilled and could fill
any of a number of unskilled labor positions. Welfare
mothers are unlikely to earn high-enough wages to keep them
out of poverty.
This low wage level tends to follow welfare mothers
from job to job, due to their lack of general labor market
experience (skill accumulation) , especially due to their low
levels of education. Not only do welfare mothers have
little skill accumulation, they also tend to be employed in
low-skill positions,26 so that any labor market experience
25 Katherine G. Abraham and Henry S. Farber, "Job duration,
seniority, and earnings," The American Economic Review, vol.
77, no. 3, June 1987.
26 Altonji and Shakoto, loc. cit.
15
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they do accumulate is low-quality. Typical low-skill
positions include working as a maid, as a janitor, or in a
laundry.27 Wages are also tied to worker productivity. The
low level of skills that these women maintain throughout
their employment history seriously compromises their ability
to experience wage growth. It is clear that a welfare
mother who overcomes the obstacles to gaining employment is
unlikely to possess the skills needed to earn a self-
supporting salary, and she is unlikely to qualify for a job
that will offer her skill accumulation and wage growth.
Welfare mothers are also more likely to experience health
problems (such as alcoholism), lack of drive, lack of
perseverance, and lack of confidence, which are likely to be
positively correlated with quits and layoffs.28 This means
that a welfare mother who is able to get a sustainable job
is not always able to keep it. This then reinforces
employers' preference for not hiring welfare mothers.
The real tragedy is that a job which enables a welfare
mother to be self-supporting may not be sustainable. This
is because most low-skilled and unskilled jobs are short
term or seasonal.29 The high rate of failure of small
27 These are the positions held by Ellen Harris, a forty-
three-year-old mother of seven, as cited in Rank, oja. cit. ,
p. 120.
28 Ibid.
29 Abraham and Farber, loc. cit.
16
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businesses in California also causes the high rate of
termination of low-skill employees: 97% of these firms
employ fewer than 200 people.30 In California, most of the
low-skill jobs are in groups of three or four employees in
small businesses, as opposed to the more traditional
Northeast factories, where thousands of low-wage jobs may be
held at one company.31
Being a welfare mother is a self-perpetuating destiny:
by circumstance, she is only able to work at jobs which are
unstable or do not offer wage growth. Even should she
overcome great odds to succeed at one of these dead-end
jobs, her possession of one of these jobs may do her more
harm than good.32 She will soon find herself unemployed and
most likely back on welfare, and her employment history will
be marred by yet another high-turnover incident. Her next
potential employer may see her spotty job history and decide
not to pay to train a person who has a pattern of leaving
jobs after short periods of time.33 This sense of being
•'stuck" by low-wage jobs is keenly felt among these women:
"There are only so many good-paying jobs that exist in this
society, and there are tons and tons of minimum wage jobs.
30 Connell, WORC. p. 12.
31 Ibid.
32 Rank, loc. cit.
33 Altonji and Shakoto, loc. cit.
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And as long as we expect people to work them, there are
gonna be people who can't make it without help. There's
only so many people can rise to the top, and then no more
can," said Cindy Franklin, a welfare mother struggling to
exit welfare.34
The problem is clear: welfare mothers are welfare
dependent because they are unemployable. At every step of
the job process, lack of skills prevents them from obtaining
and maintaining work. They are unable to pass employment
tests, survive a probationary period, or keep a job that
pays a living wage. If these women are removed from the
state welfare rolls, they will be unable to find jobs.
County General Relief Funds will be bankrupted by this surge
in support demand. The only viable solution is also the
simplest one: these women must be made employable. They
must be educated to find work and pass interviews, to
function well in an office, and to strive for advancement.
They must also be educated with basic skills, so that they
are able to pick up skills on the job, gather labor market
experience, and use their higher levels of human capital to
command ever better jobs and higher salaries.
These women cannot compete in the job market because
they lack not only job skills, but soft skills as well. Job
34 As interviewed in Rank, op. cit. . p. 127.
18
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skills include word processing, or cash register operation;
soft skills include knowing to speak politely in an office,
or to consistently show up for work when scheduled. An
excellent example is the welfare program in Riverside
County, CA. In Riverside County, the Greater Avenues for
Independence (GAIN) program has been assisting inferior
applicants to become superior applicants, and to find and
keep jobs, all at considerably less expense than comparable
programs.35 Through job training, these women have
increased their value to employers so that they are worth a
higher than poverty wage.
Welfare-to-work via education and job training has been
the cornerstone of welfare in America for over fifteen
years. The Job Opportunities and Basic Skills Training
(JOBS) Program, created by the Family Support Act of 1988,
has encouraged states to create mandatory welfare employment
programs for different segments of the Aid to Families with
Dependent Children (AFDC) caseload.36 These programs seek
to increase earnings and decrease dependence on welfare.
Many of these programs have used education and job training
as a means to this end. As more data becomes available, it
35 Riccio, GAIN, p. vi.
36 Daniel Friedlander, Subgroup Impacts and Performance
Indicators for Selected Welfare Employment Programs, p. vii.
19
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is becoming clear that in the JOBS program, the greater the
emphasis on education, the more successful the program.
An excellent model of this kind of a program is the
Greater Avenues for Independence (GAIN) program in Riverside
County. GAIN is California's version of JOBS and has
operated as California's JOBS program since July 1989. By
applying these principles, GAIN has greatly improved the
quality of jobs its participants obtain. In Riverside,
there has been a strong push towards quickly educating
participants to work. Welfare mothers in Riverside County
are able to exit welfare altogether, and become self-
supporting, following the intervention of welfare-promoted
education and job training. Riverside's focus on education
training has been a key to its success.37 Using education
and mandatory job training, Riverside GAIN has had success
in meeting the goal of self-sufficiency for its
participants.
The results of the Riverside GAIN program hold true
across the spectrum of JOBS programs. JOBS programs of this
sort are so effective because there is an educational
component in every level of service, which is made a
condition of receiving welfare benefits. The path taken by
new recipients in Riverside is typical of JOBS programs
37 Riccio, GAIN, p. 293.
20
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(Figure 1) : new recipients may be exempt from JOBS if they
undertake self-initated education or training. Otherwise,
they are moved into a cycle of basic education. Once they
have met the requirement for English as a Second Language,
Adult Basic Education, and High School Equivalency (as
needed), they are moved forward to the job search phase.
However, until such time as they obtain permanent employment
that removes them from the JOBS program, they must
constantly combine job search with job skills training
classes, vocational education, or post-secondary education.
Across the country, states such as Florida and Illinois are
shifting to education-intensive, GAIN-style JOBS programs.38
As the JOBS program shows, education and job training
is the bridge that carries women from welfare to work. Some
of the most popular propositions for helping welfare mothers
exit welfare have not been successful because they ignored
this. For example, there has been a great deal of interest
in ’ ’job creation."39 This misses the point: welfare mothers
already have the opportunity to work (although at lousy
jobs) . They are simply unable to earn high enough wages or
to keep these jobs. Offering additional jobs will not
change their skill level. While a program that creates
38 Friedlander, Subgroup Impacts, p. 14
39 Connell, WORC. p. 12.
21
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FIGURE 1
SIMPLIFIED DEPICTION OF THE GAIN PROGRAM MODEL
i- s
O 3 *
O S .
i*
■ "O
P X
Source: Riccio, James, et al., GAIN: Benefits,, Costs, and
Three-Year Impacts of a Welfare-to-Work Program. New
York, Manpower Demonstration Research Corporation,
September 1994, p. 4.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
"make work” jobs for these women might help, their paychecks
essentially are welfare.40 It is unlikely that these jobs
will permit them to accumulate valuable skills. When the
state stops propping up these created jobs, welfare mothers
will need to return to welfare once again.
Another proposed solution has been increasing the
minimum wage. This way, a welfare mother who finds a job
will be more likely to earn a wage above the poverty line.
However, instituting a minimum wage confuses price with
worth. Requiring women to earn more doesn't make them more
valuable, it makes them costlier. If these women were
employable, a minimum wage solution might be worth
considering. In this case, however, it just widens the gap
between the quality of low-skilled work they can perform and
the quality of low-skilled work they will be expected to
perform. They will be even less likely to possess the
greater skill levels required, and will be even less likely
to pass employment tests or interviews.
Low-skilled workers can't earn enough to support
themselves because their marginal productivity is very low.
Education and job training is the best solution to this
problem. When people have skills, employers are willing to
40 Daniel Friedlander, et al., Arkansas: The Demonstration
of State Work/Welfare Initiatives, p. 77.
23
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pay them more. This benefits low-skill workers who are
capable of becoming high-skill workers. In the case of low-
skill workers who are just not capable of becoming high-
skilled, it is not possible to raise their marginal
productivity. From a supply and demand perspective,
education is still an excellent solution: employers pay
low-skill workers very little, because they can: there is a
glut of low-skilled labor on the market. By training those
who are trainable, some low-skilled workers are converted to
high-skill workers; this reduces the supply of low-skill
workers.41 When people are trained, they are eligible for a
larger pool of jobs than before. This training and
expansion continues until hiring is complete.42 In fact,
the California Bureau of Labor Statistics estimates that 60
percent of the new jobs in the U.S. over the next decade
will require no more than a high-school degree and minimal
or no on-the-job training.43
While it is possible to use economic tinkering to
change the amount of welfare mothers in this way, there is
substantial support in welfare and employment theory for the
use of education and job training as a primary solution to
41 R.A. Jackman and P.R.G. Layard, "The efficiency case for
long-run labour market policies," Economica, vol. 47, no.
187, August 1980.
42 Ross, op. cit. . p. 9.
43 Ibid.
24
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moving welfare mothers from dependence to work. A program
which emphasizes classroom learning such as vocational
training, post-secondary education, or pursuit of education
credentials, will probably produce more successful job
candidates; it is important, therefore, that all basic
education needs are met, so that all participants are
eligible for this more advanced training. Also, it is
useful to link advanced training to welfare receipt, which
will increase the number of recipients who pursue this
option.44 Recipients who do not wish to receive higher
education are then motivated to exit welfare sooner.
Returning to the JOBS example, some things are
altogether unimportant to a program's success.45 The
characteristics and differences of the people who
participate in the program has very little effect.
Regardless of their skills or motivation, education makes
everybody better off.46 Also, it doesn't matter if
participants are in a rural or urban environment; the
training can be adjusted to meet the needs of the local
economy.47
44 Riccio, GAIN, p. 30.
45 Ibid. , p. 279.
46 Ibid. , p. 292.
47 Ibid. , p. 278.
25
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In an era of ever-shrinking federal funds, job training
must be considered from a cost-benefit perspective.
Although training is expensive, it is not nearly as
expensive as supporting an unemployable person for her
entire life. It is also a bargain when compared to the
expense of bailing out bankrupt counties attempting to bear
the burden of the unemployable. Education and job training
is an expense that is entirely justified. It is worth
noting, however, that the Riverside County, CA, GAIN program
set a new standard of achievement, returning taxpayers $2.84
for each $1 invested.48 Even with the expense of an intense
focus on education, with 20.7%49 of recipients participating
in basic education alone, the Riverside GAIN program has
become one of the best values in the history of California
welfare.
The problem with welfare today is that the majority of
welfare recipients are single mothers, who are largely
unemployable. Federal reforms have mandated that these
women be removed from state welfare rolls; this means that
they must be made employable. This, then, is the
theoretical hypothesis which may or may not be supported by
empirical analysis: that education, particularly skills
training, is the solution to the problem, as suggested by
48 Ibid., p. vi.
49 Ibid., p. 41.
26
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the analysis of economic theory above. That is, in an
environment where education is widely available, welfare
mothers can end their welfare dependence. The hypothesis
implies that when all welfare mothers are participating in
education and job training, the states will be able to
reduce their welfare rolls. This is the hypothesis which is
tested in Chapter 2.
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CHAPTER TWO:
REGRESSION ANALYSIS
There is substantial support in welfare and employment
theory for the use of job training and education as a
primary solution to moving welfare mothers from dependence
to work. This hypothesis is also supported by empirical
evidence.
An excellent opportunity to illustrate this is provided
by national data on state-level welfare-to-work programs.
The federal Omnibus Budget Reconciliation Act (OBRA) of 1981
enacted a number of changes in the AFDC program and gave
states expanded authority to plan and carry out initiatives
to increase the linkage between welfare and work. In
particular, the act allowed states to reorganize the
management of the Work Incentive (WIN) Demonstration
Program, the major federally-funded employment program for
AFDC recipients.50 This was broadened considerably when the
Family Support Act (FSA) was passed in 1988. As the
50 Friedlander, et al., Arkansas, p. 1.
28
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centerpiece of the FSA, the Job Opportunities and Basic
Skills Training (JOBS) Program provided new federal matching
funds for state welfare-to-work initiatives aimed at
increasing the employment and self-sufficiency of applicants
to and recipients of Aid to Families with Dependent Children
(AFDC), the major federal and state cash welfare program.51,52
To bolster this additional investment, JOBS extended
the mandates to AFDC applicants and recipients with children
as young as three years old (one year old, at state option)
and strengthened the rules requiring all participants to
take jobs or engage in activities leading to employment.
However, it left states with considerable flexibility to
design service delivery strategies and to set priorities for
the level and emphasis of their investment in JOBS.53 There
exists a version of JOBS (often named WORK) in every state;
for example, the State of Florida's is named Project
Independence, while JOBS is called the WORK Program in
Arkansas.
51 James J. Kemple, et al. , Florida's Project Independence,
p. ES-1.
52 As the reader is well aware, the Personal Responsibility
and Work Opportunity Reconciliation Act of 1996 eliminated
AFDC, replacing it with Temporary Assistance to Needy
Families (TANF). Please refer to Chapter Three of this
paper for a complete review and analysis of the effects of
this change.
53 Kemple, loc. cit.
29
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A good example of a state-level JOBS program is
California's Greater Avenues For Independence (GAIN)
program. While GAIN is a statewide program, it is
administered by each of the 52 counties individually,
allowing for great variation in implementation. For
example, Riverside County focuses almost exclusively on
finding immediate employment for each participant, while
Alameda County strongly promotes "human capital" development
first.54 This variety in implementation across programs
allows analysis of the link between the success of JOBS and
the different versions of JOBS unique to each state, and to
each county within a state.
County-level data from states across the nation makes
an excellent foundation for empirical analysis. As
mentioned above, JOBS is generally shaped on the state
level, but formed and administered on a county-by-county
basis. This yields a variety of success rates; as the
econometric results will show, these results are often
correlated with the degree of emphasis placed on education
in a particular program.
Econometric analysis of national, county-level welfare
data provides excellent empirical support for the hypothesis
that education, particularly including job training, is the
54 Ibid., p. 5.
30
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key to moving single mothers on welfare off the welfare
rolls. With the selection of an appropriate dependent
variable, and the use of a few well-chosen, theoretically
mandated independent variables, regression analysis supports
the hypotheses of the first part of this paper.
The best models are those on which much care has been
spent developing the theoretical underpinnings, and only a
short time has been spent pursuing alternate estimations of
that equation. That is, the fewer regressions run, the more
reliable and consistent the estimates.55 Therefore, the
majority of this chapter is devoted to specification of one
regression run. This equation is theoretically sound enough
that it is possible to limit respecification of the
regression to a single theoretically justified alternate
estimation.
55 A.H. Studenmund, Using Econometrics, pp. 413-414.
31
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DATA
Data on the implementation of welfare in various states
is maintained by each individual state's Department of
Social Services or an equivalent agency. The Manpower
Demonstration Research Corporation (MDRC) is responsible for
conducting multi-year evaluations of JOBS for individual
states. Recent performance reviews by MDRC provide
excellent data on the nature of each state's JOBS program.
By reviewing the MDRC reports, it is possible to select
twenty-one comparable welfare administration regions for
analysis. These twenty-one regions (almost exclusively
counties) are drawn from seven states which demonstrate a
strong similarity in their approach to JOBS, while
maintaining a useful variance in emphasis: Arkansas,
California, Florida, Illinois, Maryland, Virginia, and West
Virginia. Table 1 lists each of the twenty-one counties or
comparable welfare administration regions, and details the
key differences in their approaches. Interestingly, the use
of education, including job training, varies considerably
across states and counties. For example, 27.8% of the study
group of Hillsborough County, FL, participated in education
or training56, while 42.3% of the study group of Alameda
56 Kemple, op. cit.. p. 150.
32
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TABLE 1
THE SEVEN STATES IN THE STUDY
AND THEIR JOBS PROGRAMS
Arkansas began operating the WORK Program for single heads
of households receiving or applying for AFDC in October
1982. The program consists of a fixed sequence of required
activities: a two-week group job search, or job club,
followed by up to 60 days of individual job search.
Enrollees who are still unemployed after both activities are
assigned to an unpaid work experience position for up to 12
weeks. On completion of this sequence, participants can be
reassigned to any program activity. Mandatory participation
status applies to mothers of children age three or older.
Almost all of these single parents were women, with the
majority (86%) black. Half had never been married; one-
fourth had, but were not living with their spouses; and
another one-fourth were divorced or widowed. More than half
had children between ages three and five, and half had never
attained a high school diploma or its equivalent. Random
assignment began on June 20, 1983, and continued through
March 31, 1984, during which time 1,153 applicants and
recipients entered the main research sample. (Jefferson
County/Pulaski South)
California has the country's biggest AFDC caseload and
operates the nation's largest welfare-to-work program, the
Greater Avenues for Independence (GAIN) program. GAIN began
operating in 1986 with a mixed service strategy: a strong
and pervasive employment-focused message (including the
active use of job developers) , a balanced use of basic
education and job search, and adequate resources and
commitment to extend a serious participation mandate to all
GAIN-eligible people on welfare. GAIN uses educational and
basic skills levels to sort registrants into one of two
service streams. Those deemed by GAIN to be in need of
basic education must participate in basic education classes,
then job search, while those deemed to not be in need of
basic education must participate in job search first. After
July 1989, GAIN'S participation mandate was extended to
single parents with children 3 to 5 years old at the time of
orientation. The California sample is composed entirely of
single heads of households, primarily female, and varies
(continued)
33
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TABLE l (continued)
widely in racial and ethnic composition. On average, 50% of
the sample did not have a high school diploma or GED. The
22,971 members of the research sample were enrolled in GAIN
between March 1988 and June 1990. (Alameda County, Butte
County, Los Angeles County, Riverside County, San Diego
County, Tulare County)
Florida created Project Independence with the Florida
Employment Opportunity Act of 1987, and it became Florida's
JOBS program in 1988 following minor modifications.
Participation requirements cover all of the state's single
parents (the vast majority of them women) with children age
three or older. Project Independence emphasizes relatively
low-cost, independent job search services for the majority
of its participants and reserves its more expensive
education and training services for those considered least
able to find work on their own. The 18,000-member research
sample includes all individuals who were determined to meet
the state's criteria for mandatory participation in Project
Independence between July 1990 and August 1991. Project
Independence features a two-track system: "job ready"
entrants (those with at least a tenth grade education, for
example) begin with a few loosely supervised two-week
periods of independent job search, followed by job club
participation. Entrants who are not "job ready" are placed
in basic education services. All recipients not working a
minimum of 30 hours per week are required to participate in
one of these two tracks. The evaluation began in July 1990
and ended in September 1993, when Florida had a welfare
caseload of 175,000. The sample contained few women with
preschool age children. 52% of the sample had a high school
diploma or GED. (Bay County, Broward County, Dade County,
Duvall County, Hillsborough County, Lee County, Orange
County, Pinellas County, Volusia County)
Illinois operated the WIN Demonstration Program (WDP)
statewide from 1982 until late 1985, when with minor
modifications it became Project Chance. The first component
of WDP is Independent Job Search (IJS), a mandatory two-
month period of self-directed job search. Those who
complete the job search period without finding jobs are
required to work in unpaid positions for three months.
Education and training activities are only engaged in by
(continued)
34
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TABLE 1 (continued)
clients who make arrangements on their own initiatives. In
the second group, IJS is joined with the Illinois Work
Experience Program (IWEP), which included further job
experience and education. There is no crossover between the
IJS and IJS/IWEP groups. All recipients must participate in
IJS at least once, and there is no job club. Participation
is mandatory for single parents whose youngest child is six
years of age or older. Seven out of eight sample
members were female, and almost three-quarters were black.
Registration of the 11,912 research sample began in February
1985 and ended in June 1986. (Cook County I [IJS], Cook
County II [IJS/IWEP])
Maryland has established nine special demonstration
projects, known collectively as the Employment Initiatives,
for its AFDC recipients: in Baltimore County, Maryland has
operated the Options Program since October 1982.
Participation is mandatory for single heads of households
whose youngest child is six years old or older. Due to
exceptionally high funding levels, group job search, work
experience and training positions have been all but
eliminated from the Baltimore Options Program. Activities
largely revolve around staff periodically calling in
registrants for counseling and referral to jobs. Basic
education is encouraged, but no enrollee is allowed to
participate more than one time in classroom skills and on-
the-job training. The hallmark of the Baltimore program is
individualization of services. The total sample was
primarily female (90%); the majority (approximately 70%)
were black. Less than 10 percent were married and living
with a spouse. More than half had not received a high school
diploma or its equivalent. The main Baltimore research
sample consists of 3,172 welfare applicants and recipients
who were randomly assigned between November 15, 1982 and the
end of December 1983. (Baltimore County)
Virginia developed the Employment Services Program (ESP) in
January 1983, with single-agency management authority vested
in the state-level welfare agency. ESP consists of a series
of activities for AFDC applicants and recipients: the first
activity is mandatory job search, followed by non-mandatory
education and training. ESP is operated statewide,
(continued)
35
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TABLE l (continued)
targeting all mandatory individuals. All assignments are
limited to 13 weeks, although participants may be
reassigned. Participation is mandatory for single heads of
households whose youngest child is six years old or older.
The sample consisted entirely of single female heads of
households, with blacks predominating, most of whom had not
completed high school. The research sample consists of 3,184
participants, those randomly assigned from August 1983
through September 1984. (State of Virginia)
West Virginia has administered a Community Work Experience
Program (CWEP) to single AFDC parents since July 1983. In
West Virginia, workfare is pursued as the primary component
of CWEP. Work is required for the maximum allowable time,
and the work obligation lasts as long as the recipient
receives benefits. The statewide program is essentially
workfare; no other major services are offered. Practice of
CWEP is strictly uniform across the state. Funding is
provided for day care. Participation is mandatory for omen
with children age six or older. Half the sample had
completed high school, and the sample was over 90% white.
The full research sample consists of 3,694 welfare
applicants and recipients who were randomly assigned between
March 1983 and April 1984. (State of West Virginia)
Sources: Arkansas: The Demonstration of State Work/Welfare
Initiatives. GAIN: Benefits. Costs, and Three-Year
Impacts of a Welfare-to-Work Program. Florida/s Project
Independence. Illinois: The Demonstration of State
Work/Welfare Initiatives. Maryland: Final Report on the
Employment Initiatives Evaluation. Virginia: The
Demonstration of State Work/Welfare Initiatives, and
West Virginia: The Demonstration of State Work/Welfare
Initiatives.
36
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County, California, participated in education or training,57
within two to three years of entering the JOBS program.
JOBS welfare programs are almost always administered on
a county-by-county basis within each participating state.
That is, while the state is the agent responsible for
outlining the basics of that state's welfare-to-work
program, counties generally have a great deal of autonomy in
choosing which elements to emphasize, and those on which to
focus less strongly. An exception to this, the State of
West Virginia, is included in the sample. In the case of
West Virginia, which has 21,000 welfare caseloads
annually,58 the state maintains.nine welfare offices
statewide, each of which is strictly monitored to provide
services which are consistent with those of the other
offices. In this case, West Virginia is analogous to
Baltimore County, MD, which has 41,484 annual caseloads59
and 18 offices,60 similarly structured. Due to the
unusually high degree of homogeneity in this case, it is
appropriate to treat West Virginia as a single observation
57 Riccio, GAIN, p. 41.
58 Daniel Friedlander, et. al., West Virginia: The
Demonstration of State Work/Welfare Initiatives, p. 1.
59 Daniel Friedlander, et al., Maryland: Final Report on the
Employment Initiatives Evaluation, p. 16.
60 Friedlander, Subgroup Impacts, p. 17.
37
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on par with the other observations, which are generally on a
county level.
There are three other notable exceptions to the county-
level data set: the observations for Arkansas, Illinois, and
Virginia. The observation for Arkansas is actually more
than a single county. In both record keeping and program
administration, the southern part of Pulaski County, AR,
(which contains the capital city of Little Rock) has been
annexed to nearby Jefferson County, AR. Because the two
regions have been united into a single welfare
administration region by the state of Arkansas, they appear
here as a single observation, Jefferson County/Pulaski
South, AR.
The case of Cook County, IL, (which contains the city
of Chicago) is just the opposite: Cook County maintains two
entirely distinct welfare programs, into which recipients
are randomly assigned. The separation is so discrete that
it is possible to divide Cook County into two separate
observations, Cook County I and Cook County II.
Finally, in the case of Virginia, the caseload of the
entire state is both so small and so homogenous, in both
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population characteristics and welfare administration61 that
the entire research sample of the state (3,18462) has been
consolidated into a single observation. Considering how
small the state is, in both size and population, this seems
entirely appropriate.
The study was of applicants for, and recipients of,
AFDC in these seven states whose participation in JOBS was
mandatory, i.e., a condition for receiving their full
welfare grant. To determine the effects of JOBS, mandatory
registrants who attended an orientation to the program were
randomly assigned to either an experimental group (who were
subject to JOBS's participation mandate) or a control group
(who were precluded from JOBS but could seek other services
in the community) .63 This random assignment was performed
on the county level in these seven states. The difference
between outcomes for the two groups (control and
experimental) is the measurable improvement caused by the
JOBS program of that state and/or county. There is a great
degree of homogeneity within the two groups (experimental
and control) across the counties (Table 2). This means that
the effects of JOBS on the two groups will be comparable.
61 James Riccio, et al., Virginia: The Demonstration of
State Work/Welfare Initiatives, p. 3.
62 Ibid. p. 15.
63 Riccio, GAIN, p. 4.
39
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TABLE 2:
SELECTED CHARACTERISTICS OF THE RESEARCH SAMPLE
CALIFORNIA
Percent who thought
that a participation
mandate was a "good
idea" or a "very good
idea" Alameda Butte
Los
Angeles
experimentals (%) 55.4 64.8 64.5
controls (%) 55.2 63.3 73 .0
difference 0.2 1.5 -8.5
Riverside San Diego Tulare
experimentals (%) 71.4 77.6 67.2
controls (%) 71.0 72.7 68. 0
difference 0.4 4.8 -0.7
Strongly agreed (7-10
on a 1-10 scale) that:
"Making welfare mothers
work if they don't want
to is bad for their
children" Alameda Butte
Los
Angeles
experimentals (%) 25.4 24.3 25.1
controls (%) 22.4 21.4 26.5
difference 3.0 2.9 -1.4
Riverside San Diego Tulare
experimentals (%) 27. 0 20.7 24. 6
controls (%) 25. 6 26.2 25.2
difference 1.4 -5.5 -0.6
(continued)
40
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TABLE 2(continued)
CALIFORNIA (continued)
Percent in found to be
in need of basic
education Alameda Butte
Los
Angeles
experimentals (%) 67.5 84.8 58.2
controls (%) 69.5 71.2 56.7
difference -2.0 13 .6 1.5
Riverside San Diego Tulare
experimentals (%) 56.7 60.7 67.9
controls (%) 56.2 62.3 66.2
difference 0.5 -1.6 1.7
ILLINOIS
Cook County
I
Control Difference
Age(%):
Less than 18 9.6 10.4 -0.8
18 - 24 15.3 15.5 -0.2
25 - 34 46.3 44.9 -3.6
35 - 44 20.2 21.1 -0.9
45 or older 8.8 8.1 0.7
Cook County
II
Control Difference
Age(%):
Less than 18 9.1 10.4 -1.3
18 - 24 17.1 15.5 1.6
25 - 34 45.5 44.9 0.6
35 - 44 20.4 21.2 -0.8
45 or older 8.0 8.1 -0.1
(continued)
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TABLE 2(continued)
ILLINOIS (continued)
Cook County
I
Control Difference
.
Ethnicity (%)
White, Non-
Hispanic 16.1 15.6 0.5
Black, Non-
Hispanic 71.8 71.8 0.0
Hispanic 11.0 11.6 -0.6
Other 1.1 1.1 0.0
Cook County
II
Control Difference
Ethnicity (%)
White, Non-
Hispanic 15.5 15.6 -0.1
Black, Non-
Hispanic 72.5 71.8 0.7
Hispanic 10.9 11.6 -0.7
Other 1.1 1.1 0.0
Cook County
I
Control Difference
Ever received
AFDC during
10 months
prior to
random
assignment(%) 67.8 68.7 -0.9
(continued)
42
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TABLE 2(continued)
ILLINOIS (continued)
Cook County
II
Control Difference
Ever received
AFDC during
10 months
prior to
random
assignment(%)
69.2 68.7 0.5
Cook County
I
Control Difference
Ever employed
during four
quarters
prior to
random
assignment
(%)
31.2 31.7 -0.5
Cook County
II
Control Difference
Ever employed
during four
quarters
prior to
random
assignment
(%)
30.5 31.7 -1.2
(continued)
43
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TABLE 2(continued)
ILLINOIS (continued)
Cook County
I
Control Difference
Average
earnings
during four
quarters
prior to
random
assignment
($)
1310.45 1255.32 55.13
Cook County
II
Control Difference
Average
earnings
during four
quarters
prior to
random
assignment
($)
1238.40 1255.32 -16.92
Sources: Riccio, GAIN, pp. 47 and 62; and Friedlander,
Illinois, p. 29.
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In this way it is possible to link a county's use of
education and job training to the effectiveness of that
state's JOBS program.
The data used in this study came from a variety of
sources, including automated employment, earnings, and
welfare records for the full sample, a registrant survey
administered two to three years after orientation to a
subsample of experimentals and controls, and program
participation and fiscal information obtained from the
counties and various state agencies.64 All of the data is
measured for the time period following a recipient's
participation in JOBS orientation. Because of this, the
actual dates of the observations are staggered from the mid
1980s to the early 1990s. The data is adjusted for this by
measuring all effects within the context of the period of
participation. The depth and breadth of the data maintained
on nationwide state JOBS programs by MDRC provides an
excellent selection of appropriate variables for econometric
analysis.
64 Ibid. , p. 5.
45
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DEPENDENT VARIABLE:
For the purpose of this paper, the aim of a successful
JOBS program is to significantly decrease the amount of AFDC
payments received by participants. This is essential
because it represents a reduction in the amount of welfare
money needed by a participant. While the many positive
effects of a JOBS program that combine to make a participant
able to exit the welfare rolls (job success, increased
income, greater self-esteem) may be unmeasurable, the
results of these effects are the same: a decreased
dependence on welfare, and thus a reduction in the amount of
AFDC payments received. In order to measure the
effectiveness of a given JOBS program, the average total
AFDC payments of JOBS participants are compared to the
average total AFDC payments of welfare recipients in each
county (those who were precluded from JOBS). This
difference is the dependent variable, AFDC.
AFDC was selected as the dependent variable for several
reasons. The first is that AFDC represents measurable steps
towards exiting the welfare rolls. A recipient who is
reducing the amount of AFDC needed will eventually need no
AFDC at all. AFDC proxies for this rise to self-
sufficiency. Second, the severe decrease in federal AFDC
(now TANF) spending mandated by the Personal Responsibility
46
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and Work Opportunity Reconciliation Act (welfare reform) of
199665 will shortly force JOBS programs to operate on ever-
shrinking budgets. In order to remain functional, JOBS
programs must be able to quickly reduce the need for AFDC in
its participants. The twelve-quarter (three year) study
period reflects the shift in state and federal attitudes
towards minimizing the amount of time recipients receive
benefits66. Measurement of this variable over a 5 to 7 year
horizon is less useful in today's political climate.
It is essential to note that this decrease in AFDC
payments is reflecting a decrease in a participant's need
level. This does not refer to reduced payments caused by a
decrease in the supply of AFDC monies; it refers to a
reduction in the amount of welfare money demanded by
participants. It is also important to note that AFDC
measures the difference between the percent decrease in the
control group and the experimental group, not the overall
decrease. When a JOBS program is successful, experimentals
will experience a greater decrease than controls, so the
difference will widen. In a successful JOBS program, the
difference grows, so AFDC increases. In fact, the higher
AFDC is, the more successful a program is (by this measure) .
65 Please refer to Chapter Three.
66 Otto Solorazno, Budget Officer of LA County DPSS, in a
speech delivered to the UCLA Quarterly Anderson Forecast
Conference in Los Angeles, September 18, 1996.
47
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Three alternate measures of "success” in welfare
programs were considered and rejected. First, percent of
JOBS participants earning an income above the poverty line
after three years. Second, percent increase in average
total earnings in the first three years. Third, the percent
of JOBS participants both employed and off AFDC by the end
of year 3 (measured as the difference between percent of
JOBS and non-JOBS participants who have achieved this)
(Table 3).
Although it would seem that the goal of a JOBS program
is to enable participants to earn incomes above the poverty
line, as a dependent variable it is all but useless. There
is no constant nationwide poverty line; it varies from urban
areas to rural areas, and is enormously influenced by the
non-income social services made available by a JOBS program,
other welfare program, or private charity. For example, a
single mother with two children has income above the poverty
line if she is earning $10,000 year, if she is in the State
of California, availing herself of state-sponsored child
care, and is using the Earned Income Tax Credit.67 This, of
course, is completely irrelevant to a single mother in
Virginia. Since it is impossible to define what constitutes
an above-the-poverty-line income in any standard way, the
variable is useless in a regression.
67 Ross, loc. cit.
48
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TABLE 3
COMPARISON BETWEEN SELECTED DEPENDENT VARIABLE AFDC
AND ALTERNATIVE DEPENDENT VARIABLES
Variable Definition
APDC The difference between the average
total AFDC payments received by
controls and experimentals during the
12 quarters following orientation.
INCOME The difference between the percent of
controls and experimentals who are
earning $10,000 or more in year three
of participation in the GAIN program.
% INCOME The percentage change in the
difference between average total
earnings of experimentals and
controls, three-year total.
OFFAPDC The difference between the percent of
controls and experimentals both
employed and off AFDC at the end of
year three.
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While percent increase in total earnings measures the
absolute effectiveness of JOBS in increasing the earning
power of experimentals versus controls, this does not
measure JOBS's success at its stated goal, that of
permanently enabling welfare recipients to exit the welfare
rolls. Rather than being an absolute measure of JOBS's
impact on income, it is heavily influenced by the original
income levels and earning abilities of the JOBS participants
at their time of entry into the program. It is useful to
know which GAIN programs are most effective in increasing
income, because this reflects the possibility that
AFDC payments may be reduced. However, given the wide range
of original earning levels upon entry to JOBS, measurements
of relative increases in earnings do not provide much useful
information.
The other potential dependent variable is the
difference in percentage of JOBS and non-JOBS participants
that are employed and receiving no AFDC at the end of year
three. While an ideal JOBS program would have this as an
aim, this is a needlessly high goal. Many recipients who
have earnings above the poverty line still receive AFDC.
Welfare-to-work is structured so that recipients who are now
able to support themselves may remain eligible for
supplementary support services, such as child care vouchers
for children under 13. For single mothers on welfare, these
50
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benefits assist women who are able to support themselves,
except for these costs. A women who is capable of
supporting herself but receives child care vouchers will
become a woman who is off the welfare rolls once her
youngest child is 13. According to this dependent variable,
a woman with a 10 year old in subsidized day care is a
"welfare mom", while a woman with a 14 year old able to look
after himself is a "success story," even if both women earn
the same (above the poverty line) income. Clearly, for the
purposes of this analysis, this is splitting hairs - in
three years, and with zero additional JOBS involvement aside
from the vouchers, the first woman becomes a "success story"
and the JOBS program in her county has increased its success
rate.
Measuring the increase in income caused by JOBS
participation isn't meaningful, whether it is measured
against a benchmark or against the income level of others;
measuring both employment and exit from AFDC is too
stringent a measurement. The ability of a JOBS program to
enable recipients to require decreasing levels of welfare
money is a reasonable and appropriate dependent variable.
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INDEPENDENT VARIABLES:
* education - A very important factor in the success of a
welfare program, according to theory, is the strength of a
program's educational emphasis. This includes both "soft
skills" training as well as traditional classroom
instruction. In most JOBS programs, this begins by
requiring those in need of basic education to attend special
classes - English as a Second Language, Adult Basic
Education, or High School Equivalency. Clearly, a person in
need of any of these three programs is at a serious
disadvantage in the workforce. Also available are
postsecondary and vocational training programs.
Education serves a primary purpose: by increasing the
skill level of a participant, that person is made
competitive in the work force. Further, the acquisition of
skills increases a person's marginal output and thus their
salary. As skill level increases, the amount of AFDC
required by a participant will decrease.
Education also has two indirect benefits. First,
educational accomplishment provides side benefits to the
participant: an increase in self-esteem, a better attitude.
This increased confidence may motivate a participant to try
harder to keep and maintain work. Second, in some cases,
52
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participants already possess basic skills that would enable
them to find work, albeit work which is inferior to
employment obtainable with further education. Many JOBS
participants, when required to return to school, dislike
school so intensely that they exit the JOBS program
altogether, i.e., accept lower-paying employment.68 This
"deterrence effect" helps reduce the welfare caseload to
only the most needy and motivated participants.69
Clearly, the most useful function a JOBS welfare-to-
work program can provide is to educate its participants, to
teach them employable skills. The difference between the
percent of controls and experimentals who ever participated
in education or training within 12 quarters after
orientation is the independent variable EDUCATION.
* job development efforts - For welfare recipients, who have
demonstrated their inability to find and keep jobs, this an
essential part of a welfare program. A program may provide
"job clubs" to provide information about job openings,
subsidize the additional costs incurred by employers (for
attendance monitoring, for example), or actually solicit
employment offers on behalf of participants. Many JOBS
participants are sub-par job candidates: they lack skills,
68 Riccio, GAIN, p. 291.
69 Ibid.
53
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the habit of employment, or even confidence - sometimes
simply due to their absence from the work force. Because
the primary goal of JOBS is to convert unemployed or less-
employable people into successful employees, job development
efforts are important.
Welfare recipients who are not enrolled in a JOBS
program must also incur job development efforts if they wish
to become employable and employed. For example, they may
seek a mentor or search the want ads. Participation in job
development efforts by JOBS participants is compared to
participation by non-JOBS participants to measure the effect
of the JOBS program on participation in job development
activities. The difference between the participation rates
for these two groups is the independent variable JOBSEARCH,
which covers the entire spectrum of job search and
development activities.
Careful specification of these variables is an
essential part of testing the hypothesis that education,
such as job training, is the key to a successful welfare-to-
work program. It is also required to support the results of
54
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the regression analysis. After carefully sifting through
data as detailed above and elsewhere, the final variables
selected for use in the regression are: AFDC, EDUCATION, and
JOBSEARCH (Table 4) .
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TABLE 4
DEFINITIONS OF VARIABLES FOR THE FIRST REGRESSION
Variable Definition
AFDC The difference between the average
total AFDC payments received by
controls and experimentals during the
12 quarters following orientation.
EDUCATION The difference between the percent of
controls and experimentals who ever
participated in education or training
within 12 quarters after orientation.
JOBSEARCH The difference between the percent of
controls and experimentals who ever
participated in employment-related
activities within two to three years
after orientation.
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FIRST REGRESSION:
Table 5 contains data on the two variables for the
JOBS counties/regions in the sample. Using the data
specified there, the first regression run produces:
+ +
AFDC = f(EDUCATION, JOBSEARCH)
Constant:
Std Err of Y Est:
R squared:
R-bar-squared:
No. of Observations:
Degrees of Freedom:
- 6.9723
4.158701
0.167764
0.07
21
18
X Coefficients:
Std Err of Coeff:
T scores:
EDUCATION
0.25805
0.137242
1.88
JOBSEARCH
-0.03149
0.097728
-0.32
Critical T value for a 5 percent one-sided test: 1.734
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TABLE 5
DATA FOR VARIABLES FOR THE FIRST REGRESSION
Independent Variables
County AFDC EDUCATION JOBSEARCH
Alameda County, CA -4.3 5.3 28.0
Butte County, CA -7.7 2.7 9.8
Los Angeles County, CA -5.5 -1.8 36.6
Riverside County, CA -14.9 3.0 26.2
San Diego County, CA -7.9 7.4 22.5
Tulare County, CA 0.7 3.3 24.6
Bay County, FL 2.6 11.1 20.7
Broward County, FL -8.3 5.8 21.1
Dade County, FL -3.8 26.7 31.3
Duvall County, FL -5.0 5.8 19.9
Hillsborough County, FL -9.6 11.4 35.7
Lee County, FL -10.0 3.1 22.0
Orange County, FL -11. 6 2.9 11. 9
Pinellas County, FL -5.6 13 .3 19 . 5
Volusia County, FL -6.5 9.2 26.0
Jefferson County and
Pulaski South, AR
-9.6 2.4 38.0
Cook County I, XL -1.6 16.1 34.7
Cook County II, IL -3.1 17.4 31.6
Baltimore County, MD -0.2 20.4 28. 9
West Virginia -1.5 1.6 9.3
Virginia -4.2 11.6 51.0
(continued)
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TABLE 5(continued)
Sources: GAIN; Benefits. Costs, and Three-Year Impacts of a
Welfare-to-Work Program. Florida/s Project
Independence. Arkansas: The Demonstration of State
Work/Welfare Initiatives. Illinois: The Demonstration
of State Work/Welfare Initiatives. Maryland: Final
Report on the Employment Initiatives Evaluation, West
Virginia: The Demonstration of State Work/Welfare
Initiatives. and Virginia: The Demonstration of State
Work/Welfare Initiatives.
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This regression presents solid, albeit imperfect,
information on the effects of EMPLOYMENT and JOBSEARCH on
AFDC. The R-bar-squared of .07 is a poor one. In light of
the strong theoretical support for these independent
variables, this low R-bar-squared indicates that the
regression requires further adjustment. The standard errors
are low, but the t-scores are uneven: EDUCATION scores
significantly on a t-test, while JOBSEARCH does not.
There are a few possible reasons for the appearance of
the unwelcome t-score of JOBSEARCH. Multicollinearity of
some of the variables, irrelevant variables, or omitted
variables might damage the statistical ratings of this
otherwise promising regression.
Multicollinearity, when some of the independent
variables are correlated, is a possibility. These two
variables might move together: it is likely that an agency
which provides a strong educational foundation will build on
that foundation with job clubs. This is not necessarily
true, however: in the JOBS group in Hillsborough County, FL,
participation rates for education or training were less than
half of the participation rates for employment-related
activity (27.8% v. 61.1%).70 The reverse was true for Los
Angeles County, CA, where 27.2% of the JOBS group
70 Kemple, loc. cit.
60
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participated in education or training, but only 14.0%
participated in employment-related activity.7 1
High standard errors and low t-scores are the hallmark
of multicollinearity. Here, although standard errors are
low, t-scores vary considerably. A simple correlation
coefficient below 0.30 indicates that multicollinearity is
not much of a problem. A simple correlation coefficient
greater than 0.50 indicates that multicollinearity is likely
present. The simple correlation coefficient of EDUCATION
and JOBSEARCH is 0.41. This leaves the question of
multicollinearity unresolved; fortunately, doing nothing is
often the best "cure" when faced with this problem.72
The presence of an irrelevant variable is usually
heralded by high standard errors, low t-scores, and a low R-
bar-squared. In this case, the strength of the low standard
errors and the high t-score indicate that JOBSEARCH is not
irrelevant; and there is strong theoretical support for the
inclusion of both variables. Since both are essential,
reformulating them would damage the regression; this further
supports the decision to ignore any potential
multicollinearity.
71
72
Riccio, GAIN, p. 41.
Studenmund, op. cit., p. 276.
61
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Omitted variable bias, on the other hand, is almost
surely interfering with the statistical significance of this
regression. Omitted variable bias causes significant
unexpected signs or surprisingly poor fits. In this
regression, the JOBSEARCH variable is not significantly
different from zero, although the hypothesis of Chapter One
suggests its effects on AFDC are positive. Within the
context of omitted variable bias, the extremely low R-bar-
squared is a useful indicator. Given the low R-bar-squared,
omitted variable bias is a near certainty.
It is theoretically very likely that significant
variables have been omitted. Of particular interest would
be a variable which controls for the variety of economic
conditions across the nation. Strong local economies are
better able to absorb a wide variety of new labor force
entrants; in areas where economic conditions are grim, a
welfare recipient may require extensive training before
becoming competitive in the labor market. An excellent
proxy for local economic conditions is the unemployment rate
in that county.
This regression appears to be a good one in most
respects, but the low R-bar-squared and strange results of
JOBSEARCH indicate that the regression could be improved by
running it with a different specification. In this case,
62
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the addition of a variable which controls for the effects of
local economic conditions should increase the worth of the
regression. Of course, the effects of job training and
education on enabling a participant to exit the welfare
rolls may be seriously affected by the strength or weakness
of the local economy. As a proxy for these changes, the
unemployment rate of each county is represented by the
independent variable UNEMPLOYMENT (Tables 6 and 7).
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TABLE 6
DEFINITION FOR NEW VARIABLE FOR THE SECOND REGRESSION
Variable Definition
UNEMPLOYMENT The unemployment rate in each county
in the sample that corresponds to the
period of the sample.73
73 Refer to Table 1 for sample dates.
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TABLE 7
DATA FOR NEW VARIABLE FOR THE SECOND REGRESSION
County UNEMPLOYMENT
Alameda County, CA 5.1
Butte County, CA 9.2
Los Angeles County, CA 7.1
Riverside County, CA 9.3
San Diego County, CA 5.6
Tulare County, CA 13.3
Bay County, FL 6.6
Broward County, FL 5.6
Dade County, FL 6.8
Duvall County, FL 5.5
Hillsborough County, FL 5.1
Lee County, FL 4.6
Orange County, FL 5.5
Pinellas County, FL 4.9
Volusia County, FL 5.2
Jefferson County and
Pulaski South, AR
9.1
Cook County I, IL 9.0
Cook County II, IL 9.0
Baltimore County, MD 6.9
West Virginia 15.0
Virginia 5.3
(continued)
65
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TABLE 7(continued)
Sources: GAIN: Benefits. Costs, and Three-Year Impacts of a
Welfare-to-Work Program. Florida's Project
Independence. Arkansas: The Demonstration of State
Work/Welfare Initiatives. Virginia: The Demonstration
of State Work/Welfare Initiatives. Statistical Abstract
of the United States 1994. and Statistical Abstract of
the United States 1986.
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SECOND REGRESSION:
When the regression is run again with the inclusion of
UNEMPLOYMENT, it becomes:
+ +
AFDC = f (EDUCATION, JOBSEARCH, UNEMPLOYMENT)
Constant: -12.9009
Std Err of Y Est:
3.827238
R squared: 0.3343
R-bar-squared: 0.21
No. of Observations: 21
Degrees of Freedom: 17
Coefficients:
Std Err of Coeff:
T scores:
EDUCATION
0.298793
0.127839
2.33
JOBSEARCH
-0.00131
0.091121
-0.014
UNEMPLOYMENT
0.654793472
0.31751547
2.06
Critical T value for a 5 percent one-sided test: 1.740
67
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This regression is clearly an improvement over the
first one. The inclusion of UNEMPLOYMENT is a good choice -
not only is it strongly supported by theory, but it has
mitigated somewhat the flaws of the first regression: it
features even lower standard errors and a greatly improved
R-bar-squared. In fact, the R-bar-squared has tripled in
value. The new regression appears superior to the earlier
specif ication.
The omitted variable bias, as evidenced in the t-
scores, appears greatly improved. Now the t-scores show
much milder shortcomings: while JOBSEARCH is still unusual,
EDUCATION is still strong, and UNEMPLOYMENT would be
significant, except that it features an unexpected sign.
This unexpected sign is interesting: it indicates that
UNEMPLOYMENT may make AFDC increase, not decrease. For
example, higher unemployment rates may increase the
competitive edge of program participants, inspiring them to
even greater success rates (and thus, a larger AFDC). Or,
UNEMPLOYMENT may make success harder for both groups. In
any case, although the hypothesis of Chapter One is that
higher unemployment rates make JOBS programs less effective,
this is not necessarily true. There are many different
effects UNEMPLOYMENT could have on AFDC, so it is not
appropriate to hypothesize whether the influence will be
positive or negative.
68
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This removes the concern about UNEMPLOYMENT having an
"unexpected sign," so that regression appears very strong.
Interestingly, the problem of low t-scores improved in the
new specification, which eases the concern regarding
multicollinearity. In hindsight, the decision to ignore the
possible multicollinearity was a good one.
The second regression provides great support for the
hypotheses of this thesis. Education, particularly job
training, remains a significant influence on AFDC receipt
levels. Participation in job search also affects AFDC
receipt levels. These results become markedly clear once
the distorting effects of local economic conditions are
removed.
69
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COMPARISON:
A comparison of the two regressions shows that the
influence of the local economy is a significant factor, and
that the effects of education become even more significant
once local effects are controlled for. Essentially, the
hypothesis of Chapter One is supported by the empirical
analysis. The results, strikingly, call one variable into
question: the effects of JOBSEARCH. In the second
regression, JOBSEARCH is insignificant. This is surprising,
considering what would appear to be solid theoretical
justification for its inclusion in the model.
There are two possible reasons for this: either the
model is inappropriate or the variable is. However, the
rising R-bar-squared and the otherwise strong other
independent variables suggest that the model is essentially
appropriate. The problem is likely due to the selection of
the JOBSEARCH variable. In comparison to EDUCATION and
UNEMPLOYMENT, JOBSEARCH is simply not meaningful enough of a
variable to warrant inclusion.
Why isn't JOBSEARCH empirically significant? Most
likely the problem lies in the definition of JOBSEARCH
itself. Essentially, the "job clubs" which comprise much of
this variable provide an extra boost to those who are having
70
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difficultly obtaining employment. However, the strong
significance of EDUCATION tells a different story. In all
likelihood, these people are not employed because they have
difficulty picking up the want ads. They are unemployed
because they lack the necessary skills to qualify for the
jobs they find available. Once they have been given the
necessary skills (via EDUCATION), assistance with job
hunting is really not necessary; rather, it merely speeds up
a process already put in motion by EDUCATION.
Another subgroup of welfare recipients is the small
group of those who don't want to work. Forcing these people
to job hunt is not likely to produce results; driving them
off welfare through the deterrence effect of EDUCATION74 is
a surefire way to induce them to job hunt. Also, many
people hunt exhaustively for work before turning to
welfare75; they already know how to search, they just aren't
qualified for the jobs they find. Those who genuinely do
not know how to search can be instructed rather quickly.
Also, the on-the-job monitoring included in the variable is
less necessary when applied to educated workers.
74 See footnote 69,
75
Rank, op. cit., p. 39.
71
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Thus it becomes clear that the JOBSEARCH variable is
perhaps not as theoretically essential as it originally
seemed. The second regression confirms this.
A review of the two regressions supports the central
hypothesis of this thesis: education, particularly when it
includes job training (which includes soft skills training)
is an essential requirement for a welfare program intending
to move recipients from welfare to work. One hypothesis
failed to be supported, however: the hypothesis that
requiring participants to increase their employment-related
activity will decrease their need for AFDC money. In fact,
job search assistance as mandated by JOBS is useless. This
holds true even when it is applied to a variety of local
economic conditions. In light of these results, job search
assistance is a waste of time and money, and any welfare
reform program which incorporates education such as job
training for recipients will likely have a higher success
rate than one that does not.
72
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CHAPTER TWO APPENDIX:
IMPLICATIONS OF THE JOBSEARCH VARIABLE
Despite theoretical expectations that JOBSEARCH would
have a positive impact on AFDC, the regression results
indicate that JOBSEARCH is insignificant. A closer look at
the data and other empirical evidence illustrates why this
is so. In fact, the evidence shows that additional levels
of employment-related activity (which is what the JOBSEARCH
variable measures) do not provide increased benefits to
participants.
The difference measured by JOBSEARCH between
experimentals and controls is this: one group
(experimentals) must perform the amount of employment-
related activity to which they are assigned, whether or not
they expect that the search will be beneficial. The control
group, however, is only performing the amount of work-
related activity that it personally desires to perform.
This level is quite low: on average, just 20.2% of controls
choose to engage in employment-related activity.76 This low
76 Source: Table 8.
73
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level is the level which the control group feels is
beneficial. The selection of such a low level is
interesting, because there is ample evidence that recipients
search exhaustively for work before accepting welfare,77
and that this search is fruitless, causing discouragement
and thus withdrawal from employment-related activities.78
The simple answer is this: JOBSEARCH is insignificant
because, although there is a difference between the levels
of employment-related activity, the additional participation
performed by experimentals is unimportant. The extra
employment-related activity performed by experimentals is
unimportant because controls are already performing the
effective level of employment-related activity. That is, in
the absence of a JOBS program, the level of employment-
related activity that welfare recipients perform is the
efficient level.
There is a large body of empirical evidence which
indicates that controls are already performing at the
efficient level. First, there is the data itself (Table 8).
The control group is not required to perform any work-
related activities, so these numbers represent their
personal preferences. Across the board, there is very
77 Rank, op. cit., p. 43.
78 Heckman and Borjas, loc. cit.
74
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TABLE 8
COMPONENTS OF THE JOBSEARCH VARIABLE
County Control
(%)
Experi
mental
(%)
Difference
Alameda County, CA 4.2 32.2 28. 0
Butte County, CA 4.2 14.0 9.8
Los Angeles County, CA 1.4 38.0 36.6
Riverside County, CA 7.8 34.0 26.2
San Diego County, CA 1.7 24.2 22.5
Tulare County, CA 3.9 28.5 24. 6
Bay County, FL 44.0 64.7 20.7
Broward County, FL 46.3 67.4 21.1
Dade County, FL 35.7 67.0 31.3
Duvall County, FL 32.1 52.0 19.9
Hillsborough County, FL 25.5 61.1 35.7
Lee County, FL 42.9 64.8 22. 0
Orange County, FL 41.5 53.5 11.9
Pinellas County, FL 47. 2 66.7 19.5
Volusia County, FL 49.0 75.0 26.0
Jefferson County and
Pulaski South, AR
3.1 41.1 38.0
Cook County I, IL 3.2 37.9 34.7
Cook County II, IL 3.2 34.8 31.6
Baltimore County, MD 4.8 33.7 28.9
West Virginia 10.8 20. 1 9.3
Virginia 11.8 62.8 51.0
Median 10.8 41.1 26
Mean 20.2 46.4 26.2
(continued)
75
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TABLE 8(continued)
Sources: GAIN: Benefits. Costs, and Three-Year Impacts of a
Welfare-to-Work Program. Florida's Project
Independence. Arkansas: The Demonstration of State
Work/Welfare Initiatives. Illinois: The Demonstration
of State Work/Welfare Initiatives. Maryland: Final
Report on the Employment. Initiatives Evaluation. West
Virginia: The Demonstration of State Work/Welfare
Initiatives, and Virginia: The Demonstration of State
Work/Welfare Initiatives.
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little indication that controls think employment
related activity is a worthwhile pursuit: even in the most-
active observation (Volusia County, Florida), less than half
of the controls choose to seek employment in any way. In
43% of the observations, less than 5% of controls choose to
participate in work-related activities.79 This clearly
indicates that, according to the control group,
participation in employment-related activities is not an
important activity.
However, there is also evidence that, initially, the
unemployed do participate very extensively in job search and
other employment-related activity. The behavior of the
controls, however, indicates that these people change their
attitudes significantly as they gather more information over
time. According to interviews with welfare recipients and
case managers, employment-related activity among recipients
follows a pattern: extensive search followed by persistent
failure to secure employment, causing withdrawal from the
labor force. On average, 71% of unemployed heads of
households search actively for work prior to entering
welfare in an effort to avoid entering welfare.80 In these
interviews, the commitment to finding work is a major theme,
with most recipients hopeful that they will eventually find
79 Source: Table 8.
80 Rank, pp. cit. . p. 121.
77
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work.81 In fact, in California, only 0.4% of the sample
stated a preference for welfare.82 It is clear that most
welfare recipients are strongly committed to ending welfare
dependency, but quickly learn to reject participation in
work-related activities as a means to that end.
When a welfare participant has decided that, no matter
how hard they try, they will not obtain employment, that
recipient is considered "discouraged” and withdraws from the
labor force. That is, they cease participation in
employment-related activity. In fact, there is ample
evidence of extensive discouragement among workers. On
average, 40.2%^ of welfare recipients have been on welfare
for over two years. In California, 31%84 of recipients have
been on welfare for more than six years. In the state of
California, which has a total population of 31,786,570 and a
total welfare population of 2,616,509, there are an
estimated one million discouraged workers.85 There are also
an estimated 500,000 part-time employees who wish to work
81 Ibid., p. 39.
82 Riccio, GAIN, p. 187.
83 Sources: Riccio, GAIN, p.18; Kemple, op. cit.. p. 31;
Riccio, Virginia, p. 33; Friedlander, Arkansas. p. 25; and,
Friedlander, Maryland, p. 35.
84 Riccio, GAIN, p. 18.
85 Ross, loc. cit.
78
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full-time, but are discouraged.86 This means that 40%
(nationwide) to 57% (California) of recipients do not
believe that employment-related activity is worthwhile.
Although interviews repeatedly indicate that welfare
recipients wish to exit welfare, the majority of them are
discouraged workers. They have learned through experience
that participation in employment-related activities are not
the way to end welfare dependence.
The weight of this evidence indicates that welfare
recipients have discovered through trial and error that the
efficient level of employment-related activity is a low one.
The degree of discouragement, even in the face of strong
commitment to ending welfare dependence, shows that there is
not a link between the degree of job search performed and
the possibility of obtaining employment. The failure of
motivated recipients to pursue this option indicates that it
does not contribute to their success. Although these people
prefer to exit welfare, they prefer low levels of
participation in employment-related activities to higher
levels, because they have learned that higher participation
levels do not make them better off.
Control group members - those whose employment-related
activity is not artificially altered by JOBS - find that
86 Ibid.
79
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high levels of search are not more effective than low
levels. They have found that only low levels of
participation are necessary. If low levels were not the
most effective, their behavior would change and they would
participate more; after all, this is a highly motivated
group.87 This is empirical evidence that via these low
employment-related activity participation rates, controls
are already doing enough effective participation in work-
related (i.e., job search) activities.
The control group is performing the efficient level of
employment-related activity. By their behavior they have
shown that they do not experience greater benefits by
performing more. The experimental group is legally required
to perform employment-related activities at a rate which is
greater than that of the control group - an average increase
of 26.2% more.88 However, since there is no additional
benefit from this additional participation, the additional
participation required by the JOBS program does not make
experimentals better off than controls.
The independent variable JOBSEARCH, which measures the
additional participation, therefore does not influence the
dependent variable AFDC, which measures the improvement in
87 Rank, loc. cit.
88 Source: Table 8.
80
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the experimentals over the control group. This is why
JOBSEARCH is an insignificant variable.
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CHAPTER TWO
APPENDIX TWO:
SUBGROUP REGRESSION ANALYSIS
The Chapter Two regressions interpret the effects of
education and work-related activity participation on AFDC
receipt levels. The regressions both support and reject the
hypotheses of Chapter One: the hypothesis that education is
key to achieving self-sufficiency is upheld, while the
hypothesis that additional job search is beneficial, is
rejected. While these regressions provide empirical support
for the hypotheses of the first chapter, they do not tell us
enough about the effects of the independent variables on the
subgroups.
In order to discover the effects of the independent
variables more completely, the data is separated into two
subgroups, EXPERIMENTAL and CONTROL (Table 9). The data in
the full sample measures changes in each variable between
the two subgroups; EXPERIMENTAL is the absolute amount of
each variable for the experimental subgroup, and CONTROL is
82
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TABLE 9:
DATA FOR THE SUBGROUP ANALYSIS
EXPERIMENTAL DATA SET
AFDC JOB
SEARCH
EDU
CATION
UNEM
PLOYMENT
Alameda County, CA 17593 32.2 28.4 5.1
Butte County, CA 11659 14 13 .5 9.2
Los Angeles County,
CA
17314 38 26.8 7.1
Riverside County,CA 11284 34 34.8 9.3
San Diego County,CA 13283 24.2 28. 6 5.6
Tulare County, CA 15653 28.5 26.4 13.3
Bay County, FL 4099 64.7 47.1 6.6
Broward County. FL 3479 67.4 42.9 5.6
Dade County, FL 4733 67 51.7 6.8
Duvall County, FL 4241 52 36 5.5
Hillsborough
County, FL
3719 61.1 27.8 5.1
Lee County, FL 3130 64.8 37 4.6
Orange County, FL 3647 53.5 29. 3 5.5
Pinellas County, FL 3450 66.7 49. 1 4.9
Volusia County, FL 3542 75 46.4 5.2
Jefferson County/
Pulaski South, AR
771.69 41. 1 25.9 9.1
Cook County I, IL 4416.03 37.9 32.3 9
Cook County II, IL 4346.36 34.8 30.8 9
Baltimore County,
MD
3058.03 33.7 38.1 6.9
West Virginia 2681.37 20.1 7.9 15
Virginia 1923.28 62.8 23.9 5.3
(continued)
83
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TABLE 9(continued)
CONTROL DATA SET
AFDC JOB
SEARCH
EDU
CATION
UNEM
PLOYMENT
Alameda County, CA 18375 4.2 23.1 5.1
Butte County, CA 12635 4.2 10.8 9.2
Los Angeles County,
CA
18319 1.4 28.6 7.1
Riverside County,CA 13267 7.8 31.8 9.3
San Diego County,CA 14419 1.7 21.2 5.6
Tulare County, CA 15538 3.9 32.1 13.3
Bay County, FL 3994 44 36 6.6
Broward County. FL 3793 46.3 37 5.6
Dade County, FL 4918 35.7 25 6.8
Duvall County, FL 4464 32. 1 30.2 5.5
Hillsborough
County, FL
4112 25. 5 16.4 5.1
Lee County, FL 3477 42.9 33.9 4.6
Orange County, FL 4123 41.5 26.4 5.5
Pinellas County, FL 3653 47.2 35.9 4.9
Volusia County, FL 3786 49 37.3 5.2
Jefferson County/
Pulaski South, AR
864.55 3.1 23 . 5 9.1
Cook County I, IL 4486.38 3.2 48.4 9
Cook County II, IL 4496.38 3.2 48.2 9
Baltimore County,
MD
3064.12 4.8 17 .7 6.9
West Virginia 2721.4 10.8 6.3 15
Virginia 2006.87 11.8 12.3 5.3
(continued)
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TABLE 9(continued)
Sources: GAIN; Benefits. Costs, and Three—Year Impacts of a
Welfare-to-Work Program. Florida/s Project
Independence. Arkansas: The Demonstration of State
Work/Welfare Initiatives. Illinois: The Demonstration
of State Work/Welfare Initiatives. Maryland: Final
Report on the Employment Initiatives Evaluation. West
Virginia: The Demonstration of State Work/Welfare
Initiatives. and Virginia: The Demonstration of State
Work/Welfare Initiatives.
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the absolute amount of each variable in the control
subgroup. Because each subgroup is similar in
composition,89 a comparison of identical regressions
performed on each subgroup provides excellent insight on the
nature of the independent variables.
Of course, regression analysis of the subgroups is not
similar to regressions performed on the full sample. The
real benefit of subgroup analysis is that it provides
excellent information on possible multicollinearity of the
independent variables. While the information from Chapter
Two does substantially prove or refute the existence of
multicollinearity, subgroup analysis can and does. In this
way, the entire sample and all analysis is strengthened.
89 Source: Table 2.
86
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FIRST SUBGROUP REGRESSION:
An analysis of the effects of EDUCATION, JOBSEARCH, and
UNEMPLOYMENT on AFDC, performed on only the EXPERIMENTAL
subgroup data, yields the following results:
+/-
AFDC = f(EDUCATION, JOBSEARCH, UNEMPLOYMENT)
Constant: 19921.99
Std Err of Y Est: 4513.994
R squared: 0.399397
R-bar-squared: 0.29
No. of Observations: 21
Degrees of Freedom: 17
X Coefficients:
Std Err of Coeff:
T scores:
EDUCATION JOBSEARCH UNEMPLOYMENT
123.4504 -276.966 -619.642
137.7487 90.66391 483.3556
0.90 -3.05 -1.28
Critical T value for a 5 percent one-sided test: 1.740
87
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Compared to the second regression in Chapter Two, these
results are unusual. While the R-bar-squared has risen
slightly, both EDUCATION and UNEMPLOYMENT fail the t-test,
and EDUCATION has an incorrect sign: it is not likely that
increased education will increase AFDC dependence. This
obvious flaw calls the rest of the regression into question:
it casts doubt on the apparent strength of the JOBSEARCH
variable. In addition, the standard errors have
skyrocketed. Contextually, this regression is most
effective when paired with the second subgroup regression,
performed on control group data.
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SECOND SUBGROUP REGRESSION:
An analysis of the effects of EDUCATION, JOBSEARCH, and
UNEMPLOYMENT on AFDC, performed on only the CONTROL subgroup
data, yields the following results:
+/-
AFDC = f(EDUCATION, JOBSEARCH, UNEMPLOYMENT)
Constant:
Std Err of Y Est:
R squared:
R-bar-squared:
No. of Observations:
Degrees of Freedom:
12977.16
5272.226
0.268601
0.14
21
17
X Coefficients:
Std Err of Coeff:
T scores:
EDUCATION JOBSEARCH UNEMPLOYMENT
4.454506 -177.765 -345.705
110.4651 75.2342 496.4129
0.04 -2.36 -0.69
Critical T value for a 5 percent one-sided test: 1.740
89
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Analysis of this regression yields similar results to
those of the regression above. With the CONTROL data,
however, the R-bar-squared is strikingly worse than the
regression in Chapter Two. Again, only JOBSEARCH is
significant, a result that cannot be relied upon given the
obvious flaws of the regression. The very high standard
errors also devalue the results.
COMPARISON
It is clear that regression analysis on the two
subgroups does not provide information of the same degree as
the analysis in Chapter Two. However, these regressions do
provide very effective information regarding potential
multicollinearity among the variables. While analysis of
multicollinearity can be performed on the full sample, that
result is inconclusive. It is only by analyzing the
subgroups that a meaningful assessment of potential
multicollinearity can be made.
As shown in Chapter Two, the simple correlation
coefficient of the second full-sample regression is 0.41.
As a rule of thumb, a coefficient below 0.3 0 indicates that
multicollinearity is not a problem; a coefficient above 0.50
is a good indicator of the presence of multicollinearity.
90
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Clearly, the full-sample analysis does not provide helpful
information regarding the possibility of multicollinearity.
In the first subgroup regression, the simple
correlation coefficient of EDUCATION and JOBSEARCH is 0.21.
In the second, the simple correlation coefficient of
EDUCATION and JOBSEARCH is 0.50. This is very useful,
because it indicates that there is not likely
multicollinearity among the experimental group, and that any
possible multicollinearity which may appear in the full-
sample regressions might occur only among the control
population.
This is a crucial distinction, because JOBS programs
are only intended to affect the experimental group.
Multicollinearity among controls therefore is not relevant.
In this way, it possible to examine the results of the full-
sample regression more effectively: while there is
indeterminate multicollinearity, any multicollinearity which
may exist affects only the control group. Therefore any
possible multicollinearity in the full-sample regressions
will not affect the ability of the regressions to forecast
the effects of a JOBS program on its participants.
91
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CONCLUSION
A review of the subgroup regression analysis is an
important accompaniment to the full-sample regression
analysis of Chapter Two. The subgroup results provide
essential evidence regarding possible multicollinearity.
Essentially, it is possible to conclude that the unresolved
issue of multicollinearity among the full-sample results
does not damage the results of Chapter Two. The subgroup
analysis has proven to be essential.
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CHAPTER THREE:
THE FUTURE OF 8TATE-LEVEL WELFARE
On August 22, 1996, President Clinton signed the
Personal Responsibility and Work Opportunity Reconciliation
Act (H.R. 3734, "welfare reform"), eliminating the 60-year-
old Aid to Families with Dependent Children (AFDC). The new
federal welfare legislation gives block grant funds to the
states to provide time-limited benefits to families. The
Temporary Assistance to Needy Families (TANF) provisions
eliminates AFDC as the federal entitlement and repeals most
federally-prescribed eligibility requirements. In its
place, TANF provides states with broad flexibility to design
replacement programs. TANF mandates a work-participation
expectation in which specified percentages of families must
participate in work activities or states will face severe
financial sanctions.90
States that fail to meet the welfare-to-work targets
set forth in the federal law risk reductions in their block
90 California Department of Social Services, The California
Temporary Assistance Program: Detailed Program Description,
p. 1.
93
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grant allocation. The penalty starts at 5% of the
allocation and increases each year if the work participation
goals are not met. The percentage of a state's welfare
households that must be moved off aid and into work
activities increases from 25% by July 1, 1997, to 50% in
2002. Able-bodied recipients will no longer be entitled to
receive cash payments for more than five years in their
lifetime, and assistance will be discontinued if they do not
engage in work activities within two years.9 1
The federal welfare reform will bring striking changes
to JOBS programs across the country. Each state is
currently preparing state-level reform programs in order to
implement the federal law. The sudden, severe changes in
federal welfare are causing states to scramble in order to
be in compliance before the new laws take effect. Across
the country, on a county-by-county level, welfare is being
confronted by federal changes.
One of the most striking changes brought by the federal
reform is the need to submit federal welfare grant bids.
California's bid was submitted by the state, via the
Controller's Office, to the federal government in December
1996; grants must be approved by the federal government
before states can receive the funds. California is one of
91 Connell, W.O.R.C. . p. 1.
94
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the first states to comply. This is an essential
difference: for the first time, the federal government is
holding states accountable for their welfare spending.
With the submission of its grant bid, California
entered the forefront of state-level welfare reform. It is
likely that other states will follow California's example,
as California has the country's biggest AFDC caseload.
California includes about one-sixth of the nation's AFDC
population, and the GAIN program accounted for a large share
(almost 13 percent) of the federal government's total JOBS
spending for fiscal year 1993. Furthermore, over 26 percent
of all federal and state expenditures on AFDC in the United
States were spent in California in that year.92 Thus,
California's experiences are particularly important in the
continuing national debate over welfare reform.
While it is beyond the scope of this paper to analyze
the effects of the federal welfare reform on every JOBS
program in the U.S., a review of California's case does
provide an interesting perspective on the future of all JOBS
programs.
In response to the federal welfare reform, California
has had to adapt. While some of the changes have already
92 Riccio, GAIN, p. 3.
95
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occurred, the debate is far from over. California's
Controller Kathleen Connell and Governor Pete Wilson each
have their own ideas about how the welfare reform plan
should be implemented. California State Controller Kathleen
Connell's Work Opportunity Response Commission (WORC)
prepared California's block grant bid, in which it detailed
the state's plans for spending the federal welfare grant
money. California Governor Pete Wilson has long led a
California welfare reform movement by attempting to scale
back welfare in California by dismantling large parts of it.
The two camps are at cross-purposes: the Controller is
considering ways to most productively expand welfare with
the use of federal funds, while the Governor is considering
ways to reduce it.
Two additional features of the federal welfare reform
bill have substantially altered welfare in California. A
new federal tax credit has been created to stimulate job
growth, and time limits are now applicable. Specifically,
employers receive a 50% tax credit on the first $10,000 in
wages earned by a long-term welfare recipient.93 This is
the first time that the federal government has so broadly
endorsed welfare hiring incentives. Prior to the federal
welfare reform, a family remained eligible for benefits
until the youngest eligible child reached age 18, or the
93 Connell, WORC. p. 12.
96
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family no longer met eligibility requirements.94 The new
five-year lifetime limit on benefits is a huge step towards
dismantling the American welfare entitlement system. Though
the means of enforcing this limit have yet to be found, time
limits still have a profound effect on attitudes towards
entitlement. In many ways, the federal welfare reform
destroys California's existing welfare system, as it will
all JOBS programs across the country.
In response to this, California State Controller
Kathleen Connell organized a welfare reform task force, made
up of industry and public leaders, to create California's
federal block grant bid.95 By authoring and submitting the
bid, the Controller essentially defined the new direction of
welfare in California. The Controller has directly
addressed the impending federally-mandated reduction in
welfare rolls. The focus of the Controller's Work
Opportunity Response Commission (WORC) plan is on using the
money to fund California programs which are designed to
remove recipients from welfare dependence.
94 California Department of Social Services, op. cit., p.
15.
95 Kathleen Connell, W.O.R.C. Force Work Opportunity
Response Commission. Sacramento, Office of the Controller of
the State of California, December 1996.
97
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Though not legally binding, the focus of the proposal
is "work first." Essentially, WORC grants autonomy to the
counties, but heavily prefers to use the money to fund job
training and reentry centers in each county, possibly
located in disused military bases. The model for these will
be the highly successful Riverside County JOBS program, part
of California's Greater Avenues for Independence (GAIN)
program. The training will teach some basic job skills, but
will focus heavily on soft skills.
In addition, the Controller has recommended two
additional features be incorporated into California's
welfare system. The federal reform's tax credit must be
reinterpreted substantially if it is to be relevant to
California employers. The Controller also addresses the
extensive fraud within the California welfare system,
suggesting the use of an ATM-style system of benefits
distribution. Use of such a system would reduce the cost of
distribution and help to eliminate benefit theft and fraud.
Many California employers are unlikely to see any
benefits from the federal tax credit: over 40% of
California's businesses incur net operating losses each
year.96 In the California State version, California
companies would be able to receive a federal refund of 50%
96 Connell, W.O.R.C. . p. 12.
98
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of the credit amount, or a maximum of $2,500 per eligible
employee. They would also have the option to "carryback1 1
(apply the credit to past taxes) up to three years, or to
"carryforward" (apply the credit to future taxes) up to 15
years, the full amount of the tax credit.97 Extending the
federal tax credit in this way makes it relevant to
California businesses, and effective in this state.
Food stamp fraud in the United States results in the
theft of $1 billion dollars each year.98 A recent study
found that a third of the recipients receiving cash and food
stamp assistance are receiving the benefits fraudulently.99
This would be ended by a ATM-style "swipe card" system of
benefits distribution, which is used both to withdraw cash
benefits and make food stamp purchases. Food stamp use
could be electronically restricted to only legal purchases.
The card also could be accepted for payment of child care,
removing a major barrier to employment of welfare mothers.
It may also be used to deliver child support payments
automatically, greatly relieving state expenditures on child
support enforcement. Finally, use of a card to distribute
97 Ibid.
98 NBC Nightly News with Tom Brokaw, February 17, 1997.
99 Sandra R. Smoley, "California Health and Welfare
Agency/CDSS: Massive welfare fraud uncovered in Orange
County," PR Newswire, April 2, 1996.
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benefits would be superior to the current system of mailing
checks, which is vulnerable to check forgery and mail theft.
Governor Wilson's proposed California welfare plan is
the California Temporary Assistance Program (CalTAP). Some
features of CalTAP have been already voted into law, but
were unenforceable under previous federal laws. As of March
1, 1997, minor parents must live with their parents in order
to receive benefits, plus they must participate in the Cal-
Learn program with satisfactory grades.100 This law was
enacted prior to the reform, but wasn't enforceable until
this time. Governor Wilson's plan includes requiring all
adult aid recipients to participate in approved work
activity. Also, caseworkers who counsel welfare mothers
must introduce these women to the idea of adoption, either
for unwanted children or children in homes where there is
serious neglect or danger. CalTAP links establishment of
paternity to benefits in an effort to enforce child support
payments. CalTAP requires proof of child immunization and
school attendance, and intensive job search performed by all
recipients. Legal immigrants who entered the U.S. prior to
August 22, 1996, (and legal immigrants who entered the U.S.
after August 22, 1996 and meet the exception criteria) will
remain eligible for aid under CalTAP. However, new entrants
100 California Department of Social Services, op. cit., p.
14.
100
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who do not meet the exception criteria will not be eligible
for aid for the first five years they are in the country.101
Another controversial feature of CalTAP is a proposed law
reducing the benefits paid to some newcomers to California.
Under that law, people who have lived in California for less
than 12 months can receive no more in benefits than they
would have received in their old state.102
In fact, many have found Governor Wilson's proposals to
be unnecessarily (and illegally) harsh. A court order has
recently blocked the law barring newcomers from receiving
higher benefits in California than in their home states. A
recent USC study also condemns CalTAP and Governor Wilson's
strategies, reporting that they would cause widespread
poverty and loss of benefits to recipients that would be
removed from the rolls because of their inability to meet
work requirements.103 Nonetheless, CalTAP's proposals
continue to be popular.
Although CalTAP was strongly supported by many
Californians, the Assembly Human Services Committee has
deleted all specifics from Governor Wilson's welfare reform
101 Ibid.
102 Rich Harris, "Judge blocks California welfare reform,"
Associated Press, April 4, 1997.
103 Carol Tucker, "Study warns welfare reform will increase
poverty," USC Chronicle. April 14, 1997.
101
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plan. The committee deleted all of the work requirements,
time limits, benefit cuts and other restrictions from
Governor Wilson's bills. Only a few noncontroversial
measures, such as new sanctions on recipients who abuse
drugs, remain.104
Essentially then, Controller Connell's WORC plan has
received federal endorsement, while CalTAP has been
disabled. In fact, in May 1997 the California Democratic
Party endorsed the WORC plan as its own version of welfare
reform.105 However, the two plans have some similar
features. Both want to see welfare recipients taking charge
of their own lives, and both support mandatory work
participation. They differ in their approach to recipients,
however. WORC sees welfare mothers as caught in a trap not
of their own making. CalTAP believes that welfare
recipients are lazy and eager to get a free ride. It
remains to be seen which attitude will prevail in
California.
/
So far, all that can be said with any certainty is that
it seems that the federal block grants will fund some form
of training, possibly with hiring incentives. A wide
104 California Department of Social Services, loc. cit.
105 Eloise Anderson, "State Democrats' approach to welfare
reform - spend," Los Angeles Daily News, May 18, 1997.
102
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selection of welfare reform possibilities remain available.
Splits in public opinion over which direction to take state-
level welfare reform are common across the states in the
wake of the federal reform. The state of West Virginia, for
example, is proposing to implement a stringent, Cal-TAP
style program, which features harsh restrictions of the
behavior of recipients.106 The state of Virginia, by
contrast, endorses a more WORC-like program designed to
educate recipients while improving their self-esteem.107 The
divide between these two schools of thought is a nationwide
split; it is useful to analyze the situation in California,
as this presents possible outcomes for all other states as
well. It is worthwhile to review the effects of the various
proposals in order to assess their potential to achieve the
goals of welfare reform.
The new federal legislation will prove to be of varying
effect in California. The transition of money from AFDC to
TANF block grants may be beneficial if it is used by
California to invest in job training. The five-year
lifetime limit will most likely cause "expired" welfare
mothers to relocate out-of-state, and new welfare mothers
106 State of West Virginia, State Plan for Temporary
Assistance for Needy Families. 1997.
107 Robert C. Metcalf, Making Welfare Work: Virginia's
Transformation from Dependency to Opportunity, annual
report, 1996.
103
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move into California; there is not yet an effective national
registry that could monitor a person's lifetime welfare
receipts from state to state. Also, the requirement that
people be eliminated from the rolls will most likely simply
cause people to switch from federally-funded TANF welfare to
county-funded General Relief. Requiring California to
submits bids for grant money will require California to
fully disclose its welfare plan: how it plans to help
recipients, what will be asked of them in return, and even
California's attitudes towards recipients. This brings a
new sense of accountability to welfare in California. The
federal tax credit is unlikely to have any meaningful effect
on hiring in California, because of the preponderance of
businesses operating at a loss.
On the whole, then, the federal reform may not
substantially alter the ability of welfare mothers to
transition from welfare to self-sufficiency. The bulk of
its reforms will have no effect on California. The most
effective features include the use of bids for block grants,
and the progressive denial of welfare to current recipients.
Welfare reformers now have an additional hurdle to overcome:
reform plans must be incorporated into the grant bid or they
will not be funded. This increases statewide awareness of
the details of welfare in California, although this does not
guarantee that the new information will be used wisely.
104
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Requiring states to move percentages of recipients off of
welfare only lessens the number of people receiving welfare
from a state agency, as opposed to a county agency. The
impact could be disastrous.
The federal welfare reform has the potential to affect
California, but this potential must be harnessed
effectively. The Controller's WORC plan attempts to steer
the federal reform into productive channels. The use of the
TANF money, as described in WORC, will likely have a
strongly beneficial impact. It is important to note that,
while "work first," including its version of employer hiring
tax credits, may be very helpful to welfare mothers, it will
be entirely useless unless it is rigorously combined with
soft skills training, such as with the Riverside County GAIN
model. The GAIN program not only teaches people how to
work, it helps them to locate jobs. It is essential that
the employer-focused efforts be viewed as merely the
handmaiden of job training programs, for without soft skills
a new hire cannot hope to acquire the on-the-job training on
which this system relies.
With WORC, the Controller is planning a two—pronged
approach of job creation and job training. If it is
properly executed, it could be broadly and thoroughly
effective in turning welfare mothers into profitable
105
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employees. California's efforts to place state-trained
employees into waiting jobs will be helpful to county
economies, as it will prevent burdensome surges in county
welfare rolls. The implementation of ATM-like cards for
benefit distribution will be helpful as well. It will
streamline the delivery of benefits, reducing expensive
waste and fraud.
Recent action by the courts has invalidated CalTAP.
However, CalTAP's focus was on using benefits as a tool to
get recipients to perform tasks, and it was these
manipulative aspects of CalTAP that the courts found
illegal. The ends that Governor Wilson sought to achieve
with CalTAP, primarily cost-cutting measures, are often
widely supported among Californians. For example, while the
state is divided on the issue of encouraging adoption of
unwanted welfare children, most Californians agree that the
state should not (and cannot afford to) pay benefits for a
child whose father is delinquent on his child support
payments. The means that CalTAP used to achieve its ends
were found to be illegal, but there is strong support in
California for those ends. Many Californians want to find
solutions to a welfare system that they see as out of
control. It is very likely that the components of CalTAP
will resurface elsewhere, so their effects may be discounted
only at great peril to the state.
106
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Although blocked by the courts, much of CalTAP might
actually be beneficial to California, if not to recipients.
By making welfare uncomfortable, shifting support of poor
children from the state to private homes, and reducing
welfare payments, California may reduce expenditures on
welfare. This is urgent, because the federal welfare reform
demands it. The ability of counties to refuse to pick up
the slack may prevent county bankruptcy, although it may
lead to disaster if people are left in the lurch. Welfare
mothers who are already unemployable will certainly not
become employable simply because welfare is no longer
available to them; and women who are starving on their feet
are less trainable, and less likely to become self-
sufficient. While much of Governor Wilson's plan will
reduce state welfare spending, it probably won't do much to
improve the incomes or employment status of welfare mothers,
and may harm them.
However, Governor Wilson's focus on paternal
responsibility and timely child support may be beneficial
for both the state and for welfare mothers. Requiring
fathers to support their currently state-supported offspring
will certainly reduce their welfare expense to the
California, and thus the size of California's grant request.
For some women, the illegal withholding of child support
makes the difference between welfare and self-sufficiency.
107
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In the case of welfare mothers with young children who are
planning to have more state-supported children, there might
be some instances where these women choose to not bear
further children, seeing how difficult their lives will be
when their children are older and the state refuses them
benefits. The emphasis on child support may also make some
men reluctant to father children that they cannot afford to
personally support.
H.R. 3734, WORC, and CalTAP have many shared goals and
features, but in many ways they diverge. All three want to
reduce the amount of money spent on welfare and the number
of people receiving welfare. The federal plan is vague
where WORC and CalTAP are very detail-oriented. And while
both WORC and CalTAP want to change welfare in California,
WORC attempts to offer more services in shorter dependency
periods, while CalTAP restricts both the number of services
available and the number of people eligible. Some of parts
of these plans are already law, and some parts may never be.
Welfare reform may be recreated considerably before the
debate is over. Altogether different proposals may be
considered. This sense of flux and disorder is typical of
all the states in the abrupt wake of the federal welfare
reform. It is worthwhile, then, to examine which qualities
of these reforms make them helpful to welfare mothers, and
108
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which qualities compromise these women's ability to become
self-sufficient.
Welfare mothers can be helped by any measures that
educate them to hold jobs. This includes job skills such as
word processing, but must always include training in soft
skills if the proposals are to be successful. As long as
soft skills and job training are provided, any efforts to
persuade firms to consider employing these women will be
beneficial. When child care is provided or facilitated,
there is a better chance for success. Also, emphasizing
paternal financial responsibility helps to create a climate
that may free women to pursue their desire to be employed.
Welfare mothers can be harmed by proposals that force
them off welfare without regard for where they will go; they
already desire to exit welfare, and those that don't will
certainly not be more employable when they are penniless.
Programs that place them into the workplace, but do not
adequately train them first, will harm them by marking them
as failures, further limiting their future chances of being
hired.
In sum, it is not so simple a matter to use welfare
reform to remove welfare mothers off of the rolls. These
conclusions must be considered carefully before action is
109
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taken: only skills training gives these women access to
sustainable jobs. All other methods of removing them from
TANF will transfer the expense of their benefits to
alternate welfare agencies. Welfare reform that keeps these
conclusions in mind will have far greater success than
reforms which disregard them.
110
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CONCLUSION
As its effect on California indicates, the signing of
the federal welfare reform bill has thrown state-level
welfare into a tailspin. If an effective solution is not
implemented, the cost to the states will be severe, both
socially and financially. Fortunately, it is an easy
problem to solve. It is considerably less easy to achieve
agreement on a statewide level, and to pass welfare reform
laws which reflect this solution.
The analysis of the information in this paper reveals
the following answers to the welfare debate in California
and the other states:
* Education and training is the solution to welfare reform
in California. The majority of California's welfare
population is dependent because they can't get jobs, not
because they prefer unemployment. Skills training makes
them employable. Denying them benefits doesn't make them
employable, it makes them unable to get jobs, and destitute.
Ill
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Training is the only way to legitimately reduce the amount
of welfare dependence in California.
* Participation in employment-related activities does not
help. Welfare recipients have already determined the
efficient level of search, and it is a low level.
Increasing their participation requirements does not provide
additional benefits. It is a waste of money and manpower to
make employment-related activities a central component of
welfare reform.
* Welfare reform must be completed quickly. The first of
the federal deadlines is July 1, 1997, and California has
yet to choose a final system of welfare. The Controller's
block grant bid is in direct contradiction to the plans of
the Governor. There is no orderly method being used to
build a new system. This disarray is a common element among
the states' reform plans. The upheaval caused by federal
reform must be addressed directly and promptly. Otherwise,
reform will be made by the courts as they edit the various
proposals which come before them. This is no way to create
a comprehensive and affordable state welfare program.
Clearly, there is need for action, and the time is now.
Otherwise, states will soon find themselves facing severe
financial sanctions. Although there are many versions of
112
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reform being presented, there is little consensus. While
economics provides an ideal structure for analysis of the
problem, there has been little application of this by most
welfare reformers. Instead, meaningful progress has been
delayed by irrational and unjustified proposals.
Economic theory can be a useful tool for choosing among
the many welfare reform options available to states today.
There are a wide variety of reform proposals, and an even
wider variety of opinions about them. The appropriate
choice is not always clear; however, this paper provides a
meaningful context within which to examine them. Given the
disorderliness of California's welfare reform movement,
sensible advice on the effects of various proposals is
sorely needed. This paper presents the underpinnings needed
to create a successful welfare program, and the conclusions
in it provide a means of assessing the appropriateness of
the various options. It is with an eye towards this that
all present and future welfare reform proposals must be
judged. Unless mandatory education and training is made a
legal condition of TANF receipt, and quickly, state-level
welfare reform will fail.
113
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Asset Metadata

Creator Silver, Michelle Steffanie (author)

Core Title Federal welfare reform: State-level strategies

School Graduate School

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, labor,Economics, Theory,OAI-PMH Harvest,Political Science, public administration,sociology, public and social welfare

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Cheng, Harrison (committee chair), Cason, Timothy (committee member), Kaplan, Elaine Bell (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c16-16486

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Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

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