The Changing Role of Welfare in the Lives of Low-Income Families with Children

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Executive Summary

Reforms passed in 1996 ended welfare as we knew it. Individuals no longer have an entitlement to welfare, and states have changed how they administer cash assistance. Most states actively discourage welfare entry and aggressively require new entrants to pursue paid work. Numerous other safety net programs also changed, as the 1996 legislation limited immigrant eligibility for food stamps, scaled back children's eligibility for disability benefits, increased federal money for child care, and placed greater demands on states' child support enforcement systems. States were given incentives to encourage marriage and the formation of two-parent families and to reduce out-of-wedlock child bearing.

The dramatic decline in welfare caseloads represents the most stunning post-reform outcome. Caseloads declined by over 50 percent in just a few years. Numerous studies attempt to explain caseload decline and how families fared. Scholars generally agree that the strong economy, work supports such as the Earned Income Tax Credit, and welfare reform all encouraged a shift from welfare to work, especially among single mothers. Scholars disagree about the relative importance of each of these factors.

The National Survey of America's Families (NSAF), conducted by the Urban Institute as part of its Assessing the New Federalism project, documented changes in low-income families' circumstances at the national level over the 1996 to 2002 period. This study uses these data to summarize what we learned about families in the welfare system. We describe outcomes for three low-income groups: families currently on welfare, families that recently left welfare, and those that never received welfare. The outcomes discussed include family structure, demographic characteristics, work and barriers to work, income, and well-being.

To establish comparability across the three sample groups we limit the sample to low-income families, defined as those with income below 200 percent of the federal poverty level either last year or in the current year and not above 250 percent of the poverty level in either period.¹ These income restrictions confine all three sample groups—current welfare recipients, recent welfare leavers, and nonwelfare families—to families with consistently low incomes.

Changes in welfare policy after reform had the potential to affect who stayed on welfare, who exited welfare, who came on to welfare, and who did not come on. This means that all three groups of low-income families we study could be affected by changes in welfare policy. In addition, all three groups can be affected by the economy and broader societal trends. Over time, changes for one group can influence the composition of other groups of low-income families. Our results, therefore, generally describe outcomes among low-income families most likely to be affected by the evolution of the new welfare policies.

Our key findings are described below.

Notes from this section of the report

1. While all states had flexibility to set needs standards and benefit levels under AFDC, federal rules generally defined work requirements, income disregards, treatment of different family sizes, and benefit guarantees. States had to apply for waivers from the federal rules under strict requirements that results be evaluated and cost neutral.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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