**Executive Summary**

**[Evaluating Two Welfare-to-Work Program Approaches:]{.underline}**

**[Two-Year Findings on the Labor Force Attachment and]{.underline}**

**[Human Capital Development Programs in Three Sites]{.underline}**

Welfare reform has been near the top of the American political agenda
for almost a decade, a reflection of persistent dissatisfaction with the
Aid to Families with Dependent Children (AFDC) program. At the center of
the reform discussion is the bedrock value of work. AFDC was created in
1935 primarily to ensure that women whose husbands had died or were
disabled could care for their children without being compelled to go to
work. By the end of the 1980s, however, most mothers were in the
workforce, including mothers of young children, and the Depression-era
commitment to helping mothers stay at home was considered obsolete. The
key welfare reform question then became *how best* to move AFDC
recipients into the workforce, toward self-sufficiency, and out of
poverty---still an immensely important question.

States have traditionally responded to this question by implementing one
of two different welfare-to-work program strategies. The first, often
referred to as the "labor force attachment" (LFA) strategy, emphasizes
placing people into jobs quickly, even at low wages, reflecting a view
that the workplace is where welfare recipients can best build their work
habits and skills. The second, often called the "human capital
development" (HCD) strategy, emphasizes education and training as a
precursor to employment, based on the belief that the required skill
levels for many jobs are rising and that an investment in the "human
capital" of welfare recipients will allow them to obtain better and more
secure jobs. Although each strategy has elements of the otherLFA
programs include education and training components and HCD programs
include job search componentsthe two approaches both convey different
messages to welfare recipients about the best route to self-sufficiency
and emphasize different program components.

This report examines the relative strengths and limitations of
particular versions of the LFA and HCD program strategies. It includes
the findings from one part of a multi-year, seven-site evaluation and
draws on the advantages of a unique experimental design implemented in
three of those seven sites. The evaluation had its origins in the Family
Support Act (FSA) of 1988, which marked a major shift in the philosophy
of welfare by establishing a system of mutual obligation---between
government and recipients---within the AFDC entitlement structure. As
part of the Job Opportunities and Basic Skills Training (JOBS) program
created by the FSA, welfare recipients had to look for and accept a job
or participate in employment-promoting activities such as education,
vocational skills training, or temporary, unpaid work experience
provided through the welfare department; if they refused, they risked
losing part of their cash (and, in some cases, Food Stamps and Medicaid)
benefits. In turn, government was to provide a wider array of services
and supports to a broader share of the welfare population than it ever
had before---all with the purpose of equipping welfare recipients for
work. More recently, the emphasis of welfare reform has again shifted:
Recipients have stronger obligations to meet, states have a commanding
and more flexible role, and the receipt of federal benefits is now
subject to a time limit. Work, however, is still key. But what is the
best way to make sure that welfare recipients who can work actually find
and keep jobs? Various responses to that question are currently shaping
federal and state welfare reform initiatives,[^1] and this report takes
a preliminary look at two of them---the LFA and HCD approaches described
above.

The report is part of a larger study called the National Evaluation of
Welfare-to-Work Strategies (formerly known as the JOBS Evaluation),
conducted by the Manpower Demonstration Research Corporation (MDRC)
under contract to the U.S. Department of Health and Human Services
(HHS), with support from the U.S. Department of Education.[^2] The study
was a response to the FSA's call for an evaluation with a random
assignment design, to assess the various welfare-to-work programs
anticipated under the Act. The specification of this type of research
design reflected the legislators' desire to obtain the most reliable
estimates of the effects of these welfare-to-work programs, taking into
account "normal" welfare dynamics (that is, the fact that many welfare
recipients get jobs and/or leave the welfare rolls each year
"normally"without the help of any special program). Under a random
assignment design, people eligible for a program are randomly assigned
to either a program group (and subsequently enroll in the program) or to
a control group, which neither has access to the program nor is subject
to its requirements. This method assures that individuals in these
groups do not systematically differ in their measured and unmeasured
background characteristics. As a result, any differences in their
subsequent job search, education, training, employment, or welfare
experiences can be attributed with confidence to the effects of their
particular program. (The term program "impacts" is used to refer to
these subsequent differences.) In the National Evaluation of
Welfare-to-Work Strategies, over 55,000 individuals in seven sites have
been randomly assigned to groups who remained eligible for specific
welfare-to-work programs or to groups who did not participate in these
programs.

The three sites covered in this report are Atlanta, Georgia; Grand
Rapids, Michigan; and Riverside, California.[^3] As part of a largely
unprecedented effort to rigorously compare the effects of two distinct
types of welfare-to-work program strategies, each of the three sites
simultaneously operated two different programs: a labor force attachment
program and a human capital development program. [^4] In each site, AFDC
applicants and recipients were randomly assigned to one of three groups:
a group subject to the LFA program, a group subject to the HCD program,
or a control group not subject to any welfare-to-work program. (Control
group members were neither eligible for any program services nor subject
to program participation and employment requirements; they could,
however, on their own initiative, enroll in employment-related
activities normally available in their communities.)[^5] Based on a
comparison of the experiences of individuals in the three randomly
generated groups, this report presents, for single-parent AFDC
recipients (94 percent of whom were women), findings on the
implementation, participation patterns, and costs of the two types of
programs operated in each site. In addition, the report assesses, in the
short run (based on only two years of follow-up), the effectiveness of
the two program approaches in promoting employment and reducing welfare
expenditures.[^6] The major research questions addressed in the report
are as follows:

**Implementation.** Did the LFA and HCD programs convey different
messages to and provide qualitatively different experiences for welfare
recipients assigned to each type of program?

**Participation.** Did the programs succeed in engaging a substantial
proportion of individuals in program services consistent with either an
LFA or HCD approach? What was the duration of participation in these
services? How did participation levels in the LFA and HCD groups compare
with the extent to which control group members enrolled in activities on
their own?

**Enforcement of a Welfare Obligation*.*** To what extent were welfare
recipients participating in a program activity, employed, or sanctioned
(that is, experiencing a welfare grant reduction because they didn't
cooperate with the program's participation mandate) during every month
in which they were required to participate?

**Cost.** Was the HCD model more expensive than the LFA model, as
anticipated? How did these costs compare with the costs of other
services used by control group members? What accounts for differences in
costs between the two models and across the three sites?

**Impacts.** Within the two-year follow-up period, did the two types of
programs, relative to the experiences of the control group, increase
employment, earnings, and GED attainment, and reduce AFDC receipt and
AFDC payments?

**LFA compared with HCD.** Is the LFA or the HCD model more effective at
this early point? Are the impacts of either model likely to be
sustained, drop off, or increase past the two-year point? Do the results
leave open the possibility that the HCD model may be superior in the
long run?

. This summary presents selected findings from the very comprehensive
report. Following an overview of the findings, the rationales behind the
LFA and HCD welfare-to-work program approaches are explained,
highlighting the relevance of the two approaches to current welfare
reform initiatives. The subsequent sections discuss findings on the
nature, costs, and employment and welfare effects of the LFA and HCD
program strategies, relative to what would have happened in the absence
of these welfare-to-work programs; then, taking advantage of the unique
research design implemented in each of the study sites, the effects of
the two strategies are directly compared. Finally, the implications of
the findings for current welfare reform policies are discussed.

**I. [Overview of the Findings]{.underline}**

Implementing two distinct welfare-to-work programs within the same
locality, and randomly assigning welfare recipients to the different
programs or to a control group, represented an untried research design
in welfare studies. The results indicate that the design was, in fact,
implemented as was intended, and the LFA and HCD programs provided
qualitatively different program experiences for welfare recipients:

-   **The LFA and HCD program staff communicated different "messages" to
    welfare recipients about how to obtain employment---**that is,
    whether to take the first job that came along or to first invest in
    education or training and be more selective.

-   **The two types of programs also differed in the way they sequenced
    and emphasized services.** Compared with what would have happened in
    the absence of these mandatory welfare-to-work programs, the LFA
    programs most significantly increased participation in job search
    while the HCD programs most notably increased participation in adult
    basic education (not college). The HCD programs in two of the sites
    also increased the percentage of individuals who obtained a high
    school diploma or GED certificate during the two-year follow-up
    period by 10 percentage points, whereas none of the LFA programs
    resulted in any increase.

-   **The LFA and HCD programs were mandatory to the same degree.**
    Staff in both types of programs frequently responded to
    nonparticipation by imposing welfare sanctions---that is, grant
    reductions.

-   **The HCD programs cost about twice as much as the LFA programs**.
    Most of the HCD programs' costs, however, were borne by non-welfare
    agencies (that is, organizations providing adult education,
    vocational training institutes, business and trade schools, and
    community colleges).

Follow-up much longer than two years is needed to fully assess the
relative effectiveness of the two welfare-to-work program approaches:
Theoretically, only the results in the later years of the follow-up
period are expected to show the predicted payoff from the HCD approach,
because by then HCD sample members will have had time to put their newly
acquired education and training skills to work in the job market.
Similarly, longer follow-up is needed to determine whether the LFA
approach will enable individuals to acquire skills on the job and "work
their way up" from entry-level positions. Nevertheless, the following
two-year results were found when the experiences of the LFA and HCD
sample members were compared with those of the individuals in the
control group:

-   **Both the LFA and HCD programs increased individuals' two-year
    cumulative employment and earnings**. On average, one out of every
    five welfare recipients who normally would not have worked in an
    unsubsidized job during the two-year follow-up period did so as a
    result of the LFA programs. In addition, two-year earnings were
    increased by more than \$1,000 per average LFA sample member in each
    of the three sites, and the quarterly patterns suggest that the
    earnings impacts are likely to continue in follow-up year 3. The HCD
    programs in two of the sites led to small first-year increases in
    employment and earnings that grew in the second year of follow-up;
    HCD employment and earnings impacts were smaller and decreasing in
    the third site.

-   **The cumulative employment and earnings impacts over the two-year
    period were smaller for the HCD programs than for the LFA
    programs**. Future trends, however, are not clear from the two-year
    data: HCD *earnings* impacts for most subgroups had not caught up
    with those of the LFA programs by the end of the two-year follow-up
    period, but HCD *employment* impacts for some subgroups had
    surpassed LFA impacts as of this point.

-   **Both the LFA and HCD programs reduced welfare expenditures within
    the two-year follow-up period**. Relative to the total welfare
    payments that the control groups received over the two years, the
    LFA and HCD programs reduced welfare expenditures between 6 and 18
    percent, depending on the site and program. This result was not
    expected for the HCD programs, given their initial "investment"
    period and the small observed HCD impacts on employment and
    earnings.

-   **The magnitudes of the welfare impacts for the LFA and HCD programs
    at each site were either fairly similar throughout the follow-up
    period or, if not, became similar by the end of the two-year
    follow-up period**. In both types of programs, sanctions appear to
    have contributed to the impacts on welfare payments and partly
    explain why welfare savings were sometimes larger than earnings
    gains.

-   **For those who entered the study without a high school diploma or
    GED certificate, both the LFA and HCD approaches achieved AFDC
    savings. While the LFA approach consistently produced earnings
    impacts across all sites for this subgroup, the HCD approach did
    not. As a result, individuals in this subgroup who were subject to
    the HCD approach experienced, on average, welfare reductions that
    were not offset by earnings gains.** For those who had a high school
    diploma or GED certificate at the start of the study, AFDC savings
    and increases in earnings were achieved by both program approaches.

The report's findings also shed light on issues of heightened importance
under the recently enacted state block grants known as Temporary
Assistance to Needy Families (TANF), which replaced AFDC:

-   **Both the LFA and HCD programs decreased the proportion of
    individuals who remained continuously on the welfare rolls
    throughout the two-year follow-up period**.

-   **Sanction rates in these LFA and HCD programs were much higher than
    in previously studied programs, but the higher sanction rates were
    not associated with higher rates of eventually participating in
    program activities, compared with participation results for past
    programs**.

-   **Women with preschool-age children were able to participate in
    program activities; moreover, earnings and welfare impacts,
    resulting from both the LFA and HCD programs, were found for this
    group as well as for women with older children**.

-   **Although the LFA and HCD programs were not operated under TANF
    rules or designed to meet TANF standards, it is likely that they
    would have failed to meet the ultimate participation rates specified
    in TANF, even though they achieved many TANF aims:** They engaged
    large numbers of individuals in employment-related activities or
    imposed financial sanctions on them, generally increased the number
    of individuals who worked during the follow-up period, and decreased
    welfare use and expenditures.

**II. [The Labor Force Attachment and Human Capital Development Program
Approaches: Their Underlying Rationales and Relevance to Current Welfare
Reform]{.underline}**

The labor force attachment and human capital development welfare-to-work
program approaches represent opposing views on how best to promote
ongoing work and self-sufficiency among welfare recipients. According to
adherents of the LFA approach, welfare recipients can best build their
work habits and skills and move up to better positions in the workplace,
even if their initial jobs are not high-paying, long-lasting, or
particularly desirable. In contrast, proponents of the versions of the
HCD approach tested in these sites believe that when more program
resources are invested up-front in basic education and skill development
(but not college) and entry into the labor market is delayed (relative
to an LFA approach), recipients will eventually obtain better and more
stable jobs, and will be less likely to lose their jobs and return to
the welfare rolls. The control group, in contrast to both LFA and HCD,
represents what would happen in the absence of a special, mandatory
welfare-to-work program.[^7]

Since welfare-to-work programs began in the 1970s, welfare
administrators have designed programs that have leaned toward either the
LFA or the HCD approach, for a locality's entire welfare caseload or for
certain subgroups of welfare recipients. In the early 1990s, rigorously
comparing the effects of the LFA and HCD approaches as part of a
large-scale evaluation was seen as a way to provide valuable operational
lessons for federal, state, and local policymakers and program
administrators.

In the wake of recently enacted welfare policy changes, it remains
critical to determine the effects of LFA and HCD program approaches.
First, the importance of identifying successful and cost-effective ways
of moving people from welfare to self-sufficiency---through jobs that
will last and not simply be a revolving door back to the welfare
rolls---increases when states are confronted with the challenges and
opportunities of block grant funding, participation and "work" targets,
and welfare time limits. Second, subgroup findings are more important.
In order to most efficiently target state resources, it will be
essential to determine who benefits the most and least from different
types of welfare-to-work programs. This report examines program
effectiveness for several subgroups; later evaluation documents will
analyze results for many more subgroups. Third, one of the aims of the
new welfare law is to increase the breadth, depth, and intensity of a
welfare obligation for those receiving government assistance. The new
law seeks to do that through more stringent and higher participation
standards, increased penalties for nonparticipation in "work" or
work-promoting activities, and expansions in the type and number of
people who are required to work or participate in work-promoting
activities in order to receive welfare. All these changes heighten the
importance of examining the ways in which various welfare-to-work
program approaches, such as the LFA and HCD strategies, can increase the
extent to which individuals are "covered" by a welfare-to-work
obligation. Although operated prior to the enactment of the new law, the
programs in the three diverse sites examined in this report---which were
well run, highly mandatory, and, in Grand Rapids, required women with
children as young as age one to participate---can provide valuable
lessons.

Finally, TANF's purpose, similar to the purpose of AFDC, is to
financially provide for poor children. Continuing this focus on
children, the National Evaluation of Welfare-to-Work Strategies contains
a pioneering child outcomes study that will measure the effects on young
children of changes in welfare parents' circumstances --- in income,
reliance on welfare, time spent out of the home, use of child care, and
education achievement or literacy level --- that were caused by various
types of welfare-to-work programs. This report indicates the extent to
which the LFA and HCD programs changed parents' earnings, welfare
receipt, and education credentials; future documents will assess, within
the evaluation's strong random assignment design, whether these and
other types of changes in parents' daily living circumstances affected
their children's cognitive development, behavioral and emotional
adjustment, and physical health and safety.

**III. [Implementation of Distinct LFA and HCD Programs]{.underline}**

-   **In each of the three sites, the LFA and HCD programs conveyed
    different messages to welfare recipients about the most expeditious
    route to self-sufficiency and provided recipients with distinctly
    different in-program experiences.**

Setting up and running two different welfare-to-work programs and
randomly assigning individuals to the various programs (or to a control
group)---in order to produce more credible results than those generated
by cross-site comparisons---was an untried welfare-to-work program
research design when this evaluation began. While a number of earlier
studies have examined the effects of specific additional program
components using a three-group random assignment design, no prior
welfare-to-work program evaluations have implemented this type of design
to determine the effects of different *comprehensive* program models,
emphasizing different program components and contrasting messages about
the best means through which to achieve self-sufficiency. Therefore, one
of the initial questions that should be addressed is: Was it possible,
in fact, to implement such a research design? In brief, based on
extensive data collected from field research, surveys of program staff
and welfare recipients, and program case files, the answer is yes.

Staff in the LFA programs consistently pushed welfare recipients to get
into the labor market quickly and encouraged them to not be too
selective in deciding whether to take a job, and the available evidence
suggests that welfare recipients in the LFA programs absorbed and
understood this message. Program assignments also reflected this
message: The first activity to which LFA sample members were assigned
was usually "job club," which consisted of several weeks of classroom
instruction on how to look for and obtain jobs, followed by several
weeks, in a supervised setting, of calling employers and lining up
interviews. The instruction and resources included in this activity were
uniformly designed to help the participants rapidly obtain employment.

Staff in the HCD programs, in contrast, encouraged welfare recipients to
invest time in education or training in order to prepare themselves for
good jobs and, while HCD staff tended to encourage individuals to accept
job offers when they came along, a lower percentage of HCD sample
members, in comparison with LFA sample members, reported that they felt
pushed to take a job *quickly*. HCD program assignments were in line
with these messages: The first assigned activity for HCD sample members
was generally adult basic education courses or, less commonly,
vocational training courses.

-   **While contrasts between the LFA and HCD approaches within each
    site existed, the three sites implemented the LFA model and,
    especially, the HCD model somewhat differently. This was to be
    expected, as the two models were ideal types; when transformed into
    real programs, they inevitably were shaped by and adapted to their
    very different environments.**

The LFA and HCD programs built on the three sites' varied prior
experiences in operating welfare-to-work programs. In addition, each
program was tailored to fit the divergent characteristics of its own
welfare population, labor market, and available community employment and
training services (shown below in Table 1). Individuals entering
Atlanta's programs, for example, had reading and math test scores that
were, on average, much lower than those of sample members in the other
two sites. As might be expected as a result, staff in Atlanta's programs
emphasized basic education to a much greater degree than vocational
training and college, compared with staff in the other two sites.

**Table 1**

**Site and Sample Characteristics**

+-------------------------------+---------+---+----------+---+---------+---+
| **Characteristic**            | **At    |   | **Grand  |   | **Rive  |   |
|                               | lanta** |   | Rapids** |   | rside** |   |
+-------------------------------+---------+---+----------+---+---------+---+
| **Site**                      | 6.2     |   | 5.5      |   | 11.7    |   |
|                               |         |   |          |   |         |   |
| County unemployment rate,     |         |   |          |   |         |   |
| 1993 (%)                      |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| Average monthly AFDC          | 23,113  |   | 7,508    |   | 27,775  |   |
| caseload, 1993                |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| AFDC grant level for a family | \$280   |   | \$474    |   | \$624   |   |
| of three, 1993                |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
|                               |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| **Sample**                    |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| Percent of sample members:    |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > With a youngest child 3--5  | 35      |   | 22       |   | 49      |   |
| > years old                   |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > With a youngest child 1--2  | 1       |   | 44       |   | 6       |   |
| > years old                   |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > Living in public housing    | 41      |   | 3        |   | 3       |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > With no high school diploma | 44      |   | 42       |   | 43      |   |
| > or GED certificate          |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > With low reading test       | 61      |   | 39       |   | 37      |   |
| > scores                      |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > Already enrolled in an      | 8       |   | 36       |   | 12      |   |
| > education or training       |         |   |          |   |         |   |
| >                             |         |   |          |   |         |   |
| > program as of random        |         |   |          |   |         |   |
| > assignment                  |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > Never worked full time for  | 31      |   | 36       |   | 29      |   |
| > six months or more          |         |   |          |   |         |   |
| >                             |         |   |          |   |         |   |
| > for one employer            |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > Received AFDC for five      | 54      |   | 33       |   | 28      |   |
| > years or more               |         |   |          |   |         |   |
| >                             |         |   |          |   |         |   |
| > cumulatively                |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
|                               |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| Median hourly wage at which   |         |   |          |   |         |   |
| sample members said they      |         |   |          |   |         |   |
| would take a full-time job    |         |   |          |   |         |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > With medical benefits       | \$6     |   | \$6      |   | \$7     |   |
+-------------------------------+---------+---+----------+---+---------+---+
| > Without medical benefits    | \$7     |   | \$8      |   | \$10    |   |
+-------------------------------+---------+---+----------+---+---------+---+

In addition, the programs reflected site differences in staff management
methods, the level of emphasis on providing personalized attention and
encouragement to welfare recipients, and approaches to monitoring
participation in program activities. Relative to the programs in the
other two sites, for example, Grand Rapids was notable for closely
monitoring individuals' program participation and strictly enforcing
participation rules; in the event of a failure to participate in an
assigned program activity, individuals were sanctioned without delay.

Finally, the programs operated within the context of state
welfare-to-work program policies and procedures. Riverside's programs,
for example, operated under regulations governing welfare recipients'
participation in adult basic education, specified by California's
Greater Avenues for Independence (GAIN) program, the state's JOBS
program. These regulations had the effect of restricting Riverside's HCD
program to individuals who entered the study without a high school
diploma or GED certificate.[^8]

In sum, these particular sites provided the opportunity to compare the
effectiveness of the LFA and HCD programs in three very different
environments. The three boxes that follow highlight key site
implementation differences and discuss how each of the sites
concurrently implemented LFA and HCD programs.

**IV. [Findings for the LFA Approach]{.underline}**

-   **Although most individuals participated in job search while in the
    LFA programs, in both design and practice LFA program approaches do
    not consist of only this activity; short-term education and training
    activities, and unpaid work experience, were provided for
    individuals who were unsuccessful in their job search attempts.**

The vast majority of individuals in the three LFA programs were first
assigned to, and participated in, job search. Individuals who did not
obtain work through job search were usually assigned to short-term
education, vocational training, or unpaid work activities so they could
boost their skills and resume their job search as soon as possible. In
addition, some individuals were already participating in self-initiated
education or training activities when they were randomly assigned to the
LFA program; usually, they were allowed to continue in these activities
as their program assignment.

For several reasons, LFA sample members in Riverside were less apt to
participate in non-job search activities than were individuals in the
LFA groups in the other two sites. First, clients were more often
temporarily deferred from program participation in Riverside than in
Atlanta or Grand Rapids, which resulted in lower participation rates in
job search and non-job search activities in Riverside than in the other
two sites. Second, among the Riverside sample members who participated
in job search as an initial activity, about two-fifths found jobs while
in this activity --- a proportion that is much higher than the
comparable one in Atlanta and somewhat higher than the one in Grand
Rapids. As a result, fewer Riverside LFA sample members were available
for a subsequent program assignment, relative to the other sites.

Reflecting the role of activities other than job search in the LFA
programs, a substantial share of the per-sample-member cost of providing
services while individuals were enrolled in the LFA programs was spent
on education or training activities. In addition, as shown in Figure 1,
this share varied widely by site because the LFA case managers in
Atlanta and Riverside stressed education and training activities to
differing degrees and because many of the sample members in Grand Rapids
who entered the LFA program had already started an education or training
program; in most cases, Grand Rapids LFA case managers allowed them to
continue these activities in fulfillment of their welfare-to-work
program obligation.

**Figure 1**

**Percent Distribution of Two-Year Program-Related Costs per LFA Sample
Member,**

**by Activity**

![](media/image1.emf){width="6.497916666666667in"
height="2.8506944444444446in"}

-   **Overall, compared with what would have happened in the absence of
    a welfare-to-work program, the three LFA programs most dramatically
    increased participation in job search.**

In all three sites, as shown in Figure 2, LFA sample members were at
least seven times more likely to engage in job search than their control
group counterparts during the two-year follow-up period. (The first bars
in the Atlanta section of the figure, for example, illustrate that 65
percent of the site's LFA group members participated in job search
during the follow-up period, compared with 6 percent of the Atlanta
control group members.) In addition, in Atlanta, relative to the control
group members' independent employment-related activities, the LFA
program also resulted in substantial increases in basic education
participation. The LFA programs' increases in participation, relative to
participation levels in the control group, were similar for those who
did and did not have a high school diploma or GED certificate as of
program entry. (These results are not shown in Figure 2 but appear
later, in Figures 9, 10, and 11.)

The three LFA programs also sanctioned substantial numbers of
individuals for failing to participate in a program activity (see Figure
2). Sanctioning rates were extremely high in Grand Rapids, where 42
percent of all LFA sample members were sanctioned.

**Figure 2**

**Rates of Participation and Sanctioning, by Site and LFA or Control
Group Status**

![](media/image2.emf)

-   **Excluding spending that would have occurred in any case---that is,
    without any special welfare-to-work program---the two-year net LFA
    per-person cost, averaged across the three sites, was \$1,550.
    Welfare departments paid the majority of the program costs, but
    non-welfare agencies provided and paid for a substantial share of
    the LFA program services.**

The *gross* cost per LFA sample member during the two-year follow-up
period consists of costs paid by welfare departments and non-welfare
agencies, while sample members were enrolled in the LFA programs as well
as after they exited the programs and, in some cases, left AFDC. The
gross cost ranged from \$2,082 to \$4,406 across the three sites (see
Table 2). Welfare departments paid only a portion of the gross cost,
since some of the services of the LFA programs were provided and paid
for by organizations offering adult education, vocational training
institutes, business and trade schools, and community colleges. Across
the three sites, for every dollar welfare departments spent operating
the LFA programs, they were able to secure another \$.78 worth of
services from non-welfare agencies.

The *net* cost per LFA sample member during the two-year follow-up
period consists of the gross LFA cost minus the gross cost per control
group member. The net cost thus represents how much was spent per LFA
sample member *in addition to* what would have been spent in the absence
of a mandatory welfare-to-work program. While Grand Rapids had the
highest gross cost per LFA sample member, it also had the highest gross
cost per control group member (owing to the many control group members
enrolled in self-initiated activities), resulting in the lowest net cost
of the three sites. Riverside's net cost per LFA sample member was also
relatively low, but was due to the low participation by LFA sample
members in education and training activities. Atlanta LFA sample members
tended to participate more in education and training, relative to the
other sites, so net costs were higher in this site.

**Table 2**

**Two-Year LFA Gross and Net Costs (in 1993 Dollars)**

+---------------+-----------------+-----------------+-----------------+
| **Site and    | **Gross Cost    | **Gross Cost    | **Net Cost per  |
| Activity**    | per LFA**       | per Control     | LFA**           |
|               |                 | Group Member**  |                 |
|               | **Sample        |                 | **Sample        |
|               | Member**        |                 | Member**        |
+---------------+-----------------+-----------------+-----------------+
| **Atlanta**   |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | \$2,345         | \$758           | \$1,587         |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 968             | 277             | 691             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 3,312           | 1,035           | 2,277           |
+---------------+-----------------+-----------------+-----------------+
|               |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| **Grand       |                 |                 |                 |
| Rapids**      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | 4,013           | 3,090           | 922             |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 393             | 207             | 186             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 4,406           | 3,298           | 1,108           |
+---------------+-----------------+-----------------+-----------------+
|               |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| **Riverside** |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | 1,945           | 789             | 1,156           |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 137             | 29              | 107             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 2,082           | 819             | 1,263           |
+---------------+-----------------+-----------------+-----------------+

NOTE: Rounding may cause slight discrepancies in calculating the sums
and differences.

-   **The LFA programs produced immediate increases in employment and
    AFDC savings relative to what would have happened in the absence of
    a mandatory welfare-to-work program. These results were found in all
    three sites, suggesting that the LFA approach can have positive
    effects in different geographical and economic environments, for
    different types of welfare recipients, and with staff who have
    different attitudes and work styles.**

The labor market and welfare behavior of the control group represent
what would have happened to study sample members in the three sites in
the absence of a mandatory welfare-to-work program. Over two years of
follow-up, as shown by the two-year earnings levels in Figure 3, control
group members earned, on average, between \$3,410 (in Atlanta) and
\$4,174 (in Riverside). (These figures include those who did and did not
work during the follow-up period.) Comparing the average two-year
earnings of the controls with those of LFA group members (see Figure 3),
the LFA programs increased earnings by more than \$1,000 per average
sample member in each of the three sites.

The quarterly earnings impact patterns depicted in Figure 3 reflect the
difference between the LFA and control groups' earning levels. As the
graph suggests, the earnings impacts in all sites are likely to continue
in follow-up year 3. In Atlanta, for example, the earnings impact (that
is, the difference between the LFA and control groups) was relatively
small during the first several quarters of the follow-up period.
Starting in quarter 4, however, the difference between the two groups'
earnings increased, with the magnitude of the difference (that is,
impact) stabilizing or declining slightly beginning in quarter 6. Given
that the Atlanta quarterly earnings impacts remained between \$164 and
\$208 per quarter in the last four quarters of the follow-up period, it
is likely that earnings impacts will continue to accrue in the third
year of follow-up (for which data are currently unavailable).

Various types of changes can contribute to earnings impacts to varying
degrees: More people might be working as a result of the program;
on-the-job earnings might increase for people who would have worked even
in the absence of the program; or those same people might keep their
jobs longer. In Grand Rapids and Riverside, impacts on total earnings
were generated solely by increases in employment, without increasing
earnings for those who normally would have worked or leading to
longer-lasting jobs. In Atlanta, increased earnings on the job, in
addition to increases in employment, generated total earnings impacts.

**Figure 3**

**LFA Impacts on Earnings**

![](media/image3.emf){width="6.497916666666667in"
height="2.8506944444444446in"}

AFDC savings were also achieved in all three sites. Relative to the
total AFDC payments that the control groups received within the two-year
follow-up period (shown by the unshaded bars in Figure 4), the LFA
programs reduced welfare expenditures by \$368 to \$1,338, depending on
the site. These reductions represented savings of 7 to 18 percent,
relative to the welfare payments that control group members received. As
suggested by the graph of quarterly impact patterns in Figure 4, the
AFDC savings are likely to continue to accrue in future follow-up years.
In Grand Rapids, for example, while the difference in the AFDC grant
amounts received each quarter by the LFA and control group members
started to become smaller after the fifth quarter of the follow-up
period, this difference (that is, impact) was still substantial (\$139)
and statistically significant in the last (ninth) quarter, suggesting
that AFDC savings will continue.

In all three sites, most of the AFDC savings can be attributed to a
reduction in the number of months individuals received AFDC payments at
all. A significant portion of the savings, however, especially in
Riverside and Grand Rapids, was explained by reduced payment amounts
during months when individuals were still receiving AFDC.

**Figure 4**

**LFA Impacts on AFDC Payments**

![](media/image4.emf){width="6.497916666666667in"
height="2.9340277777777777in"}

-   **The LFA programs reduced joblessness and decreased the proportion
    of individuals on AFDC at the end of the two-year follow-up period,
    but up to half of the LFA sample members were on the welfare rolls,
    and not employed, at the end of the tracked two years.**

As in previously studied programs, the three LFA programs reduced
overall joblessness: On average, one out of every five AFDC recipients
who normally would not have worked during the two-year follow-up period
did so as a result of the LFA programs. In addition, compared with the
control group members, the proportion of individuals in the LFA programs
who were receiving welfare benefits at the end of the follow-up period
decreased from 7 to 11 percent, depending on the site. Finally, the LFA
programs produced earnings and welfare impacts for individuals who had a
high school diploma or GED certificate at the beginning of the study as
well for those who entered the study without these education
credentials.

However, between 50 and 68 percent of LFA sample members were receiving
welfare at the end of the two-year follow-up period; moreover, between
38 and 50 percent were both receiving AFDC benefits and were unemployed
at this point.

**V. [Findings for the HCD Approach]{.underline}**

-   **Compared with the LFA approach, the implementation of the HCD
    approach was more varied in the three sites, indicating that HCD
    approaches can encompass a broader range of activities and aims.**

Welfare recipients in the HCD programs in all three studied sites were
encouraged to initially invest time in education or training in order to
prepare themselves for good jobs, and activity assignments reflected
this emphasis. The Atlanta and Grand Rapids HCD programs, however, were
markedly different from Riverside's HCD program, partly owing to the
sample characteristics of those eligible for Riverside's HCD program. In
Atlanta and Grand Rapids, HCD sample members were commonly assigned to
basic education programs (such as high school completion classes, GED
preparation courses, classes for those with low achievement levels, or
English as a Second Language \[ESL\] courses) or to vocational training
activities; job search and work experience were also frequently
assigned. In Riverside, as discussed earlier, the HCD program included
only individuals without a high school diploma or GED; HCD assignments
were limited to basic education, and assignments to vocational training
or other activities were rare. In all three HCD programs, however,
college played a very small role: If individuals were already enrolled
in college, they were generally allowed to continue; assignments to
college, however, were usually not made. All in all, while different
types of activities were permitted in the three HCD programs, basic
education was the predominant activity in which individuals participated
during the two-year follow-up, primarily as a result of welfare
recipients' low levels of educational achievement.

HCD program participants in education and training activities were also
allowed to remain in these activities for a substantial period of time.
(Education and training assignments in the HCD programs could last up to
two years, while education and training assignments in the LFA programs
were limited to nine in-program months.) As a result of the large number
of HCD sample members who participated in education or training, along
with the length of time they spent in those activities, at least 65
percent of the cost of providing services while individuals were
enrolled in the HCD programs in each site was associated with education
or training activities (see Figure 5). In contrast, this percentage was
much lower in the LFA programs, particularly in Atlanta and Riverside.

-   **Compared with what would have happened in the absence of these
    special programs, all three HCD programs most dramatically increased
    participation in adult basic education; in two of the sites,
    participation in vocational training programs was increased as well,
    though the increase was not as large.**

**Figure 5**

**Percent Distribution of Two-Year Program-Related Costs per HCD Sample
Member,**

**by Activity**

![](media/image5.emf){width="6.497916666666667in"
height="2.7680555555555557in"}

NOTE: The Riverside sample includes only individuals without a high
school diploma or GED certificate.

Levels of participation in employment-related activities among
individuals in the HCD group and those in the control group are
presented, by site, in Figure 6. Over six times as many HCD group
members as controls in Atlanta participated in basic education programs;
participation in this type of activity was increased more than twofold
in Grand Rapids; and HCD group members in Riverside, who all lacked a
high school diploma or GED certificate, were over four times as likely
as their control group counterparts to participate in a basic education
program. In addition, the HCD programs in Atlanta and Grand Rapids
increased participation in vocational training; and the HCD programs in
all three sites---but especially the one in Riverside---increased job
search participation. Also, for HCD sample members in both Atlanta and
Riverside, the HCD programs had the effect of increasing the number of
hours that basic education participants spent in classrooms (not shown
in Figure 6). For example, Atlanta HCD group members, compared with
their control group counterparts, spent, on average, 256 more hours in
basic education programs. Finally, as shown in Figure 6, substantial
numbers of HCD sample members, particularly in Atlanta and Grand Rapids,
were sanctioned for failing to participate in a program activity within
the two-year follow-up period.

-   **The average two-year net HCD cost per sample member was about
    double that of each LFA sample member's cost. Non-welfare agencies
    bore the majority of the costs of operating the HCD programs.**

The *gross* cost per HCD sample member during the two-year follow-up
period---consisting of costs paid by welfare departments and non-welfare
agencies, while sample members were enrolled in the HCD programs as well
as after they exited the programs---ranged from \$3,540 to \$6,170
across the three sites. (See Table 3.) Welfare departments paid only a
portion of the gross cost, however. Averaged across the three sites, HCD
program-related costs paid by welfare

**Figure 6**

**Rates of Participation and Sanctioning by Site, and HCD or Control
Group Status**

![](media/image6.emf){width="6.490972222222222in"
height="4.709722222222222in"}

NOTE: The Riverside sample includes only individuals without a high
school diploma or GED certificate.

departments were only \$406 higher per HCD sample member than per LFA
sample member (\$1,747 versus \$1,341, respectively). Put another way,
for every dollar the welfare department spent on an HCD sample member,
it was able to secure another \$1.22 worth of services from non-welfare
agencies, compared with just \$.78 worth of services per LFA sample
member.

The HCD *net* cost---that is, the amount spent per HCD sample member
beyond what would have been spent in the absence of a mandatory
welfare-to-work program (as measured by the control group)---averaged
\$3,077 per HCD sample member across the three sites. HCD net costs did
not vary substantially by site.

-   **The HCD programs in Grand Rapids and Riverside increased the
    number of individuals who obtained a high school diploma or GED
    certificate.**

About 5 percent of the control group members in Grand Rapids and
Riverside who did not have a high school diploma or GED certificate as
of study entry earned one during the two-year

**Table 3**

**Two-Year HCD Gross and Net Costs (in 1993 Dollars)**

+---------------+-----------------+-----------------+-----------------+
| **Site and    | **Gross Cost    | **Gross Cost    | **Net Cost per  |
| Activity**    | per HCD**       | per Control     | HCD**           |
|               |                 | Group Member**  |                 |
|               | **Sample        |                 | **Sample        |
|               | Member**        |                 | Member**        |
+---------------+-----------------+-----------------+-----------------+
| **Atlanta**   |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | \$3,367         | \$758           | \$2,609         |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 1,097           | 277             | 819             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 4,463           | 1,035           | 3,428           |
+---------------+-----------------+-----------------+-----------------+
|               |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| **Grand       |                 |                 |                 |
| Rapids**      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | 5,594           | 3,090           | 2,504           |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 576             | 207             | 369             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 6,170           | 3,298           | 2,872           |
+---------------+-----------------+-----------------+-----------------+
|               |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| **Riverside** |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Operating     | 3,302           | 595             | 2,707           |
| costs         |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Support       | 238             | 15              | 224             |
| services      |                 |                 |                 |
+---------------+-----------------+-----------------+-----------------+
| Total         | 3,540           | 609             | 2,930           |
+---------------+-----------------+-----------------+-----------------+

NOTES: Rounding may cause slight discrepancies in calculating the sums
and differences. Riverside sample includes only individuals without a
high school diploma or GED certificate.

follow-up period. In the HCD programs in these two sites, about 15
percent of the sample members received one of these degrees, usually the
GED certificate, during this same time period. Thus, the two HCD
programs increased the number of individuals who obtained these
credentials by roughly 10 percentage points. No impacts on high school
diploma or GED certificate receipt were found over the two years in
Atlanta.

-   **The HCD programs in Atlanta and Grand Rapids led to small
    first-year increases in employment and earnings that grew in the
    second year of follow-up. In Riverside's HCD program, which included
    only individuals who did not have a high school diploma or a GED
    certificate as of program entry, a moderate first-year employment
    impact and a small earnings impact decreased in the second year. In
    the other two sites, two-year HCD employment and earnings effects
    were smaller for those who, at program entry, did not have a high
    school diploma or GED certificate than for those who had such
    credentials.**

As would be expected, since many HCD sample members were in school or
training during the first year of the follow-up period (an "investment"
period), HCD impacts on employment and earnings did not always appear
quickly. A comparison of the controls' average two-year earnings with
those of HCD group members (see Figure 7) reveals that the HCD programs
in Atlanta and Grand Rapids, which included individuals with and without
high school diplomas or GED certificates, increased earnings by almost
\$600. In both of these sites, the earnings impacts were small and not
statistically significant in the first year, but more than doubled in
the second year (illustrated in the graph of quarterly impacts in Figure
7) and became statistically significant. Earnings impacts occurred
primarily because the HCD programs helped some individuals find jobs who
would not have found employment on their own, and secondarily because
the HCD programs helped some individuals obtain longer-lasting jobs.

For individuals who entered the study with a high school diploma or GED
certificate, the HCD approach increased employment and earnings in both
years 1 and 2 of the follow-up period. Over the two-year period,
earnings for individuals in this subgroup were increased by \$960 in
Atlanta and by \$805 in Grand Rapids. For individuals who entered the
study without these credentials, the HCD approach increased earnings in
year 2 in Grand Rapids, but not in Atlanta or Riverside. (These results,
not shown below in Figure 7, appear later in Figures 9 and 10.)

**Figure 7**

**HCD Impacts on Earnings**

![](media/image7.emf){width="6.497916666666667in"
height="3.0590277777777777in"}

NOTE: The Riverside sample includes only individuals without a high
school diploma or GED certificate.

-   **The HCD programs in all three sites produced AFDC savings within
    the two-year follow-up period, a result that was not expected given
    the initial "investment" period of this approach and the small
    observed HCD impacts on employment and earnings. Welfare savings
    were found for individuals with and without a high school diploma or
    GED certificate as of program entry.**

Relative to the total AFDC payments that the control group received
within the two-year follow-up period (see Figure 8), the HCD programs
reduced welfare expenditures by \$333 to \$1,134, depending on the site.
These reductions represented savings of between 6 and 11 percent,
relative to the welfare payments that control group members received. As
the graph of quarterly impact patterns shows, the AFDC savings are
likely to continue to accrue in future follow-up years. In Riverside,
for example, the difference in the AFDC grant amounts going to the LFA
and control group members each quarter leveled off starting in quarter
3, and the difference (that is, the quarterly impact) was still
substantial (\$147) and statistically significant in the last quarter,
suggesting that AFDC savings are likely to persist into the third year
of follow-up. While most of the AFDC savings resulting from the HCD
programs were due to reductions in the number of months an individual
received welfare, a substantial portion of the savings were accounted
for by reduced AFDC payment amounts in months while individuals were
still receiving AFDC, especially in Atlanta and Grand Rapids. It is
likely that the high sanctioning rates in these two sites contributed to
this particular result and, in general, to the welfare savings observed
for the HCD programs.

**Figure 8**

**HCD Impacts on AFDC Payments**

![](media/image8.emf){width="6.497916666666667in"
height="2.923611111111111in"}

NOTE: The Riverside sample includes only individuals without a high
school diploma or GED certificate.

In Atlanta and Grand Rapids, the HCD programs reduced AFDC expenditures
for those who had a high school diploma or GED certificate as of program
entry. (The Riverside sample did not include this subgroup.) AFDC
impacts for individuals with these education credentials grew larger
from year 1 to year 2, and the trends suggest that the AFDC reductions
are likely to continue into year 3. For individuals who lacked a high
school diploma or GED certificate at program entry, the HCD programs
also reduced AFDC expenditures, and the savings are likely to continue
into year 3. In Atlanta, two-year AFDC impacts were larger for
"graduates" than for "nongraduates," while in Grand Rapids the opposite
was true; in neither site, however, were differences in the AFDC impacts
for the two subgroups statistically significant.

**VI. [Comparisons Between the LFA and HCD Approaches and Comparisons
with Previous Welfare-to-Work Programs]{.underline}**

Comparisons of the LFA and HCD approaches in the National Evaluation of
Welfare-to-Work Strategies rest on an unusually strong research design.
By virtue of the randomization process, individuals subject to the two
welfare-to-work program approaches within each site were similar in
observed baseline characteristics and in unobserved characteristics,
such as motivation. In addition, they lived in the same localities and
consequently faced the same labor markets, AFDC regulations and
practices, and work and welfare trade-offs. Finally, as described
earlier, the program messages communicated to welfare recipients in the
two types of programs, as well as the sequence and emphasis of program
activities for sample members, differed in ways that were true to the
theoretical LFA and HCD program models being tested. Differences in LFA
and HCD sample members' subsequent employment and welfare behavior must
therefore be caused by differences in the welfare-to-work program
approaches they experienced.

. Figures 9 through 11 compare, for each site, the LFA and HCD impacts
on participation in employment-related activities, sanctioning, and
cumulative earnings and AFDC payments within the two-year follow-up
period. All LFA-HCD comparisons are presented separately for individuals
who, at baseline, had a high school diploma or GED certificate and for
those who lacked these education credentials. One reason for focusing on
these two subgroups is that the HCD programs placed an emphasis on and
increased participation in different types of program activities for
individuals with and without these education credentials: For those
without a high school diploma or GED certificate, the HCD programs most
dramatically increased participation in basic education; for those
possessing these credentials, the HCD programs (in Atlanta and Grand
Rapids) increased participation in vocational training as well. (See the
top panel of Figures 9 through 11.) Another reason for focusing on the
education subgroups is that the HCD program in Riverside included only
individuals who did not have a high school diploma or GED as of program
entry. It is thus appropriate to compare the LFA and HCD impacts for the
"graduate" subgroups in Atlanta and Grand Rapids and for the
"nongraduate" subgroups in all three sites. Key findings from these
comparisons are discussed in the following section.

-   **Two years is not enough time in which to fully assess the
    effectiveness of either the LFA or HCD approach.**

Theoretically, it is only the results in later years of the follow-up
period that are expected to show a "payback" from the HCD approach,
because it will take some time for HCD sample members to put their newly
acquired education and training skills to work in the job market.[^9]
Similarly, longer follow-up is needed to determine whether the LFA
impacts will increase, stay the same, or decrease over the long run. As
a result, based on only two years of follow-up data, it is not possible
to confirm or refute the theory that HCD programs result in
higher-paying or longer-lasting jobs or that LFA programs effectively
promote "working one's way up on the job."[^10]

-   **As might theoretically be expected, total two-year employment and
    earnings impacts were smaller for the HCD approach than for the LFA
    approach. Impacts as of the end of the two-year follow-up period,
    however, do not clearly forecast a trend: HCD earnings impacts for
    most subgroups had not caught up with those of the LFA approach at
    this point, but HCD employment impacts for some subgroups had
    surpassed the LFA employment impacts.**

In the first follow-up year, employment and earnings impacts were
smaller for HCDs than for LFAs among both those who did and did not
enter the study with a high school diploma or GED certificate. Over the
entire two-year follow-up period, earnings impacts were about \$500 to
\$1,000 lower for the HCD approach than for the LFA approach, a
statistically significant difference for two of the five site/subgroup
combinations (see the second panel of Figures 9 through 11). One
exception to this pattern was that the two-year HCD earnings impacts and
the two-year LFA earnings impacts were very similar for individuals in
the "graduate" subgroup in Grand Rapids.

In only one of the five site/subgroup combinations---the Grand Rapids
"graduates"---had the HCD quarterly earnings impacts caught up with
(and, in fact, exceeded) the LFA quarterly earnings impacts by the end
of the two-year follow-up period (not shown in the figures). For both
education subgroups in Atlanta, and for the "nongraduate" subgroup in
Grand Rapids, the HCD earnings impacts in the last quarter of the
follow-up period were about half as large as the LFA earnings impacts.
In Riverside, where LFA-HCD comparisons can be made only for
"nongraduates," the LFA earnings impact in the last quarter was small,
but the HCD earnings impact was below the LFA impact level. With only
two years of follow-up, however, it is too soon to tell whether the HCD
earnings impacts will eventually overtake and surpass the LFA impacts.

The quarterly employment impacts at the end of the two-year follow-up
period underscore the need for longer follow-up, as these estimates show
some evidence of HCD "catch-up." In particular, HCD employment impacts
for those with a high school diploma or GED certificate in both Atlanta
and Grand Rapids had caught up to, and in fact surpassed, LFA employment
impacts by the end of the two-year follow-up period (not shown in the
figures).

-   **While smaller than the AFDC payment impacts for the LFA approach
    in some sites or subgroups in year 1, the quarterly HCD impacts on
    AFDC payments had mostly caught up to the quarterly LFA welfare
    impacts by the end of year 2.**

Over the entire two-year follow-up period, as shown in Figure 9, the LFA
and HCD programs in Atlanta produced welfare payment impacts that were
similar for individuals in the two education subgroups. In the other two
sites, the HCD programs produced smaller welfare payment impacts than
did the LFA programs (see Figures 10 and 11).

\[Figure 9 goes here---Atlanta partic, earnings, and AFDC impact graphs,
by education subgroup\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Figure 10 goes here---Grand Rapids partic, earnings, and AFDC impact
graphs, by education subgroup\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Figure 11 goes here---Riverside partic, earnings, and AFDC impact
graphs, by education subgroup\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

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\[Exhibit\]

\[Exhibit\]

\[Exhibit\]

The quarterly pattern of LFA-HCD differences in AFDC payment impacts
differed from the pattern for earnings impacts. AFDC impacts for LFA and
HCD sample members in all five site/subgroup combinations were either
fairly similar throughout the two-year follow-up period or became
similar by the end of the follow-up (not shown in the figures).

-   **For those who entered the study without a high school diploma or
    GED certificate, both the LFA and HCD approaches achieved AFDC
    savings. While the LFA approach consistently produced earnings
    impacts across all sites for this subgroup, the HCD approach did
    not. As a result, individuals in this subgroup who were subject to
    the HCD approach experienced, on average, welfare reductions that
    were not offset by earnings gains.**

Generally speaking, welfare recipients gain financially through their
own work effort only if their earnings exceed the amount of money they
lose in AFDC payments. Although earnings and AFDC payments are not the
only ingredients of family income, the LFA and HCD impacts on these two
income sources suggest that the degree to which earnings gains replaced
reductions in AFDC payments differed substantially across the sites but
did not differ consistently for the full samples according to program
approach. For the two education subgroups, however, HCD earnings gains
matched or exceeded AFDC reductions for individuals with a high school
diploma or GED certificate, but HCD earnings gains were much smaller
than AFDC reductions for individuals without these education credentials
(see Figures 9, 10, and 11). In both the LFA and HCD programs,
sanctioning, as well as an increased incidence of working while on
welfare, may have contributed to the larger AFDC impacts (compared with
earnings impacts) in some sites and subgroups.

The finding that HCD sample members who entered the study without a high
school diploma or GED certificate experienced a net loss of income
during the two-year follow-up period, at least as measured through the
income sources of AFDC and earnings, was unexpected. At the outset of
the National Evaluation of Welfare-to-Work Strategies, it was hoped that
the HCD approach would increase the income of precisely those
individuals who lacked educational credentials or had poor basic skills.
It was considered likely that the initial effects on earnings might be
small, while the group was out of the labor market completing their
education activities, but AFDC reductions were not expected during this
period, either. The finding of a cumulative income loss, however, should
be qualified by the fact that there are only two years of follow-up
presently available. If earnings impacts increase in the third, fourth,
and fifth years of follow-up, income losses for this subgroup in the
first two years of follow-up could be offset and, if the impacts were
sustained, income gains could be eventually realized.

-   **Given that the FSA expanded the number of welfare recipients
    required to participate in welfare-to-work programs, *aggregate*
    impacts in the three studied sites for both the LFA and HCD programs
    are most likely larger than those of previous welfare-to-work
    programs.**

One major goal of JOBS (as legislated in the FSA) was broader coverage
of the AFDC caseload with a welfare "work" or participation obligation
than was required prior to 1988. Theoretically, if JOBS programs even
just maintained the level of per-person impacts achieved by prior
programs, aggregate impacts would be larger than those achieved
previously by virtue of the increase in the number of individuals
"impacted." In reality, the LFA impacts for these three sites generally
appear to be larger, on a per-person basis, than those measured for the
low-cost, primarily job search-focused programs of the 1980s.
HCD-oriented programs were uncommon in the 1980s, so appropriate
comparison programs are not readily available.

A comparison of the longer-term costs of the LFA and HCD programs in the
three sites with their longer-term benefits (that is, impacts), to be
done at a future date, will determine whether the impacts of these
programs will translate into government savings.

**VII. [Lessons and Implications for Current Welfare Reform
Efforts]{.underline}**

The report's findings can also be viewed as addressing issues that have
heightened importance in light of the recently passed welfare reform
bill.

-   **Both the LFA and HCD programs, in all three sites, decreased the
    proportion of individuals who remained continuously on the welfare
    rolls throughout the two-year follow-up period.**

A prominent provision of TANF is a lifetime limit on the number of
months a family can receive federal welfare benefits. Although sample
members in the National Evaluation of Welfare-to-Work Strategies were
not subject to welfare time limits, the two-year findings for the three
well-run, "tough" programs analyzed in the report can provide some
evidence as to whether special welfare-to-work programs exhibit the
potential, within a two-year time frame, to reduce the number of
individuals who would reach a time limit.

Depending on the site, the number of sample members who would have
reached a two-year time limit on benefits within the available two-year
follow-up period was reduced by 9 to 25 percent as a result of the LFA
and HCD programs. Some of those who left welfare early in the two-year
follow-up period, however, returned before two years had elapsed. Rates
of recidivism among LFA and HCD sample members were generally similar to
recidivism rates among control group members. (This recidivism finding
is based on a nonexperimental comparison, however, since only employed
sample members are included and employed LFA, HCD, and control group
sample members may differ from each other in pre-random assignment
background characteristics.) All in all, the three LFA programs reduced
welfare receipt during the two-year follow-up period by 1.0 to 2.0
months, depending on the site; the three HCD programs resulted in
reductions of 0.7 to 1.1 months on welfare.

-   **Women with preschool-age children---a group not required to
    participate in welfare-to-work programs prior to the passage of
    JOBS---were able to participate in program activities. Earnings and
    AFDC impacts were also found for this group**.

TANF expands the number of welfare recipients who will be required to
work in a subsidized or unsubsidized job or to participate in an
employment-related activity while receiving welfare benefits.
Welfare-to-work programs prior to JOBS required participation of single
parents with children as young as age six; the JOBS legislation expanded
the "mandatory" group of welfare recipients to include women with
children as young as age three (or, at state option, as young as age
one); TANF, as a result of doing away with most previously allowed
exemptions (e.g., for women with children ages one or two, with drug or
alcohol problems, or with physical disabilities) expands the "mandatory"
population even further.

In the three sites' LFA and HCD programs, which included women with
preschool-age children, longitudinal participation rates---that is, the
chances that an individual would ever participate in a welfare-to-work
program activity after having been identified as required to
participate---were similar to those in pre-JOBS programs, which included
only women with school-age children. Depending on the site and program
approach, between 44 and 74 percent of the LFA and HCD sample members
participated in job search, education, training, or unpaid, temporary
work experience, as part of a mandatory welfare-to-work program, for at
least one day (but usually much longer) during the two-year follow-up
period.

In both the LFA and HCD programs, earnings and AFDC impacts were found
for individuals with preschool-age children as well as for those with
older children. Across the sites, there was no clear tendency for
impacts to be consistently larger among one or the other of these two
groups of sample members.

-   **Child care costs represented a sizable share---5 to 25 percent,
    depending on the site---of the per-sample-member cost of providing
    services while individuals were enrolled in the LFA or HCD programs
    during the two-year follow-up period.**

Given the expanded groups of welfare recipients who are required to
participate in employment-related activities under TANF, and TANF's
increased participation-level targets, welfare program operators are
concerned about the costs of providing child care. In the three
evaluation sites, the cost of providing child care services (to children
of all ages) while individuals were enrolled in the two types of
welfare-to-work programs, averaged over all sample members in a site,
ranged widely by site, from \$73 to \$709 per person over the two years.
Considering only those who received child care assistance at some point
during the two years, child care costs ranged from an average of \$435
to \$2,254 across the sites.

Several factors influenced the magnitude of average child care costs in
each site: the proportion of sample members who used child care; the
number of months a sample member participated in program activities and
thus required child care; and the average cost of a month of child care,
which was determined by the type of child care received and the number
and age of children for whom care was provided. Each of these three
measurement factors was highest in Atlanta and lowest in Riverside. On
the last factor, Atlanta encouraged participants to use licensed home
care or established day care centers, while Riverside urged participants
to rely on less formal arrangements with friends or relatives, hoping to
minimize county expenditures and to steer participants to low-cost care
that they would be able to afford, on their own, after leaving welfare.
Surprisingly, in Grand Rapids, where a very high percentage (44 percent)
of the sample members had a child aged one or two, average per-person
child care costs were lower than those in Atlanta but higher than those
in Riverside. (In these latter two sites, less than 7 percent of the
sample members had a child aged one or two.)

-   **Although the LFA and HCD programs were not operated under TANF
    rules or designed to meet TANF standards, it is likely that they
    would have failed to meet the ultimate participation rates specified
    in TANF, even though they achieved many TANF aims: They engaged
    large numbers of individuals in employment-related activities or
    imposed financial sanctions on them, generally increased the number
    of individuals who worked during the follow-up period, and decreased
    welfare expenditures.**

TANF specifies that, eventually, at least one-half of all recipients of
federal welfare benefits must be participating intensively in subsidized
or unsubsidized work or in employment-related activities, where
"intensively" means a time commitment of 20 to 30 hours in every week in
any month they are receiving benefits. The JOBS legislation similarly
specified participation standards, but the standards differed from those
of TANF in that they applied only to those "mandatory" for JOBS, counted
participation in a wider variety of activities, set gradually increasing
goals that did not reach a level of 50 percent, and did not require as
much as 30 hours per week of activity. Nonetheless, the ways in which
the report's three studied sites imposed a welfare obligation on sample
members, under the JOBS rules and goals, can highlight the challenges of
TANF's participation standards.

The three sites differed in the extent to which they "covered"
individuals with a welfare obligation during the months in which they
were required to participate in a welfare-to-work program or face
consequences. Depending on the site and program approach, sample members
were participating in an employment-related activity (for at least one
hour), employed, or sanctioned for nonparticipation in 41 to 68 percent
of the follow-up months in which they were subject to a participation
requirement. Site differences in this proportion reflected several
factors, most of which will play roles under TANF as well: Many welfare
recipients in Atlanta and Grand Rapids met a welfare obligation by
virtue of being sanctioned; given Georgia's relatively low AFDC grant
level, few welfare recipients in Atlanta could meet the participation
requirement by combining welfare and work, since many jobs made them
ineligible for AFDC; and a substantial number of AFDC recipients in
Riverside, consistent with California's GAIN program procedures, were
periodically excused on a temporary basis from the participation
requirement.

The above statistics, however, do not take into account the number of
hours each week in which individuals were participating or employed;
they simply count individuals as fulfilling a welfare obligation if they
were participating or employed *at all*, or sanctioned, *at any point in
a month*. Previous analysis of these same three sites indicated that
monthly participation rates, defined similarly to those contained in
TANF, probably would have been quite low.[^11] Many welfare recipients
in the three sites did not participate or work for 20 hours in every
week of a month because, in at least one week in the month, they had
been assigned to a program activity, but were waiting for it to begin;
their assigned program activity required less than 20 hours of
participation or was having a session break; they were sanctioned or
slated to be sanctioned; they had child care or transportation issues;
they were sick or had a family member who was sick or incapacitated;
their case workers had temporarily "lost track" of them; or they were
grappling with other personal issues or experiencing other, normal
administrative delays.

-   **Sanctioning rates in the three sites, particularly in Atlanta and
    Grand Rapids, were very high relative to previously studied
    programs, and the sanctions lasted a long time, especially in Grand
    Rapids. Interestingly, these frequent and extended sanctions did not
    increase the chances that individuals would eventually participate
    in program activities, compared with the participation rates
    achieved in past programs.**

Some current welfare reform policies specify "full family
sanctions"---that is, penalties for noncompliance with welfare program
participation or work requirements that result in terminating a family's
eligibility for welfare benefits. The programs in the three sites
examined in this report operated under the JOBS sanction rules and, as
such, sample members who did not comply with a welfare obligation could
have their welfare benefits temporarily reduced, but not
eliminated.[^12] The programs in the three evaluation sites, however,
implemented sanctions frequently and for long periods of time---more so
than previously studied programs.

A comparison of sanctioning rates in the LFA and HCD programs shows that
sanctions were not consistently more frequent in one approach or the
other. Specifically, in Atlanta, about one-fifth of the LFA sample
members and two-fifths of the HCD sample members had their AFDC grants
actually reduced because they did not cooperate with the JOBS program at
some point during the two-year follow-up period. In Grand Rapids and
Riverside, the frequency of sanctions was similar for the two
approaches, with sanctions implemented for approximately 40 percent of
the Grand Rapids sample members and for less than 15 percent of the
Riverside sample members (see Figures 9, 10, and 11). Between one-third
and one-half of those sanctioned in Grand Rapids (depending on the
program approach) were sanctioned for more than 12 months during the
two-year follow-up period; up to one-fourth of those sanctioned in
Atlanta and up to one-fifth of the sanctioned individuals in Riverside
experienced sanctions of this duration. In contrast to these findings,
sanction rates of 11 percent were the highest rates measured in studies
of previous mandatory welfare-to-work programs, and sanctions in these
prior programs lasted a maximum of three or six months. As mentioned
earlier, longitudinal participation rates for the LFA and HCD programs
examined in this report were similar to those for previously studied
mandatory welfare-to-work programs.

The frequent and long-term use of sanctions in Grand Rapids and Atlanta
appears to have contributed to the impacts on AFDC payments in these two
sites by reducing the monthly grant amounts for which LFA and HCD sample
members were eligible. Sanctioning also partly explains why AFDC savings
were generally larger than earnings gains in these sites. Increases in
combining employment and welfare receipt probably contributed to this
result in Riverside as well.

**VIII. [Conclusion]{.underline}**

The two-year findings presented above, on the labor force attachment and
human capital development approaches to welfare-to-work programs,
provide the most rigorous and credible comparison to date of these two
approaches' potential to promote work and decrease welfare reliance
among welfare recipients. A time frame of two years, however, is not
long enough to observe the full effects of these two approaches. Future
documentsas part of the full, seven-site evaluationwill provide up to
five years of follow-up on the LFA and HCD sample members, analyze the
programs' impacts on a wider array of outcomes, examine the extent to
which these programs had "spillover" effects on sample members'
children, investigate links between increases in GED certificate
attainment or gains in literacy and increases in employment

or earnings, and compare the programs' five-year costs with their
five-year benefits. The findings from Atlanta, Grand Rapids, and
Riverside will thus continue to inform welfare policymakers and program
operators as they seek to implement reforms to move adult welfare
recipients into work.

[^1]: The specific provisions of JOBS (but not its overall aims) have
    been largely superseded by the federal Personal Responsibility and
    Work Opportunity Reconciliation Act, signed into law in August 1996.
    Among its provisions, this Act replaces AFDC with block grants to
    states, known as Temporary Assistance to Needy Families (TANF).

[^2]: Child Trends, Inc., as a subcontractor, is working with MDRC on
    the child outcomes portion of the evaluation.

[^3]: The other evaluation sites are Columbus, Ohio (Franklin County);
    Detroit, Michigan (Wayne County); Oklahoma City, Oklahoma (Oklahoma,
    Cleveland, and Pottawatomie counties); and Portland, Oregon
    (Multnomah and Washington counties).

[^4]: In practice, many programs mix elements of both the LFA and HCD
    approaches. In contrast, Atlanta, Grand Rapids, and Riverside
    volunteered, for this study, to implement programs that were
    distinctly LFA- or HCD-oriented, in order to permit a clear test of
    the effects of each approach on subsequent employment and welfare
    receipt.

[^5]: Among the four other evaluation sites, a three-group random
    assignment test was also implemented in Columbus, in this case
    comparing two different case management approaches. In Detroit,
    Portland, and Oklahoma City, two-group random assignment tests were
    implemented. In these sites, the evaluation is measuring the effects
    of the sites' particular welfare-to-work program approaches under
    JOBS relative to what would have happened in the absence of a
    special welfare-to-work program. Later documents will discuss
    program implementation, participation, costs, and impacts in these
    four sites.

[^6]: The samples analyzed in this report consist of single-parent AFDC
    recipients randomly assigned to a research group in the three sites
    from mid-1991 through the end of 1992. Random assignment continued
    for an additional 6 to 13 months in these sites. The report samples
    thus represent between 50 and 63 percent (depending on the site) of
    the three sites' eventual single-parent samples.

[^7]: Note that in the absence of such a program, many control group
    members do volunteer for employment-related services, especially
    education and training programs at adult schools and local community
    colleges. This evaluation thus measures the extent to which
    mandatory welfare-to-work programs operated by welfare departments
    can elicit participation in employment-related activities from
    individuals who normally would not participate in them. In addition,
    the evaluation examines whether the requirement to participate,
    increases in the incidence of participation, and the imposition of
    sanctions for not participating result in employment increases and
    less dependence on welfare.

[^8]: The GAIN regulations specified that only individuals "determined
    to be in need of basic education" could be assigned to education
    activities. Individuals included in this group were those who did
    not have a high school diploma or GED certificate, had low scores on
    baseline reading or math literacy tests (regardless of whether they
    were high school graduates or had a GED certificate), and were not
    proficient in English. In this summary and the report, Riverside
    sample members meeting these criteria are placed in the "no high
    school diploma or GED" subgroup.

[^9]: Recent five-year findings from the GAIN Evaluation in California
    underscore this point. In Tulare County, one of the studied counties
    that operated a human capital development-oriented welfare-to-work
    program, earnings impacts were small or negative in the first two
    years of follow-up, but positive (statistically significant)
    earnings impacts emerged in year 3 and persisted throughout the
    remainder of the five-year follow-up period. See Stephen Freedman,
    Daniel Friedlander, Winston Lin, and Amanda Schweder, *GAIN:
    Five-Year Impacts on Employment, Earnings, and AFDC Receipt* (New
    York: MDRC, 1996).

[^10]: Further analysis of the nature of the program-provided education
    and training services, to be presented in a future report, will also
    help explain the eventual labor market "payback" results of the HCD
    programs.

[^11]: Gayle Hamilton, *Monthly Participation Rates in Three Sites and
    Factors Affecting Participation Levels in Welfare-to-Work Programs*
    (Washington, D.C.: U.S. Department of Health and Human Services,
    Office of the Assistant Secretary for Planning and Evaluation,
    1995).

[^12]: For a three-person family in 1993, a sanction in Atlanta resulted
    in a \$45 decrease in the monthly grant of \$280; in Grand Rapids,
    the penalty was a reduction of \$88 in a monthly grant of \$474; and
    in Riverside, \$120 was cut from a monthly grant of \$624. JOBS
    program sanctions were to continue until the sanctioned individual
    agreed to participate in the assigned program activity, with a
    minimum sanction length of three months for the second "offense" and
    six months for the third. There was no minimum length for the first
    incident of noncompliance.