Ensuring the Stability of Welfare-to-Work Exits: The Importance of Recipient Knowledge about Work Incentives

Research on designing incentives to make low-wage work a more viable alternative to public assistance has played an important role in the development of state Temporary Assistance for Needy Families (TANF) programs (Bane & Ellwood, 1994; Edin & Lein, 1997; Jencks, 1992). This article considers a related issue that generally has been overlooked--whether welfare recipients clearly understand the incentives that have been developed to encourage work. Respondent knowledge about work incentives has become increasingly important under TANF. With the imposition of five-year time limits and stricter sanctions for not fulfilling work requirements, failure to use available work supports can have serious effects on families. To explore how well recipients understand work-related benefits, I interviewed welfare recipients about a wide range of work incentives and support services in a pre-TANF waiver program in Michigan. The findings demonstrate that most respondents lacked knowledge about these incentives and thus often underestimated the benefits available from working. Furthermore, misunderstandings about incentives negatively influenced respondent perceptions about the welfare system, which may undercut future responsiveness to incentives. This article discusses the implications of these findings for the structuring and implementation of TANF work incentive policies and makes the argument that benefit simplification could improve the effectiveness of work incentives and strategies for improving the dissemination of information about work incentives. Also recommended are the development of post-employment service strategies to increase access to public supports for those who leave TANF. Literature Review No research has analyzed welfare recipients' knowledge about the full range of work-related economic incentives available to them. However, studies have shown that welfare recipients lack knowledge about both transitional Medicaid and child care benefits (Hardina & Carley, 1997; Rofuth & Weiss 1991). In addition, Hardina and Carley and Sarri and colleagues (1984) found that recipients of Aid to Families with Dependent Children (AFDC) generally did not understand basic AFDC eligibility requirements. Other studies have shown low-income people more generally underuse and lack relevant information about the earned income tax credit (EITC), food stamps, state tax incentives, and other programs (Coe, 1983; Katz, Gutek, Kahn, & Barton 1975; Olson & Davis, 1994; Swanson, 1975). Studies of the welfare system and bureaucratic relations offer possible reasons for knowledge deficits. Researchers have argued that the complexity and fragmentation of the welfare system confuses welfare recipients (Bane & Ellwood, 1994; Ellwood & Adams, 1990; Nightingale, 1989). Frequent program changes may exacerbate this complexity, as both recipients and social services personnel may not learn about relevant changes (Anderson, 1998; Bane & Ellwood). Furthermore, different programs may offer conflicting incentives and have varying eligibility rules, benefit determination criteria, and work requirements (Anderson). Variations in interactions between caseworkers and clients also may lead to differential service access and knowledge about incentives (Brodkin, 1986, 1997; Lipsky, 1980). Such inconsistencies may have grown in recent years, as staffing cutbacks, caseworker deprofessionalization, and increasingly complex regulations have made thorough information dissemination difficult (Fabricant & Burghardt, 1992). Consequently, recipients often attribute their lack of knowledge about benefits to caseworker shortcomings in providing information (Coalition on Human Needs, 1988; Southport Institute for Policy Analysis, 1992). Study Methods To test how well welfare recipients understood work incentives, I conducted personal interviews with AFDC recipients in Lansing, Michigan, between September 1995 and April 1996. …