The role of the economy and welfare policies in shaping welfare caseloads: The California experience

This longitudinal study analyzes the effect of labor market conditions and welfare policies accompanying the 1990s waivers granted by the federal government and Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193)on California's welfare caseload. A monthly semilogarithmic rate model is constructed for analyzing and predicting the single-parent welfare caseload from January 1983 to December 1998. The idea underlying this model is that during the study period month-to-month changes in the fraction of the female population ages 15 to 44 who headed a single-parent family and who received welfare were in response to changes in welfare policies and other programmatic and economic factors. The findings suggest that the role of welfare policies in shaping the caseload was modest, whereas the role of the economy was substantial. Key words: caseload; economy; time limits; waivers; welfare reform; work incentives On April 10, 1999, President Clinton announced that since he took office, welfare caseloads consisting of families with children on welfare had fallen by 50 percent or more in 29 states and by about half nationwide. The most recent policy changes intended to reduce welfare caseloads were those under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWOA) of 1996 (P.L. 104-193). On August 22, 1996, President Clinton signed PRWOA into law. This legislation replaced the federal entitlement program of Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF). For the previous 60 years, the AFDC program had provided financial assistance to poor families with children who met categorical and income eligibility criteria. In 1998, in response to federal changes under PRWOA, California's AFDC program was replaced by California Work Opportunity and Responsibility to Kids (CalWORKs). Along with time limits, this new program implemented substantial work incentives. Before the inception of the PRWOA, a number of states, including California, were granted waivers by the federal government to experiment with a variety of innovative approaches to end welfare dependence. From 1993 to 1997, welfare caseloads decreased in these states by nearly 20 percent, the largest decline in 50 years (Martini & Wiseman, 1997). In light of the goals of the 1996 federal welfare legislation, it is particularly important to determine if, and the extent to which, federal or state policies played major roles in reducing welfare receipt in the context of improving economic conditions, including lower unemployment rates and growing numbers of jobs. California's very severe recession and subsequent vigorous recovery occurred in the midst of its waivers and CalWORKs, creating an excellent domain for teasing apart the effect of policy shifts from the economy in reducing the caseload. This study determined the extent to which earlier waivers and PRWOA as implemented by CalWORKs affected the size of the welfare caseload in California. For this investigation the largest component of the welfare caseload, the single-parent component, is considered for analysis. The AFDC-Family Groups (AFDC-FG) or CalWORKs component mainly serves single-parent families, many of whom do not have labor force experience. Understanding the role that the economy and recent welfare reform policies played in reducing the caseload after the inception of the waivers and PRWOA may foster a better design of future policies. Other research that analyzes the effect of recent welfare reform legislation on welfare caseloads is national, occurred before the implementation of PRWOA, and is in short supply. Yet, state-level rather than national-level analysis is essential because welfare policies and experiences vary drastically from state to state. Findings from the present investigation should have special value for states that were granted work-related waivers similar to the ones granted to California or to states that implemented programs resembling the CalWORKs program. …