Econ Focus

The welfare reform act of 1996 — formally known as the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) — replaced the Aid to Families with Dependent Children (AFDC) program with Temporary Assistance for Needy Families (TANF) block grants. And during the late 1990s national caseloads dropped to about half their pre-reform levels, according to the Center for Law and Social Policy. But what does the welfare picture look like now, given the sluggish economy?

Perhaps surprisingly, for most of the Fifth District, recent changes have not been dramatic. Caseloads have remained fairly level, with the exception of South Carolina and West Virginia. Both states saw double-digit increases in 2001. Still, the number of people collecting benefits is lower now than before the reform. Why the continued success?

Isabell Sawhill, senior fellow at the Brookings Economics Studies program, says that not all the credit can be given to PRWORA. She notes, "Because welfare reform was implemented during an unprecedented economic expansion, questions also must be raised about how much of the good news should be attributed to the 1996 law and how much to a strong economy or to the growth of other programs such as the earned income tax credit over this same period. Research on this question doesn't permit firm answers, but almost everyone agrees that all three have been important."

Others say that the key factor has been the way states have decided to use the TANF block grants. Michael New, a post-doctoral fellow at the Harvard-MIT Data Center, argues that the strength of sanctions applied to recipients who do not meet work requirements and the level of benefits available have affected caseloads much more than the state of the economy.

"Perhaps the single biggest success of welfare reform has been the significant reduction in caseloads. ... However, the reason for the caseload decline continues to be the subject of heated debate," writes New. "Some observers suggest that the success in moving individuals off welfare has little to do with welfare reform itself but results from the economic boom of the late 1990s. This study ... concludes that economic growth had little impact on reducing welfare rolls. Instead, states with the strongest sanctions and lowest benefit levels had the most success in reducing their caseloads."

Fifth District Challenges
For South Carolina, the U.S. Department of Health and Human Services reports that the number of families receiving TANF funds totaled 20,047 in December 2001, up from 16,751 a year earlier. Results from a survey conducted last spring indicate that only about half of the caseloads were recipients returning because of job loss, according to Marilyn Edelhoch of the South Carolina Department of Social Services. The other half of the cases were new, younger recipients who had infants, were pregnant, or had less than ninth-grade educations.

Similarly, the number of West Virginia families receiving TANF assistance grew to 16,197 from 14,129 over the same period. In the Mountain State, welfare cases were already on the rise in 1999, long before unemployment began to spike. So why the increase? Much of the fluctuation is due to state policies that have either made it easier or more desirable to collect benefits. For instance, the amount of benefits for a family of three has almost doubled, from an average of $253 in 1999 to a current average of $453 per month, according to Rita Dobrich, program manager for the state's Office of Family Support.

Elsewhere in the Fifth District, Ray Goodwin, acting director of Virginia's Department of Social Services, says that the latest study of his state's welfare reform effort "shows successes, but also areas of concern. ... While many Virginians leaving welfare are finding employment and seeing increases in their earnings, health insurance coverage and periods of unemployment continue to be issues."

The Corporate World's Helping Hand
Some employers in the Fifth District have helped former welfare recipients get on their feet. For instance, Marriott Corp., which is headquartered in Washington, D.C., runs a welfare-to-work program called Pathways to Independence. Through partnerships with various organizations, Marriott workers receive support services, such as transportation and child care. "The majority of the trainees are successful and continue as full-time employees at Marriott," says Bryan Kalem of the company's Community Employment and Training office. "For the most part, we have a higher retention rate with people in the program than with people we hire through regular recruitment."