| Long-Term Poverty Rate Trends--Linked To Unemployment
We begin our more detailed analysis by noting the most basic of relationships, embodied in the old adage that most effective anti-poverty program is a good job. While often wielded by conservatives in recent decades, this is every bit as much a slogan of the labor movement, which has repeatedly had to battle conservatives to make work pay well enough to make this adage true.
As shown in the US Census table, Work Experience and Poverty Status for People 16 Years Old and Over [xls] , the poverty rate for full-time workers 16 and over has fluctuated in a narrow range from 2.4% to 2.9% from 1987 to 2008. This compares with a range of 11.8% to 14.6% for those who worked part-time and 19.8% to 24.2% for those who did not work at all. Of course, this doesn't mean that roughly 97-98% of all full-time workers earned enough from one full-time job to rise out of poverty--not with the rise of minimum-wage jobs and the fall of the minimum wage. But with multiple wage-earners and sometimes multiple jobs, very few people who had at least one full-time job have found themselves in poverty for at least several decades now. Which is why it's no surprise to find that the unemployment rate is closely related to the poverty rate, as can be seen in this chart:
Of course, the chart includes those over 65, most of whom aren't in the labor market, as well children, whose welfare comes through the intermediation of their parents or guardians. A more helpful chart breaks down the poverty rate accordingly:
The correlations between between the unemployment rate and the poverty rates for different demographic groups is as follows:
The correlations are stronger for child poverty, which is an indication children both benefit more when jobs are more plentiful, and suffer more when they are not. This obviously should not be the case in any country that is truly civilized.
It should now be apparent why I spent so much time on the debunking of Charles Murray. Once his baseless fantasies about welfare keeping people from working are cleared out of the way, we can see quite clearly and unambiguously that people work when they are able to find work, and when this enables them to work full-time, it almost always means they can make it above the official poverty line, one way or another. However, when there simply isn't enough work available-as there never is for everyone who wants to work-then the individual alone is powerless, which is the whole point of having socioeconomic policies in the first place.
Long-Term Teen Birth Rates--Already Declining BEFORE "Welfare Reform"
Even without Murray and his false and misleading arguments, however, there certainly was an increase in single-mother families with much higher rates of poverty. The fact that other countries dealt with this much more successfully than we did is a subject for next weekend's diary on international comparisons. For now, we should simply note that the increase in teen pregnancies that formed the heart of the hysteria had already peaked well before the enactment of welfare reform:
The CDC provides a more detailed breakdown, showing that declining pregnancy rates resulted in both declining birth rates and declining abortion rates, for mid-teens as well as late teens:
As can be seen, there is no appreciable change whatsoever following the passage of "welfare reform" in 1996.
Four Snapshots in Time
For closer snapshot examinations of poverty and "welfare reform" I'm going to draw on four different papers from the Center on Budget and Policy Priorities. The first came out almost simultaneous with the passage of "welfare reform" and documents how much good was being done by the welfare system then in place. The second came out two years later, and reflects the immediate aftermath period. The third came out about two years later than that, and provides a look at the time period 1993-1999, surrounding "welfare reform" by three years on either side. The fourth came out in 2006, and was a 10-year retrospective.
Snapshot 1: The Safety Net Delivers BEFORE Welfare Reform
"The Safety Net Delivers: The Effects of Government Benefit Programs in Reducing Poverty", (final revision November 15, 1996) presents a wide array of data showing the effectiveness of the very array of programs that had just been done away with, or radically altered--although a number of factors would intervene to soften the blow. Still, the successful trajectory chronicled in this article was substantially altered. I will confine myself to a just two passages. The paper is a study that focuses on the differences between per-transfer poverty--the poverty rate before people receive any government assistance--and "post-transfer poverty", the poverty rate afterwards. The first passage contrasts the effects on seniors with those on children. The second highlights the role of the safety net during recessions, underscoring how much stronger the safety net was in late 80s and early 90s compared to ten years earlier:
Comparing Effects on the Elderly and on Children
Of particular note, safety net programs reduced the elderly poverty rate in 1995 from 50 percent before receipt of government benefits to 9 percent when the benefits are counted, a stunning 41 percentage point reduction in the poverty rate. By comparison, the safety net programs reduced the child poverty rate from 24 percent before benefits are counted to 16 percent when benefits are taken into account, an eight percentage point reduction.
The social insurance programs were far more effective in reducing poverty among the elderly than means-tested programs and taxes together were in reducing child poverty.
This reflects a number of related factors which combine to treat seniors more like the citizens of Continental European welfare states, while children are treated more like the citizens of the Britain and other English-speaking countries, where market forces are more dominant.
Effects of Government Programs During Recessions
....
During recessions, poverty generally increases. Hence, poverty rose from 1989 - the last year before the recession of the early 1990s - to 1993. Between 1989 and 1993, the number of people in poverty before government benefits are counted rose from 49.9 million to 60.6 million, with more than 10 million people being added to the ranks of the poor. After government benefits are counted, however, the number of poor people increased during this period by only 5.5 million. The effect of government programs was to cut nearly in half the growth of poverty during this recession.
During the recession of the early 1980s, the impact of government programs on poverty was much smaller. Between 1979 - the last year before the onset of that recession - and 1983 when the poverty rate peaked, the number of people who were poor before receipt of government benefits increased almost 10 million. This increase was of a similar magnitude to the increase in the number of people poor before receipt of government benefits during the recession of the early 1990s. But when poverty is measured after government benefits are counted, poverty grew more than 11 million people during the 1979-1983 period. During that period, the increase in the number of people who were poor after receipt of government benefits exceeded the increase in the number who were poor before receipt of government benefits. This occurred because various safety net programs were cut between 1979 to 1983, causing a decline in the number of people lifted from poverty by government benefits.
Of course, the increase in post-transfer poverty from 1979 to 1983 is yet another demonstration that Murray's thesis was wrong. Anti-poverty programs reduce poverty, just as they are supposed to do. They do not increase it.
Nest we turn to the immediate aftermath of "welfare reform".
Snapshot 2: Just After "Welfare Reform" The Poor Trail A Growing Economy
The paper "Poverty Rates Fall, but Remain High for a Period With Such Low Unemployment" painted a picture of things getting better for some at the bottom--but not as good as they should be in a time of growth, while those still in poverty actually saw things getting worse as a whole:
Strong economic growth and low unemployment reduced poverty and raised incomes in 1997, with especially strong gains occurring among minorities. A number of years of growth have returned the poverty rate and median household income to the levels at which they stood in 1989, the last year before the recession of the early 1990s. The Census data show that 13.3 percent of Americans lived in poverty in 1997, down from 13.7 percent in 1996.
The poverty rate remained high, however, for a year in which the unemployment rate
averaged 4.9 percent, its lowest level in 24 years. The poverty rate in 1997 was at about the same level as it was in 1987 through 1989, years in which unemployment averaged between 5.3 percent and 6.2 percent. The 1997 poverty rate was substantially above the poverty rates for every year of the 1970s, even though the unemployment rate was close to or above six percent for more than half of the years of the 1970s. More than one of every eight people in the United States continue to live in poverty.
The lagging gains for those on the bottom can be seen in this chart:
But that was actually comparative good news. For those who remained in poverty, things got worse:
On average, poor families became poorer in 1997. The average amount by which families that are poor fall below the poverty line increased $200, the Census figures show, from $6,395 in 1996 to $6,602 in 1997. (These figures are both expressed in 1997 dollars.)
This increase in the depth of poverty for the average poor family appears to be related to a weakening of safety net programs in 1997; the decline in the number of families receiving assistance was much greater than the decline in the number of families that are poor. The proportion of poor families with children that receive basic cash assistance that can lessen the severity of their poverty has decreased. The proportion of such families receiving food stamp assistance also has fallen, although food stamp receipt is not reflected in the Census Bureau's standard measures of the incidence and depth of poverty.
The decreasing benefits surpassing the decline in the poverty rate can be seen in the following chart, showing the shortfall grew significantly, as soon as "wlefare reform" passed: 
Snapshot 3: Progress Stalls After "Welfare Reform" Starts
The paper "Poverty Trends for Families Headed by Working Single Mothers 1993 to 1999" clearly showed that by cutting the safety net, "welfare reform" had an immediately deleterious effect. The beginning of the executive summary laid out the broad frameworks of the findings:
In recent years, large numbers of families headed by single mothers have moved from welfare to work. This report addresses the question whether and to what degree those who work have improved their economic situation.
Among people in families headed by working single mothers, there was no progress in reducing poverty between 1995 and 1999, despite an expanding economy. Reductions in poverty as a result of economic growth were entirely offset by increases in poverty due to contractions in
government safety net programs. - Before counting the benefits of government safety net programs (including cash and non-cash programs such as food assistance and housing subsidies) as well as taxes and the Earned Income Tax Credit, the poverty rate for people in working single-mother families fell from 35.5 percent in 1995 to 33.5 percent in 1999. Poverty measured before counting government benefits and taxes primarily reflects the impact of changes in the economy on private sources of income, especially earnings.
- But after counting government benefits and taxes, the poverty rate among people in working single-mother families was 19.4 percent in 1999 - not significantly different from their 19.2 percent poverty rate in 1995.
This is in contrast to the earlier 1993 to 1995 period, when poverty rates dropped for people in working single-mother families, both before and after counting government benefits and taxes. During this period, which preceded enactment of the 1996 welfare law, safety net programs for low-income working families expanded and had a larger impact in reducing poverty among these families. This added to the effect of the economy in reducing poverty.
A few select charts serve to underscore these broad findings. First we see that the total poverty gap (amount of money needed to lift people out of poverty) declined significantly from 1993 to 1995, but tailed off after that for all families, while actually increasing for single-mother families as "welfare reform" kicked in:
The picture was even starker on a per-person basis:
The growth in the size of the earned income tax credit (EITC) offset the declines in other programs, for an over-all net gain, but the benefits did not necessarily offset for those in the deepest need:
Indeed, the biggest growth in EITC effectiveness came from 1993-1995, while the biggest drops in cash assistance effectiveness came after that:
These early results were then followed up by a 10-year report.
Snapshot 4: TANF At 10: Mixed Results
TANF AT 10: Program Results are More Mixed than Often Understood
Ten years after "welfare reform" passed, most of Versailles thought it was a great success. But CBPP pointed out that a lot was being left out of these accounts. Indeed, it found that more than half the decline in caseloads--the primary measure of "success"--was due to people who were eligible and needed help not receiving the help they were entitled to. That's some success!
Many discussions of TANF focus on three sets of trends - the decline in the number of families receiving cash assistance through TANF programs, the increase in employment rates of single mothers during the 1990s, and the decline in child poverty during the 1990s.
While important, these three sets of trends miss important information about the functioning of the TANF program and the impacts on low-income families over the last decade. Examining a broader set of indicators reveals these important facts: - Child poverty fell during the 1990s, but has increased significantly in recent years as has the number of children living below half the poverty line. While child poverty remains below its levels in the mid-1990s, the recent trends are disturbing. Between 2000 and 2004, the number of children living in families with cash incomes below half the poverty line increased by 774,000. Over the same period, the number of children getting assistance from TANF declined. While other safety net programs such as food stamps and Medicaid provided assistance to increasing numbers of individuals as the labor market weakened and poverty rose, TANF did not, failing to serve as a bulwark against deep poverty for many children.
- Employment rates among single mothers are higher today than in the mid-1990s, but they have fallen since 2000. Single mothers who leave welfare for work typically have higher incomes than they did when they received TANF, but remain poor or near-poor, often face significant work expenses and material hardships, and see only modest income growth over time.
- The number of poor single mothers who are jobless, do not receive cash public assistance (from TANF or other programs), and do not live with others who work or receive cash income support has increased significantly. Between 1996 and 2004, the number of single mothers who were working increased by about 1 million. But from 1996 to 2003, the number of single mothers who fall into this "no work, no welfare" group in an average month increased by more than 400,000. There are now roughly 1 million poor single mothers - with 2 million children - in an average month who fall into this "no work, no welfare" group.
- TANF now helps a much smaller share of the families that are poor enough to qualify for the program than it used to. Program participation has fallen sharply among families poor enough to qualify for the program under state eligibility rules (and who meet the other eligibility criteria as well), from about 80 percent in the early 1990s (under the former Aid to Families with Dependent Children program) to just 48 percent in 2002, the last year for which data are available.
Startlingly, this drop in TANF participation among eligible families accounts for more than half of the decline in TANF caseloads since 1996. Stated another way, more than half - 57 percent - of the caseload decline during the first decade of welfare reform reflects a decline in the extent to which TANF programs serve families that are poor enough to qualify, rather than to a reduction in the number of families who are poor enough to qualify for aid.
Very poor families that do not receive TANF miss out not only on the income assistance that could help these families meet their children's basic needs, but also on programs that could help them prepare for and find employment.
Here's a chart of the reduction in family participation rates:
And here's the reduction in children served:
Now that's what conservatives call a "success"!
How about you?
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