ANN ARBOR—While the number of Americans on welfare has
dropped significantly since Congress passed the 1996 welfare reform law, many former recipients still live in poverty, says a University of Michigan researcher.

“Welfare reform has led to a more rapid decline in the cash
assistance caseload than most analysts would have predicted
when the act was signed,” says Sheldon H. Danziger, the
Henry J. Meyer Collegiate Professor of Social Work and
professor of public policy at the U-M.

“Much of the success to date is due to a booming economy andto a fiscal environment in which states have more funds to spend per recipient than they had in the past. Nonetheless,even under these optimal economic and fiscal conditions, some recipients have already slipped through the cracks.”

In the new book “Economic Conditions and Welfare Reform,”
edited by Danziger and to be published in December by the
Upjohn Institute for Employment Research, about a dozen
leading economists and policy analysts examine the effects
of the 1996 Personal Responsibility and Work Opportunity
Reconciliation Act (PRWORA)—namely, why caseloads are
falling, how recipients are faring and how states are
responding.

The law gave states greater discretion regarding eligibility criteria, work requirements and other programmatic rules.In return, the federal government now provides a block grant of fixed size to each state rather than a matching grant, no longer sharing in the welfare cost increases or decreases associated with rising or falling caseloads.

Danziger says that while a tight labor market and thriving
economy have helped reduce the number of welfare recipients
nearly 40 percent (from about 12 million in August 1996 to
about 7.5 million in December 1998), only about 50 percent
to 70 percent of recipients who have left the welfare rolls
are actually getting jobs.

Some states, he says, terminate welfare recipients from
rolls because of administrative rule changes, not because
the recipients are finding work. Other states use diversion policies that attempt to limit the number of applicants who receive welfare, while still other states employ sanction policies that attempt to purge as many people as possible from the rolls.

In addition, although the strong economy has helped spur
declines in welfare caseloads and has resulted in job gains
among unmarried mothers, the poverty rate for single women
with children in 1998 (33 percent) was about the same as it
was in 1979 and 1989 (35 percent).

“The end of entitlement has meant that some single mothers,
with poor labor market prospects and no other means of
support, have not received the benefits they would have
under the pre-PRWORA welfare system,” Danziger says.
“Indeed, there are concerns that some recipients have lost
not only their cash assistance, but also the food stamp and
Medicaid benefits to which they are still entitled.”

In one of the book’s chapters, U-M economist Rebecca M.
Blank and Geoffrey Wallace of the University of Wisconsin
say that a drop in caseloads for both cash assistance and
food stamps is not surprising.

“The food stamp caseload has historically moved in very
similar ways to the cash assistance caseload,” says Blank,
dean of the U-M School of Public Policy and the Henry Carter Adams Collegiate Professor of Public Policy. “The 1996 welfare reform de-linked these two programs in a number of ways, however.

“What is surprising is that food stamp caseloads are falling as quickly as cash assistance caseloads. Many observers are worried that the food stamp declines reflect a loss of benefits to families who should still be eligible.”

Blank and Wallace say that the large reduction in cash
assistance and food stamp caseloads is due largely to
factors other than the strong economy. They conclude that a severe recession that raises the unemployment rate by 3
percent to 4 percent would still leave welfare caseloads
well below the high levels reached in the early 1990s.

Danziger cautions, however, that given current rules, much
of the welfare reform success achieved so far may disappear
during the next recession. This is because cyclical effects on state budgets will be greater than during previous recessions and many recipients will require benefit extensions/exemptions or will be ineligible without changes in diversion/sanction policies, he says.

“Overall, in its first few years, the 1996 welfare reform
has been more successful in some dimensions (notably,
reducing caseloads) than in others (raising disposable
income),” Danziger says. “The relative success of welfare
reform in reducing caseloads may have created the fiscal and political context that will allow the reforming of welfare reform in order to better serve those who need further assistance, especially those who have fallen through the cracks in the new safety net.”