+ Is welfare reformed yet?

Transcription

1 + Is welfare reformed yet? A retrospective on welfare, tax-credits and parental work policy Sophie Moullin Child and Family Policy Seminar, Columbia University & Teacher s College October 16 th, 2012

2 + Welfare reform was a political as well as economic response Post-industrialism, reduced unionization, globalization, higher unemployment, lower wages. Increasingly: long-term, regional disparities, urban, plus major gender and family changes Reagan (+ Thatcher) - welfare dependency and underclass Welfare Queens ; Losing Ground 15 years ago, Clinton (then Blair) inherits a hand-up not a hand-out...

3 + PRWORA objectives were never quite reconciled Reduce government dependency increase employment (and marriage) while some objectives were never explicit: Reduce government expenditure increase targeting Reduce child poverty increase family incomes Reduce poor child outcomes increase human capital

4 + Shift (in spending) from welfare (TANF) to work (EITC) Replaced AFDC in 1996 Block grants to states: $16.6 bn. Matched by states MOE, to total $33 Bn Goes to 1.9 million families only 5% of which 2-parent (41% no parent) Work Enforcement: TANF Eligible: families with dependent child; needy (defined by state). work activity (50% of all families) Ineligible: teen parents, drug felonies, non-citizens. Anyone after 5 yrs. Max. family of 4: $500/wk median (varies: $195 MS - $765 CT) Since 75, expanded late 80s, 93 Work Incentives: EITC Federal: costs $29- $33 Bn. p.a. Goes to 40 million: 21 million married, plus 19 m. single, adults Eligible: yr olds in full-time work, low-income. Ineligible: 35 million FT low-wage earners (no kids/ married). Earnings $50K+ (married) $45 K+ (single) Max. credits: 2+ kids: $5,160/ p.a.; 1 kid: $3,6121; single, no kids: $469.

5 + EITC incentivizes marriage, but dis-incentivizes second-earners Value of Federal EITC, Source: US Census Bureau

6 + Big initial gains in employment for single-parents stalled after 2000 Reduce dependency - increase employment (and marriage) TANF caseloads fell by 60%, from 5m to 2m Now 1.9 m. EITC coverage 20x that of TANF. Employment grew esp. for single mothers: 44% (93) - 64% (01) analysis suggests due to strong growth and work incentives, far more than work requirements. A third of women leaving TANF did not go into employment Modest negative effect on work for low-wage married mothers No signft. increase (or decrease) in marriage for low-skilled single mothers linked to welfare reforms

7 + EITC spending grew pre-crash wages did not 08 rec. 96 PRWORA 93 increase

8 + Spending on all means-tested support grew even before Total Spending Spending Per Person in Poverty 2008 crash 14,000 Total Spending, Billions of Constant $ PRWORA 12,000 10,000 8,000 6,000 4,000 Spending Per Person in Poverty, Constant $ , Year Notes: This series includes 10 spending sources: Medicaid, SNAP, EITC, CTC where credit exceeds tax liability, SSI, AFDC/TANF, Housing Assistance, Medicare Part D Low Income Subsidy, ESEA Title I Grants to From Haskins 2012, includes Medicaid, SNAP, WIC programs 0

9 + but since 2000, male and female wages have not grown

10 + Family poverty rates in the US have barely changed since the 80s 1996 PRWORA 2008 crash Source: US Census Bureau data, historical poverty table 13

11 + Policy takes US families to just 20% of median income vs. 50% in Aus. Net cash minimum-income benefit income as a % of median household income, married couple with children (2007) 70% 60% 50% 40% 30% 20% 10% 0% Includes all cash-assistance, tax-credits, and food-stamps (a near-cash benefit) Source: from Immervoll, 2009, p. 12. OECD data

12 + Without EITC+CTC, poverty would have been twice as high in 2010 Reduce child poverty increase family incomes Child poverty fell from 22% to 16% , then rose since. On SPM, TANF takes 0.8 m children out of poverty; EITC, 2.6 million. EITC has only just compensated for slow/ no wage growth No of extremely poor children doubled to 2.4m Reduce poor child and family outcomes increase human capital Some test-score and behavior gains linked to family employment and income increases of $3,000+ p.a., & when kids were 1-5 yrs. Work/family conflict most problematic for babies and teens Skills, education gap remains

13 + The next stage of reform: Evolution Target second-earners (UK), or reduce marriage penalties (US)? Look at childcare costs; individualizing EITC would cost $30bn Subsidize more part-time work (UK), or require full-time (US)? Risk embed underemployment, gender wage gap (higher in UK) Bring in older (UK) or younger workers (US) into tax-credits? Generational employment gap; youth unemployment scarring; nonresident fathers income Tougher requirements, time-limits welfare (UK), or relax some (US)? Costs of deep poverty (food stamps, schools, crime); fragile recovery UK s child poverty progress mainly reflected more generous child-elements

14 +... Or Pre-distribution? Address the underlying structure of wages: US has scope for greater min. wage coverage, enforcement as well as increase Living wage concerted action in key (e.g. care, public) sectors Reducing no. of low-skilled workers (education) but long-term, and % of low-wage jobs growing Address underlying structure of families: Target younger, (male) wages, social/ cognitive skills, and crime/ incarceration alternatives - (econ. incentives don t seem to work) Wider work reforms protect employment, wages and families: paid family leave, sick pays, right to request flexible working (UK) All child welfare as well as welfare-to-work investments

15 + References (1) Berlin, G. L. (2007). Rewarding the work of individuals: A counterintuitive approach to reducing poverty and strengthening families. Future of Children, 17(2): Blank, R. M. (2002). Evaluating welfare reform in the United States. Journal of Economic Literature 40(4): Committee on Ways and Means, U.S. House of Representatives. (2011). The Green Book: Chapter 7 and Appendix A. Currie, J. (2006). The Invisible Safety Net. Princeton, N.J.: Princeton University Press, Chapter 1. Charite, J., Dutta-Gupta, I., & Marr, C. (June 26, 2012). Studies show earned income tax credit encourages work and success in school and reduces poverty. Center on Budget and Policy Priorities: Washington, D.C.. files/ tax.pdf Deparle, J. (2009). Welfare aid isn t growing as economy drops off. NY Times, published on February 2, Ellwood, D.T. (2001). The impact of the Earned Income Tax Credit and social policy reforms on work, marriage, and living arrangements. National Tax Journal 53(4), Haskins, R., (2012, June 5). Testimony before the committee on Finance, U.S. Senate. Washington, D.C.:. U.S. Senate. Hatch, O. (2012). Testimony before the United States Senate Committee on Finance. Washington, D.C.: US Senate.

16 + References (2) Lein, L. (2012 ). Testimony before the United States Committee on Finance. Washington, D.C.: US Senate. Mead,L. (2007). Why welfare reform succeeded, JPAM 26 (2): Morris, P., Duncan, G., & Clark-Kauffman, E. (2005). Child well-being in an era of welfare reform: The sensitivity of transitions in development to policy change. Developmental Psychology, 5, Pavetti, L. A., & Kauff, J. (March 2006). When Five Years Is Not Enough: Identifying and Addressing the Needs of Families Nearing the TANF Time Limit in Ramsey County, Minnesota. Lessons From the Field: Information for Evaluators, Program Leaders, and Policy Makers. Mathematica Policy Research, Inc Schott, L. (July 6, 2011). An introduction to TANF. Center on Budget and Priorities: Washington, D.C. Shaefer, L., & Edin, K. (2012). Extreme Poverty in the United States, National Poverty Center Policy Brief. The University of Michigan. Sherman, A. (2011). Poverty and Financial Distress Would Have Been Substantially Worse in 2010 if it wasn't for Government Action, New Census Data show. Washington, D.C.: Center on Budget and Policy Priorities. Sherman, A. (July 6, 2009). Safety net effective at fighting poverty but has weakened for the very poorest. Center on Budget and Priorities: Washington, D.C. U. S Censurs Bureau (2012 ). Poverty Data: Historical Poverty Tables. Retrieved October 14, 2012, from census.gov/ hhes/www/poverty/data/historical/families

17 + Annex: additional charts

18 + The Fed. min. wage is still well below the poverty threshold Source: John Schmidt, CEPR, Based on full-time work.

19 + Much job growth since 2001, and the recession, has been low-wage 2008 Source: Klein, 2012