A How-To on Welfare Reform

When Washington required states to overhaul public assistance, critics asked whether poor families would suffer. A comprehensive study of welfare reform in Minnesota finds the opposite; in addition to less poverty, there are greater family stability, more marriages, fewer instances of domestic violence, and improvement in the behavior and school performance of children.

These findings are significant because they are the first to show a positive link between state welfare reform and substantial, far-ranging improvements in the lives of single parents and their children.

Based on a study of 14,000 parents who participated in a pilot program or received traditional welfare benefits between 1994 and 1998, the nonprofit Manpower Development Research Corp. found that employment and earnings rose and poverty was reduced for long-term welfare recipients, largely single mothers who had little education, limited if any work experience and the greatest difficulty in finding work and getting off welfare.

The pilot program required recipients to work or perform work-related activities such as training. It also allowed them to collect supplemental cash benefits until their earnings rose to 40% above the federal poverty threshold, about $18,200 for a single mother with two children. California has a similarly high earnings cutoff, but the positive effect is reduced in Los Angeles and other areas that have a much higher cost of living.

Because Minnesota provided financial incentives and generous support including child care and continued medical insurance, the new program cost more than the old Aid to Families With Dependent Children program. Under the pilot program, the state spent an additional $1,900 to $3,800 per family, a short-term investment that paid off.

Participants in the pilot program had a 35% increase in employment over those in the traditional welfare program, and earnings were on average 23% higher. Because the families in the pilot program had higher earnings and were able to keep more of their cash benefits, their incomes were more likely to rise above the poverty line. After three years in the pilot program, those families were also more likely to own a home.

When the pilot program ended in 1998, Minnesota reduced the financial incentives to lower costs. Under the current program, recipients who work can keep cash benefits until they reach 20% above the federal poverty level. The impact of these revisions on families and children has not yet been measured.

California can learn from the Minnesota approach. The state can afford to put more into supporting new workers because of the budget surplus and the decline in the welfare caseload. As in Minnesota, the goal here should be helping parents work their way out of poverty while providing better outcomes for their children.