Welfare Reform Has Led to More Work but Less Education

http://www.nber.org/digest/jan09/w14466.html

Welfare reforms have reduced both the probability that women aged 21-49 will attend high school and that those aged 24-49 will attend college, by 20-25 percent.

Over many decades, welfare programs in the United States focused on education and training as a means of developing "human capital"- skills and knowledge that increase the value of labor. The goal was to help those on public assistance become self-sufficient, aiding them in the ascent out of poverty. By the mid-1990s, however, in response to increasing caseload numbers, welfare reformers turned away from the human capital approach in favor of policies requiring welfare recipients to work in order to receive benefits and making benefits time limited.

In Effects of Welfare Reform on Educational Acquisition of Young Adult Women (NBER Working Paper No. 14466), co-authors Dhaval Dave, Nancy Reichman, and Hope Corman find that while welfare reform has reduced caseloads and increased employment rates, it "significantly decreased the probability of both high school and college attendance among young adult women-by 20-25 percent." The findings show that "work first" policies not explicitly aimed at education can nevertheless significantly affect educational acquisition.

Welfare reform in the United States began in the early 1990s culminating in the passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996. With the goal of moving current and potential welfare recipients into the labor force, the act promoted work over education. The reforms were successful in reducing welfare caseloads from their peak in 1994- about one third of the 50 percent decline can be attributed to welfare reform. Employment rates for low-skilled mothers also increased during the same period, again partially attributable to the reforms. Though these employment effects are well studied, the consequences for adult education had been little examined until now even though education was commonplace among adult welfare recipients prior to welfare reform.

Using data from the Current Population Survey -- a monthly survey of 75,000 households conducted by the Bureau of the Census -- Dave, Reichman, and Corman examined enrollment in high school, college, and other schooling, which includes trade school, GED prep programs, and other training programs. Looking first at high school dropout rates for teenage girls, they find that welfare reform increased the probability of young women staying in high school by 9-13 percent, which is consistent with previous literature. The incentives for teens are very different from those for adults. PRWORA requires teen mothers to attend school in order to receive welfare and does not impose time limits or work requirements if they are full-time students. In addition, the new regime may encourage teenage girls from disadvantaged families, who have traditionally been at risk for welfare receipt, to complete high school in order to reduce their risk of needing cash assistance in the future.

Moving on to their primary focus, adult women, the authors find that welfare reforms have reduced both the probability that women aged 21-49 will attend high school and that those aged 24-49 will attend college, by 20-25 percent. These findings suggest that gains in reducing welfare caseloads have come at a cost of lowering the educational attainment of women at risk for relying on welfare.

Dave, Reichman, and Corman explain their findings as follows: Incentives to stay in school when young may increase the chances that teenage girls finish high school, but linking welfare payments to work requirements and imposing time limits strongly motivate them to get jobs rather than continue their education when they reach majority age.

Because PRWORA granted discretion to states in deciding details, such as eligibility requirements and specific program rules, the authors are able to compare effects across states with different policies. They find that states that support schooling as an alternative to work are able to reduce the negative impact of welfare reform on education. On the other hand, women in states with strong work incentives, such as small welfare benefits and strict work requirements, face more pressure to work at the expense of their education. The authors suggest that since education is associated with higher earnings, lower future unemployment, and better health, the negative effects of welfare reform on educational acquisition of adult women may have negative implications for maternal and child well-being.

-- MacGregor Campbell