Welfare reform legislation enacted in 1996 under the Personal
Responsibility and Work Opportunity Reconciliation Act (PRWORA)
dramatically altered the social safety net for poor Americans.
PRWORA, designed to reduce long-term welfare dependency by increasing
self-sufficiency through employment, has gone a long way toward
achieving this goal. At the national level, welfare participation
has declined substantially, and the employment and earnings of
poor single mothersthe group most likely to receive public
welfare benefitshave increased while their poverty rates
have fallen.
Recent evidence suggests, however, that successful welfare reform
outcomes may depend in part on where welfare recipients live. What
has been the experience, for example, of the almost 8 million people
living in poverty in rural America compared to central cities and
suburban communities? In rural areas, employment is more concentrated
in low-wage industries (see "Low-Skill
Workers Are a Declining Share of All Rural Workers); unemployment
and underemployment are greater; education levels are lower; and
work support services, such as formal paid child care and public
transportation, are less available. In these less favorable circumstances,
how well has welfare reform worked in moving rural low-income adults
into the workforce and out of poverty?
With congressional reauthorization of welfare legislation scheduled
for 2003, ERS addresses two questions to inform the policy debate
surrounding reauthorization: What have we learned from empirical
studies about rural-urban differences in welfare reform effects
on program participation, employment, and poverty? Do rural and
urban low-income families have different needs that might be reflected
in the design of policies meant to provide assistance?
Key provisions of the Personal Responsibility
and Work Opportunity Reconciliation Act of 1996
Establishes Temporary Assistance for Needy Families
(TANF) that:
Replaces former entitlement programs with Federal
block grants
Devolves authority and responsibility for welfare programs from Federal
to State government
Emphasizes moving from welfare to work through time limits and work requirements
Changes eligibility standards for Supplemental Security
Income (SSI) child disability benefits
Restricts certain formerly eligible children
from receiving benefits
Changes eligibility rules for new applicants and eligibility redetermination
Requires States to enforce a strong child support program
for collection of child support payments
Restricts aliens eligibility for welfare and
other public benefits
Denies illegal aliens most public benefits, except
emergency medical services
Restricts most legal aliens from receiving food stamps and SSI benefits
until they become citizens or work for at least 10 years
Allows States the option of providing Federal cash assistance to legal
aliens already in the country
Restricts most new legal aliens from receiving
Federal cash assistance for 5 years
Allows States the option of using State funds to provide cash assistance
to nonqualifying aliens
Provides resources for foster care data systems and
a Federal child welfare study
Establishes a block grant to States to provide child
care for working parents
Alters eligibility criteria and benefits for child
nutrition programs
Modifies reimbursement rates
Makes families (including aliens) that are eligible for free public education
also eligible for school meal benefits
Tightens national standards for food stamps and commodity
distribution
Institutes an across-the-board reduction in benefits
Caps standard deduction at fiscal year 1995 level
Limits receipt of benefits to 3 months in every 3 years by childless able-bodied
adults age 18-50 unless working or in training
Welfare Law Changes Dramatically
The Personal Responsibility and Work Opportunity Reconciliation
Act (PRWORA) fundamentally changed the public assistance system
established during the 1930s. The Act replaced the entitlement
program Aid to Families with Dependent Children (AFDC) with Temporary
Assistance for Needy Families (TANF), which is funded through block
grants to States. TANF provides assistance and work opportunities
to needy families by granting States the Federal funds and wide
flexibility to develop and implement their own welfare programs.
It seeks to move people from welfare to work by imposing a 5-year
lifetime limit on receiving Federal welfare benefits and requiring
recipients to work or seek employment within 2 years of receiving
benefits. Low-income single mothers and their families are the
primary recipients of TANF.
The Rural Context
During the 1990s, the U.S. economy enjoyed an unprecedented
period of economic growth, as unemployment rates fell to 30-year
lows
and employment continued to expand in both rural and urban areas.
Yet, some areas within rural America benefit when the Nations
economy is strong while others do not. For example, about 364 nonmetro
U.S. counties, 16 percent of all nonmetro counties, had poverty
rates of 20 percent or higher consistently over the last four decades.
These counties contain almost a quarter of the rural poor and have
a disproportionate number of economically at-risk residents. At
the same time, their local economies are weaker and do not generate
jobs as well as other nonmetro counties. The inherent disadvantages
of these counties may be an obstacle to welfare reform efforts.
Also, some remote rural areas are characterized by conditions
that may impede the move from welfare to work, irrespective of
population characteristics or the health of the local economy.
Low population densities in these remote rural areas often mean
greater distances to jobs and increased demands for reliable transportation,
inaccessibility of key social and educational services, and fewer
child care options. To the extent that rural and urban areas differ
in their composition, local labor markets, and support services,
welfare policy outcomes may vary.
Lessons Learned
Results from recent national and State-level studies of rural
welfare reform are mixed. At the national level, welfare reform
outcomes did not differ greatly between rural and urban areas,
and policymakers might conclude that welfare reform was successful
in all areas of the Nation. However, rural areas are diverse and
national-level analyses that use a simple rural-urban dichotomy
can mask rural variation in welfare program operation, structure
of opportunities, and program outcomes revealed by a closer look
at individual State and local welfare reform efforts. When national-level
findings are disaggregated by State and by rural and urban areas
within States, a less positive picture emerges for some rural places,
particularly the poorest and most remote rural areas.
Has welfare dependency declined as a result of welfare
reform? At the national level, TANF caseloads fell by almost half between
1994 and 1999. On average, caseload declines were about as large
in rural areas as in urban areas, but some States had very different
patterns of change in rural and urban caseloads. In Mississippi,
TANF declines were smaller in rural areas than in urban areas after
accounting for differences in local conditions and population characteristics
that could have affected caseload declines. Study findings suggest
that the most isolated and remote rural areas of Mississippi, with
smaller employment growth and fewer support services, had the most
difficulty in reducing welfare caseloads. Studies in South Carolina,
Oregon, and Kentucky also found smaller rural than urban caseload
declines. These interstate differences in rural and urban outcomes
are likely due to variations in State welfare program implementation,
structure of job opportunities, and work support services.
Can rural welfare recipients find work? National studies
suggest that a strong economy, welfare reform, and expansion of
the Earned Income Tax Credit (EITC) have helped raise the employment
rates of single mothers, with one-half to two-thirds finding employment
at some time after leaving the welfare rolls. The proportion of
poor single rural mothers who were employed rose sharply after
welfare reform, increasing from 59 percent in 1996 to 70 percent
in 1999. Although the increase was similar in both rural and urban
areas, some State-level studies suggest more variable effects.
The strongest evidence comes from a Minnesota study by the Manpower
Demonstration Research Corporation (MDRC) that examined the employment
and earnings gains of a control group of single-parent (predominantly
mothers) AFDC participants and a group of similar participants
in an experimental welfare reform program, the Minnesota Family
Investment Program (MFIP). Welfare recipients were randomly assigned
to the two groups, so that any changes in employment and earnings
during the 2-year study could be attributed to the experimental
program rather than the characteristics of recipients. Employment
for single parents increased in both urban and rural counties.
In contrast to the large and lasting employment increases in urban
counties, however, increases in rural counties were much smaller
and program effects on rural employment faded considerably by the
second year of the study.
Did welfare reform improve economic status? Real annual
earnings for poor rural mothers increased from $3,835 in 1989 to
$6,131 in 1999. Income increased even more when adjusted for the
earned income tax credit (EITC), which provides a refundable tax
credit to low-income workers. In some States, however, the effects
of welfare reform on earnings were smaller for rural than urban
areas. The MDRC study in Minnesota found that the experimental
welfare reform program had no longstanding effect on the average
earnings of rural welfare recipients, although it increased the
average earnings of urban recipients. Differences in demographic
characteristics of recipients, work experience, attitudes about
welfare and work, and local economies explain some of the differences
in rural-urban average earnings.
Welfare reforms emphasis on work experience over additional
education and training means that welfare recipients best
chance to increase their earnings is to learn skills in entry-level
jobs and eventually leverage these new skills for better pay or
higher positions. However, many low-skill, entry-level jobs are dead-end jobs,
providing almost no new skills and offering limited prospects for
upward mobility.
Former welfare recipients are typically tracked into such
jobs both because their limited skills match the job requirements
and
because many of these jobs have been traditionally considered womens
work. Moreover, even among former welfare recipients with
relatively good prospects for career mobility, only a small percentage
move ahead each year, while others may lose their jobs and be forced
to take dead-end jobs. Thus, while some recipients may see substantial
wage increases after the initial job, many others will need to
acquire skills through formal education and
training to command wages that lead to economic independence.
How does welfare reform affect rural labor markets? While
rural welfare recipients have an immediate need to find employment,
their entry into the labor force can have a longer term effect
on local employment and earnings levels. The increase in labor
supply associated with welfare recipients entry into the
workforce, for example, could decrease wages not only for former
recipients but also for others competing for the same limited-skill
types of jobs. The size of this effect will depend on how the demand
for labor responds to changes in wages. If small wage declines
stimulate the creation of more jobs, then the impact of welfare
reform on wages should be small. If job creation is sluggish, however,
then larger declines in wages will be needed to match the demand
for labor with the increased labor supply.
Because welfare reform has been in place for less than a decade,
data on its effects on the labor market are limited. Earlier studies
of the aggregate labor
market suggest that effects will be small because welfare recipients constitute
a small share of the labor supply. Preliminary results of an ERS study, however,
suggest that increased workforce participation associated with caseload declines
in the late 1990s may have depressed the wages of low-skill workers by 2 or
3 percent, with the effects concentrated in places with the greatest caseload
decline. With former welfare recipients joining the labor force, unemployment
rates may also rise, at least temporarily, especially in places where welfare
leavers have difficulty finding and holding jobs. This issue may present a
greater challenge for rural areas during an economic downturn than in a period
of robust economic growth.
In May 2000, the Economic Research Service, the Joint
Center for Poverty Research, and the Rural Policy Research
Institute co-sponsored a conference, with funding from
ERS' Food Assistance and Nutrition Research Program, that
offered the first comprehensive look at the effects of
welfare reform in rural areas. Findings from this conference
are reported in Rural
Dimensions of Welfare Reform, published by the
W.E. Upjohn Institute for Employment Research in June 2002.
This effort represents the first comprehensive assessment
of the effects of welfare reform in rural America. It forms
the basis for this article and contains further details
on research methods and findings. For more information,
see the ERS Research Emphasis area, Enhanced
Quality of Life for Rural Americans.
Is the welfare-to-work transition more difficult in some
rural areas? Although rural areas have become more culturally,
politically, and economically integrated with urban areas, some
State-level analyses suggest that rural areas lag urban areas
in ease of welfare-to-work transition. In particular, welfare-to-work
transitions were harder in rural areas characterized by consistently
high-poverty and remote locations. In Mississippi, labor market
areas far removed from urban centers were found to be less likely
to create jobs matching the education level of TANF recipients.
These areas are doubly disadvantaged because most include persistently
high-poverty counties. Such remote areas have the poorest outlook
for growth in unskilled jobs, such as low-paying service or retail
jobs, the most likely employment available for welfare recipients.
These labor markets also had the weakest network of licensed
child care facilities and were least accessible by existing public
transportation, factors which also work against the welfare-to-work
transition.
According to a study of welfare families and community residents
in seven Iowa communities, welfare reform effects hinge on differences
in the proximity of jobs and access to social support services.
Urban centers offer more job opportunities and support a wider
range of social services than rural communities. Welfare recipients
who live in or adjacent to urban areas have access to more and
higher paying jobs than those who live in remote rural communities.
Welfare recipients seeking jobs require access to reliable, affordable
transportation, but cost-effective mass transit systems are less
likely to exist in more sparsely settled rural areas. Support services,
including job training or health care, are also less available
in smaller, more rural areas.
Next Steps
The overall effects of welfare reform on caseloads, employment,
and poverty have been positive throughout the country. Some rural
areas have done quite well in meeting the goals of welfare reform
by reducing caseloads and improving the economic self-sufficiency
of former welfare recipients. Yet, several studies of State welfare
programs and specific policy provisions point to fewer welfare
reform
successes in rural than in urban areas of their States. These differences are
due in part to variations in State welfare programs, including the amounts
and types of assets used to determine eligibility, the time period for work
requirements, and the design of child care and transportation assistance programs,
which may function differently in rural than in urban parts of the State. At
the same time, the diverse nature of rural areas makes welfare recipients in
some areas harder to serve than in others, particularly in consistently high-poverty
counties and the most remote rural areas with fewer employment opportunities
and work support services.
As TANF caseloads fell sharply during the 1990s, most welfare
recipients gained at least a temporary foothold in the labor market.
However, many former welfare families remained poor, and not all
received the work-based supports they needed to gain permanent
economic independence. Furthermore, the effects of the current
recession that began in March 2001 are now being felt, as national
TANF caseloads began to rise during the last quarter of 2002.
As Congress considers reauthorization of PRWORA in 2003, the policy
debate will focus on a variety of critical issues, including funding
levels, work requirements, time limits and sanctions, child care,
and the adequacy of provisions during econ-omic downturns. Of particular
importance are welfare reforms that address or recognize specific
rural issues, including less favorable job opportunities and higher
unemployment in rural than in urban areas; limited transportation;
service delivery problems; and lack of affordable,
flexible, and quality child care. Greater flexibility on time limits and work
requirements as well as increased efforts to create additional job opportunities
could greatly ease the welfare-to-work transition of rural welfare recipients,
particularly in the most poor and remote rural areas. Future welfare reforms
that recognize the diversity in context, resources, and opportunities in rural
places will offer the most effective strategies to move welfare recipients
from welfare to self-sufficiency.