New Welfare Limits Likely To Affect Alarming Number of Families

May 08, 1997

EVANSTON, Ill. --- This summer the clock will begin ticking for the new time limits for finding work and cutting off benefits that are the centerpiece of the 1996 federal legislation that is designed to "end welfare as we know it."

Within eight years, 41 percent of the current caseload of AFDC recipients will reach the 60-month cutoff for lifetime receipt of welfare, according to a new study that examined monthly patterns of AFDC receipt during the 1980s and early 1990s (see attached charts). And within two years, the 24-month work requirements will force states to seek employment or some form of allowable work activity for 52 percent of their current caseloads.

"The percentage of recipients that is likely to be affected by the 60-month limit on welfare receipt is twice as high as the percentage of exemptions allowed in the new legislation," said Greg Duncan, a co-investigator of the study and a faculty affiliate at the new Northwestern/University of Chicago Joint Center for Poverty Research. Given block grants to offer time-limited assistance under the new welfare block grant program, states are permitted to exempt up to 20 percent of their caseloads from the 60-month lifetime limit for reasons of hardship.

"Unless behavior changes drastically in response to the 1996 provisions, our estimates suggest that even when applying the most optimistic assumptions, an alarming number of low-income families will be affected by the new time limits," said Duncan, who also is a professor of education and social policy and a faculty fellow at Northwestern's Institute for Policy research. "The number of children who ultimately will be affected will run into the millions."

Kathleen Mullan Harris, University of North Carolina at Chapel Hill, and Johanne Boisjoly, University of Quebec at Rimouski, are the other co-investigators of the study, entitled "Time Limits and Welfare Reform: New Estimates of the Number and Characteristics of Affected Families." The study is available at http://www.spc.uchicago.edu/PovertyCenter/.

The researchers used Panel Study of Income Dynamics (PSID) data on monthly patterns of AFDC receipt and employment between 1983 and 1995 to estimate how many families will be affected by the new welfare legislation and the length of time it will take for recipients to reach work and benefit cutoff deadlines. Drawing upon existing research regarding welfare dynamics, the study makes distinctions between first-time and current caseload welfare recipients in its predictions, and it offers a risk index of characteristics that identifies who is most likely to reach the 60-month time limit.

Those most at risk are recipients who have never been married; who got on welfare when they were young; who lack a high school diploma; and who had preschool children when they first received welfare.

Even before benefits begin to be cut off, states are required to impose work requirements after 24 months of receipt. The analysis concludes that only 15 percent of recipients who received 24 months of welfare payments were employed at that point, and 25 percent are employed in the six-month window surrounding that point -- leaving 75 to 85 percent subject to work requirements.

"While states will have some options to exempt or reduce the work requirements, they will be penalized if they do not meet specific work participation rates mandated by the legislation," said Duncan. States are expected to choose activities satisfying the state work requirement from a list of allowable work activities contained in the federal legislation, including unsubsidized employment, subsidized private-sector or public-sector employment, on-the-job-training and job-search and job-readiness assistance for up to six weeks.

Among the findings: The distinction between current caseload recipients and first-time recipients is crucial in estimating how many families are likely to be effected by time limits, said Duncan. A 60-month limit applied to families first starting to receive benefits will affect only a minority of them, since most will never reach the limit. That is not the case, however, for the current caseload, which is over represented by long term recipients.

Although the study concentrates on 60-month federal provisions on time limits, it also presents estimates of affected fractions of the caseload in states with shorter time limits for total receipt.

The researchers caution that estimates may overstate the percentage of recipients affected by the new time limits, because some families may change behavior in anticipation of the time limits. "Still, even very optimistic assumptions about behavior leave more than one-third of recipients facing benefit cutoff," said Duncan.


Table 1: Fraction of new recipients and the total caseload accumulating 60 months of total receipt


Table 2: Selected characteristics of "current caseload" recipients who reach a 60-month time limit


Table 3: Percent of recipients who reach 60-month time limit in seven years


Table 4. Fractions of "current caseload" recipients with various scores on a "risk index" who reach a 60-month time limit
Risk index scoreRecipients who reach the 60-month limit Percent of all recipients with risk-index score
0 or 1 19% 21%
2 19 22
3 39 17
4 34 19
5 53 20



Table 5. Fraction of current caseload recipients accumulating 18, 24 and 36 months of total receipt
Reaching limit in: 18 months Time limit
24 months
36 months
18 months 60% --- ---
24 months 63 52% ---
36 months 70 61 39%
48 months 74 67 48
60 months 76 69 55
-end-


Northwestern University

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