ESEARCHRIEF
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WorkingPoorFamilieswithChildren:Leaving
WelfareDoesn’tNecessarilyMeanLeavingPoverty
ByRichardWertheimer, Ph.D.May2001
sreauthorizationoffederalwelfarelegislationgetsunderwayandtherisk ofaneconomic downturnincreases,thisisanopportunetimetocomparethestatusofworkingpoor
1
familiesbeforeandaftertheimplementationofthe1996welfarereformlaw.
Increasing
poorfamilies’employmentanddecreasingchildpovertyweretwoexplicitobjectives ofwelfare reform. Thisresearchbriefupdatesastatisticalsnapshotofworkingpoorfamilieswithchildren thatChildTrendspublished twoyearsago.Thedatainthisresearchbriefindicatethat,even duringtheeconomicboomtimesof1995-98, employmentdidnotguaranteethatafamilywould escapepoverty.
Thestatisticalsnapshotpresentedhereshowsthatofallchildrenlivinginpovertyin1995,
34percenthadaparentorparentswhoweremakingasubstantialworkeffort. By1998,that percentagehadrisento42percent. Becauseofthisincrease,eventhoughtherewasanoverall declineinchildpovertyduringthisperiod,thenumber ofchildreninworkingfamilieswith incomesbelowthepovertylevelgrewbymorethan650,000.2
Thisbriefisoneofaseriesplanned byresearchersatChildTrendstohelp informthepublicdebatesurrounding the 2002reauthorizationoftheTemporaryAssistance forNeedyFamilies(TANF)blockgrant.
Whoareworkingpoor
families?
Thereisnogenerally accepteddefinitionof “workingpoor,”even thoughthetermis widelyusedinpolicydiscussions.Forits statisticalportrait,ChildTrendsdeveloped thefollowingdefinition:
•Workingpoorfamilieswithchildrenare familieswhoseincomesarebelowthefed- eralpovertythreshold($16,640forafami- lyoffourin1998)andinwhicheithertwo parentstogetherworkatotalofatleast
35hoursaweekorasingle parentworks atleast20hoursaweek. Thiswork standardissimilartothatestablishedby the1996welfarereformlaw.3
Morepoorchildrenhave parentswhoareworkinga substantialamountoftime.
Therehas beenanincreaseinthepercentage ofpoorchildrenwhoseparentsaremeeting theworkstandard, asdefinedabove. As shown in Figure 1, in 1995, before the
FIGURE 1
Thepercentageofpoorchildrenwhosefamiliesmet theworkstandardincreasedbetween1995and1998, amongallfamilies,marriedcouplesfamilies,and singlemotherfamilies.
enactmentofthefederalwelfarereformlegis- lation,about34percentofallpoorchildren hadparentswhoweremeetingtheworkstan- dard. By1997,theyearinwhichfederalwel- farereformwasimplemented,37percentof poorchildrenhadparentswhoweremeeting theworkstandard. By1998,thepercentage hadincreasedto42percent.
Married-coupleandsingle-parent families followedthesamepattern. Amongchildrenin poor,married-couplefamilies,thepercentage whoseparentsworkedincreased from52per- centin1995to62percentby1998. Among poorchildreninsingle-parentfamilies,the percentage increased from 29 percent to
36percent.
Becauseofthelargeincreases inthepercent- ageofpoorparentswhowereworking,the numberofchildreninworkingpoorfamilies increasedfrom4.9millionchildrenin1995to
5.6millionchildren in1998–eventhoughthe totalnumberofchildreninpovertydropped duringthesameperiodby1.2million.4
Parentalemploymentgreatly reduces,butdoesnotelimi- nate,povertyamongchildren.
Theincreaseinthenumberofpoorchildren withworkingparents shouldnotbeinterpret- edtomeanthatworkingcannotreducea family’sriskofpoverty. Tothecontrary:In
1998,forexample,childrenlivinginworking familiesweresixtimeslesslikelytobepoor thanchildrenlivinginfamiliesnotmeetingthe workstandard.
•Amongchildrenlivinginfamiliesthatmet thework standardin1998,only10percent werepoor,5comparedwith59percentof childreninfamiliesnotmeetingthework standard.
•Amongchildrenlivinginmarried-couple familiesmeetingtheworkstandard,only
6 percent were poor, compared with
50percentofchildreninfamiliesnotmeetingtheworkstandard.
•Amongchildrenlivinginsingle-mother families meeting the work standard,
25 percent were poor, compared with
74percentofchildreninsingle-mother familiesnotmeetingtheworkstandard.
Poorfamiliesnotmeeting theworkstandardaremore likelytobeheadedbysingle parentsorbyparentswho havenotgraduatedfrom highschool.
Comparedwithchildreninworkingpoorfamilies, childreninpoorfamiliesnotmeeting theworkstandard arelesslikelytobeliving withbothparentsandlesslikelytohaveat leastoneparentwhohascompleted12yearsof education.
•AsshowninFigure2,only22percent6of childreninpoorfamiliesnotmeetingthe workstandardin1998werelivingwith bothparents(comparedwith47percentof childreninworkingpoorfamilies).
FIGURE 2
Thepercentageofchildrenlivingin marriedcouple familieswashigherin workingpoorfamiliesthan in familiesnotmeetingtheworkstandardin both
1996and1998.
•AsshowninFigure3,about43percentof childreninpoorfamiliesnotmeetingthe workstandardin1998livedinfamiliesin whichneitherparenthadcompleted at least12yearsofeducation(comparedwith
33percent7ofchildreninworkingpoor
families).
FIGURE3
Thepercentageofchildrenwhosebettereducated parenthadlessthan12yearsofeducationwasslightly higherin poorfamiliesnotmeetingtheworkstandard thanin workingpoorfamiliesin both1996and1998.
TemporaryAssistanceforNeedyFamilies
(TANF)programs(seeFigures5and6).8
However,thegapinhealthinsurancecoverage betweenchildreninpoorfamiliesthatmetthe workstandardandthosethatdidnotwassig- nificantlysmaller in1998–afterimplementa- tionoftheChildren’sHealth InsuranceProgram(CHIP)–thanin1996.
FIGURE5
Thepercentageofchildrenwhosefamiliesreceived FoodStampsfellin 1998,butwasconsiderablyhigher in poorfamiliesnotmeetingtheworkstandardthan amongchildrenin workingpoorfamiliesin
both1996and1998.
1998
Moreover,theeducation gapbetweenparents whomettheworkstandardandthosewhodid notwaswiderin1998(10percentagepoints) thanin1996(5percentagepoints).
Childreninworkingpoor familiesarelesslikelyto havehealthinsuranceand receivepublicassistance.
Comparedwithchildreninpoorfamilies that didnotmeettheworkstandard,in1998,chil- dreninworkingpoorfamilies werelesslikely tohavehealthinsurancecoverage(seeFigure
4)andmuchlesslikelytobereceivingfood stampsorbenefitsundertheAidtoFamilies with Dependent Children (AFDC) and
FIGURE4
Thepercentageofchildrenwithhealthinsurancewas higherin poorfamiliesnotmeetingtheworkstandard thanin workingpoorfamiliesin both1996and1998, thoughthegapnarrowed.
FIGURE6
Thepercentageofchildrenwhosefamiliesreceived AFDCorTANFfellin 1998,butwasmuchhigher amongpoorfamiliesnotmeetingtheworkstandard thanamongchildrenin workingpoorfamilies
in both1996and1998.
•In1998,70percentofchildreninworking poorfamilies hadhealthinsurancecover- age(upfrom68percentin1996,asmall butstatisticallysignificantincrease).How- ever,77percentofchildreninpoorfamilies notmeetingtheworkstandardhadhealth insurance(downmodestlybutsignificantly from81percentin1996).
•ReceiptofAFDCorTANFandFoodStampsdroppedsharplyforchildrenin bothworkingpoorfamiliesandinpoor familiesnotmeetingtheworkstandard between1996and1998.
Workingpoor
familiesareoftendoubly
disadvantagedintheir
questtoescapepoverty.
Childreninworkingpoorfamilieshavetwo keydisadvantages.Comparedwithchildrenin workingfamilies withmodestincomes(between100percentand200percentofthe povertythreshold),andwithchildren inmid- dle-to-upperincomeworkingfamilies(above
200percentofthepovertythreshold)9,chil-
dreninworkingpoorfamiliesarelesslikelyto livewithtwoparents,andtheyarelesslikely tohaveatleastoneparentwhohascompleted
12ormoreyears ofeducation(seeFigure7).
FIGURE 7
Thepercentageofchildrenwithselectedadvantages wasconsistentlylowerin workingpoorfamiliesin
1998thanin moreprosperousworkingfamilies.
•In1998,lessthanhalfofchildreninwork- ingpoorfamilieslivedwithtwoparents. In contrast,abouttwo-thirdsofchildrenin workingfamilieswithmodestincomes livedwithtwoparents, and87percentof childreninmiddle-to-upper incomeworkingfamiliesdidso.
•Aboutone-thirdofchildreninworking poorfamiliesin1998livedinfamiliesin whichthebetter-educatedparenthadless than12yearsofeducation.Incontrast,83 percentofchildreninworkingfamilies withmodestincomeshadatleastone parentwith12yearsormoreofeducation. Amongmiddle-to-upper incomeworking families,itwasnearlyuniversal forat leastoneparenttohaveahighschool diploma.
Homeownershipandaccess
tohealthcareremainelusive
goalsformanyworkingpoor
families.
Inadditiontoanincomedisadvantage,children inworkingpoorfamilies arelesslikelythan childreninmoreprosperous workingfamilies tohavehealthinsurancecoverageandtolivein afamilythatownsitshome(seeFigure7).
•In1998,70percentofchildreninworking poorfamilies hadhealthinsurancecover- age. Incontrast,79percentofchildrenin workingfamilieswith modestincomesand
94percentofchildreninmiddle-to-upper incomeworkingfamilies werecoveredby healthinsurance.
•Justoverone-thirdofchildreninworking poorfamilieslivedinahomethefamily ownedin1998,compared with54percent ofchildreninworkingfamilieswithmodest incomesand84percentofchildreninmid- dle-to-upperincomeworkingfamilies.
Implicationsfor
PublicPolicy
Thisupdatedsnapshotofworkingpoorfami- lieshasbroadimplicationsforpublicpolicies intendedtoliftworkingfamilieswithchildren outofpoverty.Thedatapresentedheresuggest a number of policy options for reaching thatgoal.
OnepolicyoptionistoincreasetheEarned Income TaxCredit(EITC),a refundablecredit availabletolow-incomeparentswhowork.In keepingwiththeintentofwelfarereform,the
EITCencouragespeopletomakeasubstantial workeffortbyincreasingtheamountofdis- posable incomereceivedforeachhourof employment. TheEITChasmade arealdif- ferenceforthefamilies whohavelearned aboutthecreditandhavebeenabletotake advantageofit. Forexample,onestudyhas estimated thatthecreditmoved2.4million childrenoutofpovertyin 1996.10
Asecondpolicyoptionistoincreasetheeduca- tionallevelsofworkingpoorparents.Obtaining moreeducation maybecostlyanddifficultto achieveforadults,anditisnotacertainguar- anteeofbeingabletoattainahigher-paying job. Italsorunscountertowelfarereform’s emphasisongettingajoband gettingitquick- ly.Nonetheless,workerswithoutahighschool diplomaorspecializedtrainingareatatremen- dousdisadvantageintoday’slabormarket.
Athirdpolicyoption istohelpparentsgetand keepgoodchild care. Holdingajobcanbeas challengingasgettingone,particularlywhena motherworriesaboutthesafetyandreliability ofherchildcare. Assistancewithchildcare canremoveoneobstacletostayingemployed.
Sincemarriageisoftenaroutetogreater income,afourthpolicy optionistoencourage marriageamongsingleparents.Twoparents workingfulltimecangenerallyescapepoverty; oneparentoftencannot.However,manyofthe programsthathavebeensetuptoprovide assistancetolow-incomefamilieswithchil- drenweakentheeconomicincentivesfor asin- gleparenttogetmarried.BoththeEITCand manyneeds-testedtransferprograms,suchas FoodStampsandMedicaid,phaseoutbenefits asincomeincreases,andthesephase-outpro- visionsoftenapplyatornearthepoverty threshold.11Asafamily’sincomeincreases – forexample,asaresultofmarriagetoasecond earner–benefits fallandtaxratesrise.At leastintheory,thissituationcreates afinan- cialdisincentivetomarry. Inaddition,these provisionsreducetheincentiveforparentsto increasetheirwagesbyworkingmorehoursor byinvestingineducationortraining.Although itisimpossibletoeliminatealtogetherthese “phase-out” problems associatedwith an
increaseinapoorfamily’sincome,itispossi- ble(atacosttothefederaltreasury)toadjust upwardlythe rangesatwhichtheyapplyorto reducethe“taxrates”theyimplicitlyimpose.
Summary
Inthefirsttwoyearsofwelfare reform,more than1.3millionfamilieswithchildrenleftthe welfare rolls,andthenumberofpoorchildren declined from5.6millionto4.9million. Nevertheless,thenumberofchildreninwork- ingpoorfamilies grewbymorethan650,000 childrenbetween1995 and1998.Overthesame period,amongpoorchildrenthepercentage whoseparentsmettheworkstandardincreased from34percentto42percent. Still,amongall U.S.children,thoseinworkingfamilies were onlyone-sixthaslikelyto bepooraschildrenin familiesnotmeetingtheworkstandard.
Inatimeofslowingeconomicgrowth,wecan expectthetransitionfromwelfaretoworking poortobecomemoredifficultbecausepoor parentsnotmeetingtheworkstandardareat acompetitivedisadvantagerelative to working poorparents.Forexample,theeducationgap betweenlow-incomeadultswhometthework standardandthosewhodidnotwaswiderin
1998thanitwas theyearbeforewelfare reformwasimplemented.Parentsinworking poorfamiliesareatasimilarcompetitivedis- advantage–evenwhencomparedwithparents in workingfamilieswithmodestincomes.
Inshort,iferadicating childpovertyisan objective,welfarereformisonlythefirststep onwhatmay bealong,arduous,andcomplex journey. Recognizingthisisespeciallycritical astheprocessgetsunderway toreauthorize theTemporaryAssistanceforNeedyFamilies (TANF)blockgrant,acenterpieceofthe1996 welfare reformlaw.Thereauthorization processopensadoorforgreaterpublicdis- courseaboutthetypesofaidandsupportneed- edbyfamiliesthatarenotonwelfare,thatare headedbyaworkingparentorparents,but thatarenonethelessstillpoor. Addressing theseneeds– theneedsoftheworkingpoor– couldwellbethenextchapter inthenation’s welfarereformstory.
ChildTrendsisanonprofit,nonpartisanresearch center that studieschildren and families.ForadditionalinformationonChildTrends,includ- ingacompletesetofavailableresearchbriefs, pleasevisitourwebsite,
ChildTrendsgratefullyacknowledgestheJohnD. andCatherineT. MacArthurFoundationforsupport ofitsresearchbriefseries,andtheFoundationfor ChildDevelopmentforsupportofourresearchon workingpoorfamiliesandchildren.
Editor:Harriet J.Scarupa
ResearchAssistant:JustinJager
Endnotes
1.U.S.Congress,PersonalResponsibility andWorkOpportunity Reconciliation
Actof1996,Sec.411.
2.Thiscalculation isbasedontheofficialdefinition ofpoverty, whichcounts onlypre-taxmoneyincome. Whenanalternativedefinition ofpovertyisused, whichincludestheEarnedIncomeTaxCredit(EITC), FoodStamps,andother non-cashbenefits,theincreaseinthenumberofchildreninworkingpoorfami- liesis about270,000.
3.Theofficialpovertystandardhasmanydeficiencies thathavebeencarefully describedelsewhere(CitroandMichael,1995). Themostimportantdeficiencies forpurposesofthisstudyarethatrefundedEarnedIncomeTaxCredit(EITC) paymentsandnon-cashbenefits(e.g.,FoodStamps)arenotincludedas econom- icresources;incomeandpayrolltaxesarenotdeductedfromincome;andwork- relatedexpenses(especiallychildcare)arenotdeductedfromincome.
4.Dalaker,J(1999), U.S.CensusBureau,Current Population Reports, Series P60-207,PovertyintheUnitedStates,1998,U.S.Government PrintingOffice, Washington,D.C.
5.Eventhough theranksofworking familieshavepresumably beenswelled withfamiliespreviouslynotmakingasubstantialworkeffort,theriskofpover- tyforworking familieshasnotchanged significantly since1996–theyear beforefederalwelfarereformwasimplemented. However,overallchildpoverty hasfallenfrom20.2percentin1995to18.3percentin1998.
6.Thisis significantlylessthanthe24percentwhowerelivingwithboth parentsin1996.
7.Thisissignificantly lessthanthe37percent wholivedinfamiliesinwhich neitherparenthadcompletedatleast12yearsofeducationin1996.
8.In1997,theyearinwhichwelfarereformwasactuallyimplemented, TANF replacedAFDC. Statisticsfor1995,therefore,areforAFDC;laterstatisticsare forTANF.
9. Usingthis definition,workingfamiliesoffourwithmodestincomeshad incomesbetween$16,661and$33,319in1998;middle-to-upper incomeworking familiesoffourhadincomesofatleast$33,320.
10.CenterforBudgetandPolicyPriorities(1998),“Strengths oftheSafetyNet: HowtheEITC,SocialSecurityandOtherGovernment Programs AffectPover- ty,”Washington,D.C.
11.Forexample, in1997,forafamilywithtwochildren earningbetween
$11,930and$29,290,theEITCwasreducedby21centsforeverydollarofaddi- tionalearnings. Thephaseout“tax”isimposedontopofthefederalpayrolltax rate,thefederalincometaxrate,andthemarginalstateincometaxrate.
©2001ChildTrends.