Introduction

While one of the main purposes of the U.S. safety net is to help individuals vulnerable to poverty provide for their basic needs and avoid hardship, there exists an important additional purpose: for individuals and families to escape dependence and achieve self-sufficiency.

Unfortunately, most safety net programs do not adequately track whether federal spending improves employment and increases earnings, which would indicate the safety net’s direct impact in building recipients’ capacity for self-sufficiency. Instead, they are primarily judged by federal government expenditures.

If we want to measure safety net programs’ role in contributing to upward mobility, they must track what happens to individuals after they exit the safety net. The Fiscal Responsibility Act does just that in its reforms to the Temporary Assistance for Needy Families (TANF) program: requiring states to engage participants in work and then report on their employment outcomes.

In these TANF reforms, the debt ceiling deal sets out a model for how to transform federal safety net investments by measuring the outcomes policymakers want to see.

The Debt Deal’s TANF Reforms

The Fiscal Responsibility Act enacted key TANF reforms that will reestablish employment as a centerpiece of the program. Section 301 reestablishes work requirements in the program by recalibrating the caseload reduction credit to 2015. Section 302 creates a pilot program for five states to meet performance measures in work and family outcomes. Finally, Section 304 requires reporting on work outcomes after beneficiaries leave the program, measuring work and earnings two and four quarters after exit.

In order to receive the TANF block grant, states must engage 50 percent of their single-parent families and 90 percent of their two-parent families in work or preparation for work.[1] The law states that parents must work or participate in education and training programs for an average of 30 hours a week (20 hours a week for single parents with children under age six).[2] In the Deficit Reduction Act of 2005, Congress reset the TANF caseload reduction credit from 1995 to 2005, permitting states to lower their work participation rate one percentage point for each percent decline in the caseload from the base year.

In 2017, 21 states had a work engagement target of zero percent.[3] That number was 34 in 2023..  The total TANF caseload was 4,548,503 in 2005, dropping to 3,074,779 in 2015. In 2022, enrollment sits at 1,862,756.[4]

AFDC and TANF Total Participation, 1965-2022

Each state will have to recalculate their individual caseloads and thus their state work participation rate, but using the most recent 2022 FY data, about 20 states will now have a zero percent participation rate, with the rest ranging from 1 percent to 47 percent.

The reform moves 14 states from a zero percent work participation rate to some level of a work participation rate. In order to meet Section 304’s requirement to track the employment outcomes of all work-eligible participants, states will have to focus on measuring more than simply sending benefits. They must also assess whether beneficiaries move towards lasting well-being by tracking whether recipients are employed and how much they are earning after exiting the program.

Safety Net Programs Don’t Track Employment Outcomes

The TANF reforms in the Fiscal Responsibility Act should guide policymaker’s changes for other safety net programs. Unfortunately, most safety net programs offer no serious data tracking or evidence that beneficiaries are achieving self-sufficiency. As Peter Schuck, a Yale law professor, summarized in 2014, “less than 1 percent of government spending is backed by even the most basic evidence of cost-effectiveness.”[5] If safety net programs don’t track the desired outcomes for all the beneficiaries they serve, they won’t fulfill the promises of those programs for at-risk individuals.  

In particular, federal agencies that oversee the Social Services Block Grant and the Community Development Block Grant, two grant programs focused on reducing poverty, do not track whether the desired outcomes were achieved. Even when administrative agencies collect data from grant recipients, the data collection is only focused on the provision of services. Also, grant recipients do not have to specify the intended number of services they expect to provide or the number of beneficiaries that will be reached per federal dollar expended.

Why Work Matters

Why track employment as an outcome in the TANF program? TANF’s history points to employment as a key intervention to break the cycle of intergenerational poverty, and that subsidizing nonworking families generally leads to more families being excluded from the workforce. Before 1996, TANF was called the Aid to Families with Dependent Children (AFDC) program. AFDC provided low-income recipients with monthly cash payments without requiring them to work or engage in work-related activities. Work among the recipient parents was very low, with only a little over 1 in 10 families including a worker. Most families were also stuck in long-term poverty;[6] and most families on AFDC received the benefits for more than eight years.[7] Unwed births rose year-over-year for decades.[8] And all of this made intergenerational child poverty worse, as one in seven children were dependent on AFDC benefits.[9]  

The contentious 1996 welfare reform bill centered around whether work should be required in exchange for receiving welfare benefits. Many on the left condemned President Clinton[10] and predicted that poverty would increase after the 1996 reforms.[11] But the exact opposite occurred.[12] Dependency declined for the first time in a half-century.[13] Employment rose, particularly among single mothers who didn’t graduate high school. The employment-to-population ratio for never-married mothers grew from 46.4 percent in the five years before the 1996 bill to 62.6 percent in the five years after the bill’s passage. Child poverty, which had been static for decades, fell by more than 60 percent.[14] 

States should focus on returning beneficiaries to work as soon as possible. Keeping unemployment short-term is essential to economic mobility. As these mothers secured employment, researchers found that financial strain and food insecurity dropped. However, if they remained in the safety net long-term, their incomes, physical health, and psychological well-being declined.[15]

When studying the broader population, particularly after a recession, research has found that prolonged unemployment makes it harder to return to self-sufficiency. Finding a new job after long-term unemployment results in a stagnation of skills, due to the loss of work connections or even because of the stigmatization frequently associated with unemployment. This compounds into sustained lower wages and mobility, causing many to experience as much as a five percent annual loss for 20 years.[16] 

Even more importantly, states should emphasize employment because of the non-economic impacts. When unemployment lasts more than six months, researchers find decreased well-being[17] including substantial mental health effects, like depressive symptoms.[18] Prolonged unemployment also comes with significant physical health declines and even shorter lifespans. Long-term joblessness measurably affects mortality by as much as a year and a half for a 40-year-old worker.[19] 

Some argue that safety-net benefits are a net positive for not only workers but their families, even if a family was detached from work. The evidence does not support this claim. In fact, several comprehensive studies demonstrate that safety-net receipt had a harmful impact on children whose parents did not work, and that increasing benefits did not produce better outcomes. When mothers who were formerly dependent on welfare end up finding employment, we see increased physical, emotional, and psychological health,[20] [21], as well as a connection of better health and behavioral outcomes for children in those families. Research even shows a connection of better health and behavioral outcomes for those children whose mothers had moved from welfare dependence to work.[22]A 1994 study found that a mother’s welfare dependence, whether single or married, was associated with a reduction in her child’s math and verbal-ability test scores.[23] A 1992 study found that girls who were raised in aid-recipient families were 1.4 times less likely to graduate high school than their peers whose parents did not receive aid.[24] A similar 2003 study found that “exposure to one year of welfare in early adolescence is associated with a reduction in schooling of about 0.3 years.”[25]

It is a step in the right direction that Congress has mandated the collection of basic employment outcome data.  By focusing on employment, the TANF program will better help low-income and vulnerable Americans to achieve self-sufficiency and overall well-being. The next step is for Congress to apply outcome measurements for capacity-building interventions. 

The Next Step: Measure Capacity-Building Interventions

Many safety net recipients simply experience short-term need. In these instances, transfer payments (e.g., cash, food, or housing assistance) with a time-limit and a modest work requirement may bring the best results. 

Other recipients might have certain obstacles where they could benefit from a specific intervention as they seek self-sufficiency, such as employment training, effective substance abuse treatment, or parenting classes. States do not currently focus most of their block grants on these activities. In FY 2021, states expended 22.6 percent of TANF and Maintenance of Effort funds on basic assistance, 7.6 percent on work, education, and training activities; and 16.2 percent on childcare.[26] States may have to emphasize more effective immediate and short-term interventions to build these individuals’ capacity. The five states who receive the pilot created in the Fiscal Responsibility Act’s Section 302 should direct their funds on measuring work and family outcome of capacity-building programs.

Tracking these program’s performance outcomes will allow states to focus their funds on capacity-building interventions in order to empower individuals to build and maintain a meaningful life. This can take many forms, depending on the specific need. It may take the form of an intensive work search for the unemployed to obtain work; short-term housing or apprenticeship programs for formerly incarcerated individuals to avoid recidivism; or residential treatment programs for those trapped in addiction to find sobriety.

Collecting outcome measurements will allow states and federal programs to conduct randomized controlled trials (RCT)[27] and third-party evaluations.[28] Regrettably, the current evidence for these interventions is similarly inadequate. Right now, the current RCT analysis of federal programs’ data indicates that most capacity-building programs do not achieve measurable impacts for participants. [29]^,[30] Few capacity-building programs track results and even those that are effective usually have modest impacts.  As summarized in a 2018 review of the 13 known large RCTs of federal programs, “Eleven of the 13 RCTs found that the programs produced either no significant positive effects on the key targeted outcomes or small positive effects that dissipated shortly after participants completed the program.”[31] Running capacity-building programs with few if any expected results both wastes taxpayer resources and could generate despair and alienation among recipients who deserve better.

One successful example of this approach was part of the reforms initiated by Mayor Rudy Guiliani in New York City.[32] In 1999, the administration replaced the standard fee-for-service contracts for job placement and training organizations with a system that gave a higher percentage of new contracts to the best performers. The new contracts incentivized the desired outcomes through payments based on the number of job placements. Within a year, the number of job placements doubled.^[33] Mayor Michael Bloomberg’s administration continued this outcome-based strategy and revised contracts to financially reward organizations for participant job retention. Under the new contract incentives, the percentage of individuals retaining jobs at 90 days doubled and 180-day retention increased more than five times.^[34]

By tracking outcomes, policymakers would have solid evidence to determine whether the capacity-building programs are effective. To create more successful capacity-building interventions, states should track outcomes and reward providers who provide clear and verifiable results.

Conclusion

While the safety net can deliver on its promise to alleviate material deprivation, the long-term goal should be for all parents and their children to break out of the cycle of dependence and poverty through self-support and social mobility. 

The TANF reforms in the Fiscal Responsibility Act is a step in the right direction. By requiring states to engage more participants in employment and then report on their employment outcomes, states will add to recipient well-being.  Federal policymakers should carry these reforms to other safety net programs by tracking clear and verifiable outcomes in the lives of vulnerable individuals.