Welfare Reform That Works: Explaining the Welfare Caseload Decline, 1996 – 2000

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Perhaps the single biggest success of welfarereform has been the significant reduction in caseloads.Since passage of the Personal Responsibilityand Work Opportunity Act of 1996, the numberof people receiving federal cash welfare paymentshas dropped by roughly 58 percent. Moreover,that reduction in caseload has been accomplishedwithout causing undue hardship for former welfarerecipients. Indeed, poverty rates, including thechildhood poverty rate, have declined along withwelfare caseloads.

However, the reason for the caseload decline continuesto be the subject of heated debate. Someobservers suggest that the success in moving individualsoff welfare has little to do with welfare reformitself but results from the economic boom of the late1990s. Others suggest that state experimentationand policies, including sanctions and benefit levels,are the primary reason for declining rolls.

Different states have pursued different policiesand achieved different degrees of success inreducing welfare rolls. Previous academic studieshave suggested that the variation in policies hasa significant impact on the level of reduction inwelfare receipt. This study builds on that previouswork by conducting a regression analysis ofcaseload reduction between 1996 and 2000 on astate-by-state basis. The study looks at a numberof factors, including economic growth, sanctions,and benefit levels, and concludes that economicgrowth had little impact on reducing welfarerolls. Instead, states with the strongest sanctionsand lowest benefit levels had the most successin reducing their caseloads.

Michael J. New

Michael J. New, a Ph.D. candidate at Stanford University, was a data analyst and research assistant at the Cato Institute in 2001.