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Unintended Consequences? Welfare Reform and the Working Poor

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  • Ann Dryden Witte
  • Magaly Queralt
  • Tasneem Chipty
  • Harriet Griesinger

Abstract

We have used a unique longitudinal database that incorporates information from diverse administrative and research sources to examine the impact of the early stages of welfare reform on poor working families who do not receive cash assistance. Our data are for 2791 working poor families from March 1996 through February 1997. Using a number of different estimation techniques, we find that the impact of the simultaneous October 1996 implementation of welfare reform and a federal minimum wage increase was to lower the earnings of the working poor families in our sample by approximately 6%. We find that increases in funding for Child Care Subsidies associated with welfare reform led to a significant increase in earnings. On net, the increase in Child Care Subsidies and the decrease in earnings because of the October 1996 changes approximately cancel out, with the representative family in our sample experiencing an estimated monthly earnings change of between -$18 and $68, with an earnings gain of $25 being most likely.

Suggested Citation

  • Ann Dryden Witte & Magaly Queralt & Tasneem Chipty & Harriet Griesinger, 1998. "Unintended Consequences? Welfare Reform and the Working Poor," NBER Working Papers 6798, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6798
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    References listed on IDEAS

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    1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
    2. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1063-1114.
    3. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472, National Bureau of Economic Research, Inc.
    4. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 605-637.
    5. Marlene Kim & Thanos Mergoupis, 1995. "The Working Poor and Welfare Recipiency," Economics Working Paper Archive wp_151, Levy Economics Institute.
    6. David Card & Alan B. Krueger, 1997. "A Reanalysis of the Effect of the New Jersey Minimum Wage Increase on the Fast-Food Industry with Representative Payroll Data," Working Papers 772, Princeton University, Department of Economics, Industrial Relations Section..
    7. Marlene Kim & Thanos Mergoupis, 1997. "The Working Poor and Welfare Recipiency: Participation, Evidence, and Policy Directions," Journal of Economic Issues, Taylor & Francis Journals, vol. 31(3), pages 707-728, September.
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    Cited by:

    1. Buhong Zheng, 2004. "Poverty comparisons with dependent samples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(3), pages 419-428.
    2. Robert J. Lemke & Ann Dryden Witte & Magaly Queralt & Robert Witt, 2000. "Child Care and the Welfare to Work Transition," NBER Working Papers 7583, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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