Does it Pay to Move from Welfare to Work?

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act requires welfare recipients to look for work, has made it much more difficult for nonworking recipients to remain on the welfare rolls, and has made it easier for them to continue to receive welfare benefits if they work part-time at low-wage jobs. In addition, the economic boom of the 1990s and changes in federal and state policies that supplement the earnings and subsidize the work expenses of the working poor have raised the net income gain associated with moving from welfare to work. We analyze data from a panel survey of single mothers, all of whom received welfare in February 1997, and find that by 1999, those who had left welfare and were working and those who were combining work and welfare were financially better off, on average, than those who continued to receive cash assistance but did not work. Those who worked had higher household incomes, lower poverty rates, experienced similar levels of material hardship, engaged in fewer activities to make ends meet and had lower expectations of experiencing hardship in the near future than did nonworking welfare recipients.