Wednesday, October 13, 2004

The Effects of Welfare Reform

In our comment section, Paul "The Voice of History" Frymer questioned whether welfare reform has had any desirable effects. I would encourage him to examine the figure linked above, which shows the rate of labor force participation of non-married women from 1978-2002. You will see that there was a very, very sharp spike in the mid-90s, which tracks the increase in reform activity in the early 90s and the PRWORA. No previous upswing in the economy saw anything like this increase in labor force participation. Welfare reform was intended, primarily, to have precisely this effect, and it seems to have worked (yes, along with lots of other things, but most of the social science analyses of the changes in this period give a substantial role to welfare reform).

We know how to increase the incomes of working people--not just income transfers, but also unionization of low-skilled jobs, education, health care, etc. What we don't really know how to do is to increase, in a durable way that isn't subject to lots of moral hazard problems, the incomes of non-working adults. Welfare reform, by pushing lots more people into the labor force, doesn't solve poverty problems on its own (although it does some of that), but it helps transform what was both a programmatically and politically insoluble problem into one that is capable of being solved through policy instruments we know work and through political means we know are viable. If the voice of history believes otherwise, I'd like him to present his argument. I am, of course, eager to make sure that I'm not putting into the record views that history will come to condemn me for.

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