Work Still Pays
IFS study shows positives and negatives of Illinois welfare reform

Summer 2003, Volume 25, Number 1

The third annual report from the Illinois Families Study has found that more than five years into welfare reform, the news is encouraging. Despite an economic downturn, annual earnings among current and former welfare recipients in the state have increased, on average, to $14,145 in 2001, up from $7,485 in 1998. More families are covered by work-related benefits such as health insurance, and job satisfaction is high.

“In short, work continues to pay,” noted the head of the study, Dan A. Lewis, an IPR faculty fellow and professor of education and social policy at Northwestern. In addition, homelessness has declined, as has material hardship, and the IFS sample is reporting less depression and better health than in prior years.

For those not working, however, the picture is more troubling. A little more than one-third, or 37 percent, of families in the study were neither working nor receiving cash assistance. This group represents some of the study’s most vulnerable families. They subsist by using benefits other than Temporary Assistance for Needy Families, or TANF, such as food stamps, Medicaid, and housing assistance. Many in this group had chronic health problems and had more children at home or a child with a severe health condition. They were also more likely to be unmarried and without a high school diploma.

Also troubling is the continued poverty among IFS families. Average annual income for these families has doubled in three years, but $14,000 is still below the poverty line for a family of three, and 67 percent of families in the survey were still living below that line.

Overall, large declines in TANF use were not matched by comparable increases in work, resulting in a large and growing group of families who were left with neither work nor TANF. By 2002, 37% of respondents were in the “no-work/no-TANF” group. The largest group, however, was the “work-only” group, making up almost half of the sample (45%) in 2002.

All Illinois families will eventually face the prospect of losing cash assistance as the 1996 welfare reform legislation imposed a five-year lifetime limit on welfare receipts. Surprisingly, five years later in 2002, very few Illinois recipients had reached their limit. This was mainly due to a policy that “stops the clock” when recipients are working or participating in activities such as job training or education. This was the case for 86 percent of IFS respondents at some point between July 1997 and June 2002.

Although some respondents might have been enrolled in educational programs or caring for sick or disabled family members, most of them were working. The groups most at risk of reaching the time limit are those with chronic health problems, more children, and children with limiting health conditions.

Critical to the continued success of welfare reform in Illinois, the IFS study found, is work supports—child care subsidies, health coverage, child support enforcement, and the option to stop the TANF time clock. The Earned Income Tax Credit (EITC), earnings disregards, food stamps, and housing assistance are also important supports for working families.

Despite fairly high rates of awareness of work-support policies, many respondents were not receiving the work-support benefits available in Illinois. Food stamp and Medicaid use dropped considerably from 1998 to 2002. Only 37 percent of working IFS respondents with a child under 12 years old were receiving a child care subsidy in June 2001. Formal child support fell slightly from 1999 to 2002, although 60 percent of families report that they still receive informal child support. By 2002, only 12 percent of respondents said they had participated in a job training or job-readiness program, and only one percent had participated in a post-secondary education program. These are both significant declines from 1999.

“The IFS survey shows the importance of work supports in both maintaining employment and earning higher wages,” said IFS project coordinator Laura Amsden, “but the question as to why more qualifying individuals are not using these supports needs further investigation.” 

Equally important, the authors argued, are supports for those not working. Policymakers should reexamine job training and education; reconsider “get-tough” policies, such as sanctions and time limits; and provide intensive wrap-around services for families and their children.

Lewis pointed out that the results are still optimistic after several years of reform policies. “Illinois has found a good balance between carrots that encourage work and sticks that make staying on welfare less attractive,” he suggested. “The country might be well served by following the Illinois example of this balance that turns welfare recipients into productive citizens.”

The Illinois Families Study, conducted by the University Consortium on Welfare Reform, is following the same group of welfare recipients in nine Illinois counties for six years. The core of the study is an annual in-person survey of a random sample of 1,899 adults who were primary TANF grantees in the fall of 1998, a little more than a year after welfare reform was implemented. Surveys are also informed by administrative data. Participants were interviewed in 1999-00, 2001, and 2002.

The Consortium consists of Northwestern University, Northern Illinois University, University of Chicago, University of Illinois at Chicago, and Roosevelt University.

The latest report is available online at www.northwestern.edu/ipr/research/IFS.html.