Baruch Professors O'Neill and Korenman Release Study Linking Welfare Reform and Poverty Reduction

December 20, 2004 Bookmark and Share

New York, NY -- According to a new study conducted for the Manhattan Institute by Baruch College professors June O'Neill (Economics and Finance) and Sanders Korenman (Public Affairs), Clinton-era welfare reform has played a significant role in the reduction of child poverty in the United States, especially among black and latino populations. These findings, the authors say, belie the theory that 1990s welfare reform would drive destitute mothers and children into deeper poverty. The study covers the years 1993 to 2001.

The study, released last week, is entitled Child Poverty and Welfare Reform: Stay the Course. It states that up to one half of the record decline in child poverty during the late 1990s was influenced by welfare reform. By 2001, the child poverty rate had fallen 6 percentage points from its 1993 peak, a 27% decline, to its lowest level since the mid-1970s. The decline in child poverty was particularly dramatic among black and Hispanic children. Between 1993 and 2002, the poverty rate among black and Hispanic children declined by almost one-third, far exceeding historical trends.

Welfare reform deserves much of the credit for the reduction in child
poverty as a result of increased work among single mothers, the group
most affected by welfare reform, the study says. Parental behavior spurred by welfare reform can take credit for as much as half of the decline in poverty among children in single-mother families, if, in addition to the increase in single mothers’ employment, we attribute part of the changes in family size and living arrangements to incentives produced by welfare reform. Doctors O’Neill and Korenman believe that there is no need to diminish the emphasis on work requirements and time-limited benefits, nor is there a need to legislate an increase in the number of hours of work required by welfare recipients. Welfare reform should stay the course. In sum, the study found that up to one half of the decline in child poverty was heavily influenced by welfare reform.

Groups with the largest declines in poverty, for example black and Hispanic children and children in female-headed households, were more likely than other children to be positively affected by welfare reform· The late 1990s reveal substantial gains in the economic well being of children that cannot be accounted for by normal economic fluctuations· The employment and earnings gains among single mothers would likely not have been achieved without welfare reform· Among black and Hispanic children living in single mother households, the increase in mother-employment accounted for an exceptionally large percentage (almost 40%) of the decline in child poverty· There was an increase in the proportion of children living in two-parent households for black and Hispanics, which further reduced poverty levels. Other important factors contributing to the decline in child poverty include:

  • Increase in parental education
  • Increase in wage rates of low-skilled workers in the U.S. economy
  • Decrease in number of children per family


Methodology



Using multiple regression analysis, the authors estimated the
contribution of these factors to the decline in poverty. O’Neill and Korenmann regressed the poverty rate of a child on a standard set of
demographic and geographic controls. The analysis also included controls for the level of welfare benefits in the state and for local labor
market indicators most pertinent to low-income households, including the state unemployment rate and the hourly wage rate for workers with no more than a high school education.

“Since the 1996 welfare reform, the overall poverty rate has dropped 9
percent- despite the 2001 recession—with even steeper declines in child poverty. This report reaffirms what we’ve known all along—welfare reform has provided families with a hand up out of poverty,” said Ways and Means Human Resources Subcommittee Chairman Wally Herger (R-CA). “Work-based welfare reform has been a huge success for millions of families and Congress is long overdue in its responsibility to provide families that remain on welfare more tools to help them leave poverty and achieve independence.”

A copy of Child Poverty and Welfare Reform: Stay the Course is available on the Manhattan Institute website, at http://www.manhattan-institute.org/html/cr_44.htm

June O’Neill is Wollman Professor of Economics at Zicklin School of
Business and director of the Center for the Study of Business and Government, Baruch College, City University of New York (CUNY). She also chairs the Board of Scientific Counselors of the National Center for Health and Statistics and is research associate of the National Bureau of Economic Research. She served as director of the Congressional Budget Office, 1995-1999.

Sanders Korenman is professor in the School of Public Affairs, Baruch College, CUNY, and a research associate of the National Bureau of Economic Research. He served in the Clinton Administration as Senior Economist of Labor, Welfare and Education for the Council of Economic Advisors.

The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility.


Contact:
Mackenzie Chambers
Press Officer,
Manhattan Institute
212-599-7000, ext. 313
mchambers@manhattan-institute.org