MEDIA CONTACT: Wendy Leopold at 847-491-4890 or w-leopold@northwestern.edu

September 14, 2004

Study: Welfare Reform Creates Two Classes

EVANSTON, Ill. --- The latest findings of the Illinois Families Study (IFS) suggest that in the years since Illinois implemented welfare reform, two distinct groups of families who once received benefits have emerged. Members of the first have found jobs and are faring reasonably well. Members of the second, however, remain unemployed and – with welfare virtually unavailable – subsist on benefits such as food stamps, Medicaid and housing assistance.

Titled "The Two Worlds of Welfare Reform in Illinois," the IFS report depicts far different circumstances for former welfare recipients who are employed. According to the report, they are faring as well or better than they did prior to welfare reform, despite the downturn in the economy from 2001 to 2003.

"More than six years after the implementation of welfare reform, Illinois has experienced a significant decline in welfare receipt but has failed to see an accompanying increase in workforce participation," said Dan A. Lewis, professor of human development and social policy at Northwestern University and a faculty fellow at the University's Institute for Policy Research (IPR).

Lewis is the principal investigator of IFS, an independently funded study by researchers from Northwestern University, Northern Illinois University, Roosevelt University, the University of Illinois at Chicago and University of Chicago. The study is designed to give Illinois lawmakers objective data to assess the value of the state's welfare reforms.

"The latest wave of IFS findings shows a continued and troubling growth in the group of families who were neither working nor receiving welfare," said Lewis. "Although many, many families have successfully left TANF for work, there is a group of families of almost equal size that relies on neither work nor TANF."

Illinois' moderate policies and the provision of several strong work supports have helped to make work "pay" for many families. For about one-half of the families studied, employment -- often supported by resources such as child-care subsidies, health insurance, and food stamps -- has offered a boost in earnings and overall well-being. For the other half who were jobless in 2003, welfare reform has meant hardship and vulnerability.

Housed at Northwestern University's Institute for Policy Research, IFS has followed more than 1,000 of the state's poorest families -- all of whom were TANF grantees in the fall of 1998 (approximately one year after welfare reform was initiated in Illinois).

On the positive side, the latest findings from 2003 reveal that work remained stable, earnings increased, and TANF use dropped sharply since the first interviews were conducted in 1999-2000. In addition, among working families, homelessness was down to 3 percent from 7 percent in 1999-2000 and the percentage receiving work-related benefits increased. For example, the number of respondents receiving employer-provided health insurance rose from 16 percent in 1999-2000 to 30 percent in 2003.

More than three-quarters (81 percent) of those who were working (48 percent) reported relatively stable levels of job satisfaction, and most adults reported that they (80 percent) and their children (96 percent) were experiencing "good" to "excellent" levels of health. Overall, depression seems to have declined with those adults reporting depressive symptoms falling from 24 percent in 1999-2000 to 18 percent in 2003.

In spite of this good news, Lewis emphasized the daily hardships that current and former welfare recipients still face in their attempts to better their lives.

The study stresses that two issues need to be addressed. First, while working families seem to be doing better after welfare reform, they still live in poverty. Many working families earn less than $15,000 a year, and 45 percent still experience some type of hardship.

Second, there remains the troubling and widening gap between the employed and the unemployed. This has led to a dramatic growth in the group of families neither working nor receiving cash assistance.

The IFS report clearly shows that work remained stable, earnings increased between 1999 and 2002, and the number of families receiving TANF dropped sharply from 53 percent in 1999-2000 to 11 percent in 2003. Unfortunately, the jobs do not seem to have followed the drop in TANF use, resulting in a growing percentage of families (43 percent) who are neither working nor receiving TANF.

This "no-work/no-TANF" group represents some of the most vulnerable families in the study. Many of these families share an increased likelihood for chronic health problems and for having children with a severe health condition. They also are more likely not to hold a high school diploma.

Although declines in TANF rolls and general improvements in family well-being point to the success of reform in Illinois, the mismatch between the sharp decline in TANF use and stagnant work levels paired with persistent poverty demonstrates the mixed legacy that Illinois welfare reform will likely have.

Increased wages and earnings, high levels of job satisfaction, approval of many reform policies, and a strong preference for work over welfare receipt indicate that many families have enthusiastically embraced new opportunities to improve their lives through work. However, the growing segment that neither works nor receives welfare demands more careful attention from the state's policymakers.

"The major challenge of the next phase of reform in Illinois will be helping unemployed families gain and maintain jobs while continuing to support families who are newly self-sufficient," Lewis said. "The challenge is to build supports that reward work and make it worthwhile to work in a low-wage environment.  Maintaining or expanding a comprehensive network of work supports coupled with a living wage for low-income families will be crucial for building on Illinois' approach to welfare reform," he added.

Lewis and his IFS colleagues at four local universities are conducting in-person surveys of residents in Cook County and eight downstate counties. These counties accounted for approximately 75 percent of the state's TANF caseload in 1998. To date, the Illinois Families Study has received funding from 12 different private foundations and government agencies.

Copies of the executive summary and technical report are available online at www.northwestern.edu/research/IFS.html or may be ordered from Northwestern's Institute for Policy Research, publications department, at ipr@northwestern.edu.