American lessons for NZ

New Zealand's finance minister suggests they might get around to implementing some campaign promises on welfare reform.

I would expect that Treasury will be looking closely at what happened in the US post 1996. President Clinton* then signed into law the replacement of AFDC (basically the Kiwi DPB) with TANF: Transitional Assistance for Needy Families. TANF provided block grants to states agreeing to some minimal rules around how they would deliver TANF funding, including a five year maximum time limit for lifetime benefits receipt for at least 80% of their caseload. States could exempt a fifth of their caseloads from the five year lifetime cap - some folks can't easily be moved into work - or could keep a larger fraction exempt but entirely on the state's dime rather than through the block grant. Different states experimented with different ways of moving folks from welfare to work and could learn from each other.

What have been the results? Large reductions in welfare caseloads, with the vast majority of welfare leavers transitioning into work. Illegitimacy rates dropped. The poverty rate among children with single mothers dropped substantially. The Index of Child and Youth Well-Being showed marked improvement. The folks at the San Francisco Fed conclude, in respect of the current recession:

Can young single mothers survive a deep recession?

The evidence presented above suggests that welfare reform has made even the most vulnerable single mothers economically more self-sufficient and that this pattern continued during and after the 2001 recession. Welfare caseloads continued to fall throughout that downturn, possibly because industries such as retail sales and health care, which employ many low-skilled women, remained relatively strong (Blank 2006).

In the current downturn, it’s natural to worry that families headed by single mothers may suffer economically. Single mothers will undoubtedly experience higher unemployment, like other workers. But recent research (Isaacs 2005) suggests that their growing attachment to the labor market better positioned them to fall onto a different part of the social safety net—unemployment insurance—during the 2001 recession. Although recent unemployment data for low-income single mothers are not yet available, we believe trends for this group should be monitored, given their implications for the well-being of single mothers and the long-term viability of the reformed welfare system.

A short reading list, in addition to links above:

• Moffitt, R. 2008. Welfare reform: the US Experience.


• Blank, R. 2002. "U.S. welfare reform: what's relevant for Europe?"


• Blank, R. 2002. "Evaluating welfare reform in the United States"


• Haskins, R. 2006. Work over Welfare: The inside story of the 1996 Welfare Reform Law. Brookings.


• Coutts, J. 2004. “New Zealand lessons from United States welfare reform.” New Zealand Business Roundtable Policy Backgrounder.

The main lesson to draw is that it is more than possible to move single mothers from welfare to work and that their children are generally no worse off for the move.

* Clinton as President facing a decent Republic Congress -- could anything in the world be better? Can we do a full team swap, replacing the entirety of Congress with the folks there in '96 (as their past selves) and swapping Clinton back into the Presidency? Wasn't it wonderful? While we're wishing for ponies, why can't the Habs have the 1993 version of Patrick Roy back in net? And lose the goofy centennial jerseys?