Work Requirements and Work Supports for Recipients of Means-Tested Benefits

Summary

The federal government has many programs that are designed specifically to help people who have relatively low income obtain food, health care, housing, and other goods and services that they might not otherwise be able to afford. Those means-tested programs provide cash payments or other assistance to qualified recipients. If recipients’ earnings rise, then their benefits typically decline. To counter that incentive for participants to work less, the programs often incorporate work requirements (which make the receipt of benefits contingent on working or preparing to work) and work supports (which make working more feasible and profitable for participants). Work support programs usually also have work requirements. (For example, only people who work are eligible for the earned income tax credit.)

This report focuses on work requirements and work supports in three federal programs: Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), and Medicaid. Of those programs, TANF is the smallest, providing monthly cash payments to about 1 million families each year. By law, most able-bodied parents who receive those benefits must participate in work-related activities. SNAP and Medicaid serve much broader and larger populations than TANF; they also have included work requirements at times, but typically applied them only to able-bodied adults without dependents. To support recipients who are working or searching for work, policymakers have made subsidized child care and workforce development services available to some participants in those programs, particularly TANF.

In this report, the Congressional Budget Office analyzes how work requirements and work supports affect the employment and income of former, current, and potential participants. In addition, the agency estimates how changes to those requirements and supports would affect the federal budget over the next nine years. Even though research suggests that means-tested programs can continue to affect former participants for many years, this report focuses on the programs’ more immediate effects.

How Do Work Requirements Affect People’s Employment and Income?

TANF’s work requirements have generally increased employment while having little effect (on net) on average income. Some recipients have earned more by getting a job, but others have lost benefits without finding work, which probably increased the number of people in deep poverty. Work requirements in SNAP and Medicaid have also reduced the benefits that people receive but have increased their employment or earnings less (for SNAP recipients) or maybe not at all (for Medicaid recipients). TANF recipients facing work requirements have been provided with strong work supports, unlike SNAP and Medicaid recipients.

TANF

Most of the research on work requirements focuses on single mothers who received recurring cash payments through TANF or its predecessor, Aid to Families With Dependent Children. The imposition of work requirements in the 1990s boosted the employment of those single mothers but had little effect on their average income, mainly because the increase in earnings for those who worked was about equal to the reduction in cash payments for those who lost benefits. The number of people receiving cash payments has continued to decline over the past two decades; by 2019, the number of recipients was about 2 million, or one-seventh of what it had been in 1993.

Although TANF’s work requirements have probably had little effect on average income among single mothers, those requirements have probably changed how income is distributed among that group. The mothers who gained employment often saw their income boosted by higher earnings and receipt of additional tax credits, but many mothers who lost benefits because they did not meet the work requirements were left in deep poverty. TANF continues to be the primary source of recurring cash assistance for able-bodied single mothers without education beyond high school, but the percentage of those mothers who are receiving assistance has fallen along with the total number of recipients.

Before work requirements were imposed, nearly all less-educated single mothers who did not work for an extended period received cash payments. By calendar year 2019, though, about one-seventh of less-educated single mothers had no earnings and no cash assistance, CBO estimates. Many of those families report having almost no income beyond benefits from SNAP. By removing families from TANF before they found work—and by deterring families from entering the program—work requirements have probably played a role in increasing the number of families in deep poverty.

SNAP

SNAP’s work requirement has probably boosted employment for some adult recipients without dependents but has reduced income, on average, across all recipients. Earnings increased among recipients who worked more, but far more adults stopped receiving SNAP benefits because of the work requirement. Most of the adults who had their SNAP benefits terminated for failing to comply with the work requirement have very low income because few of them have earnings or receive cash payments.

Medicaid

Evidence of the effect of work requirements on Medicaid recipients is limited to Arkansas, the only state where a work requirement was imposed on recipients for more than a few months. There, many of the targeted adults lost their health insurance as a result of the work requirement. Employment did not appear to increase, although the evidence is scant. Research indicates that many participants were unaware of the work requirement or found it too onerous to demonstrate compliance.

How Do Work Supports Affect People’s Employment and Income?

Most work supports increase employment and income. Subsidized child care, for instance, benefits single parents (its main recipients) by boosting their employment and increasing their resources substantially. Parents who find employment benefit from higher earnings, and those who would have purchased child care even without a subsidy have more income to spend on other goods and services. (The resources of some working parents are unaffected because they would have had a relative or friend watch their children in the absence of the subsidy.)

Job-search assistance and subsidized employment provided by workforce development programs have increased employment and income, but job training provided by those programs has had mixed results. According to a study conducted by the Department of Labor in the early 2010s on two of the largest workforce development programs, intensive job-search assistance (such as career counseling) increased participants’ average earnings by about $2,200 in the year following the receipt of assistance. In contrast, job training could reduce employment and income by causing participants to delay their job search or by reducing the number of hours they work. In the Department of Labor’s study, participants in job-training programs worked less while in training and did not work more or earn more afterward, on average.

Lawmakers modified the large workforce development programs in 2014 to better align job training with the demands of local employers. A comparable evaluation of those programs’ effectiveness since then might show increased employment and income from job-training programs if the alignment between those programs and labor market demand has improved lately. Recent research demonstrates that job training provided by smaller programs can increase employment and income when it focuses on the demands of local employers.

How Might Policymakers Change Work Requirements and Work Supports?

To increase employment, raise income, or reduce federal spending, the Congress could pursue various options that would change work requirements and work supports. Those options fall into four broad categories. Options in a category would typically accomplish similar objectives, although the effects of any particular option on employment, income, and the federal budget would depend on its details (see Table S-1).

• Options that expanded work requirements would typically increase employment. But they would have little effect on recipients’ average income (net of medical expenses, in the case of Medicaid) or would reduce it because the overall loss in benefits would equal or exceed the total gain in earnings from increases in employment. Some participants’ earnings would increase more than their benefits decreased; other participants would be left without any earnings or benefits. If the work requirements were tied to receipt of SNAP or Medicaid, the loss in benefits would reduce federal spending because the government pays for a fixed portion of the cost of those benefits. In this analysis, CBO assessed expanding work requirements in SNAP and Medicaid. The SNAP option that CBO discusses in this report might not reduce federal spending because it includes additional spending on work supports. The other option would substantially increase the amount that people who lost Medicaid coverage pay out of pocket for medical services.
• Options that reduced work requirements would typically increase federal spending on benefits and reduce employment. They would decrease the number of people with very low income and would either raise average income or change it little. Reducing work requirements during periods of high unemployment could boost recipients’ income substantially while having little effect on employment. In this analysis, CBO assesses reducing work requirements in SNAP and TANF. The TANF option would not increase federal spending because that program’s funding is set at a fixed total.
• Options that expanded work supports would typically lead to larger gains in income than options that expanded work requirements, but they would also push up federal spending. In addition, they would increase employment and reduce recipients’ expenses for work supports, leaving them with more income to spend on other goods and services. In this analysis, CBO assesses one option that would provide more workforce development services to TANF recipients when jobs are scarce and a second option that would generally increase funding for subsidized child care.
• Options that reduced work supports would typically lead to less employment, lower income, and reduced federal spending. In this analysis, CBO assesses an option that—rather than reducing federal spending—would shift funding from work supports to cash payments for nonworking families. Such a policy would reduce employment but could raise recipients’ income and make deep poverty less prevalent.

Chapter 1An Overview of Work Requirements, Work Supports, and Means-Tested Programs

The federal government has many programs that provide benefits to help people who have relatively low income. Such means-tested programs—some of which are administered jointly with the states—help the people who receive those benefits obtain goods and services that they might not otherwise be able to afford. Three of those programs are Temporary Assistance for Needy Families (TANF), which funds monthly cash payments along with many other services; the Supplemental Nutrition Assistance Program (SNAP), which assists people in purchasing food; and Medicaid, which provides health insurance.

Although the people served by those programs differ, they generally have cash income near or below the poverty line (see Table 1-1). Most families in TANF, for instance, are headed by single mothers who have no education beyond high school; despite the cash payments they receive from the program, they have very low cash income—in many cases, it is so low that they are considered to be in deep poverty. Income for SNAP and Medicaid recipients is still low but not as low, and a greater share of adults in those programs are married or childless. (In addition, many of those adults are elderly or disabled.)

In 2019, TANF provided cash payments of about $500 a month, on average, to participating families consisting of an able-bodied parent and two children—an amount equal to roughly 30 percent of the poverty threshold. SNAP provided a monthly food allowance of $372, on average.1 Average government spending on health care for such a family in Medicaid was higher—at roughly $800 per month—but was concentrated among recipients with severe medical conditions.

By design, benefit amounts in TANF and SNAP decline rapidly as participants’ earnings increase. That structure can create an incentive for participants to work less, although additional tax credits can offset a substantial portion of that decline.2 The decrease in benefits tends to be largest for families in TANF, who receive about 50 cents less in cash payments for each additional dollar they earn.

Work Requirements and Work Supports in Recent Years

To encourage participants in TANF, SNAP, and Medicaid to work, policymakers have added requirements to those programs. To receive benefits, participants must demonstrate that they are working or preparing to work. Most adults in TANF are required to work or participate in related activities, such as searching or training for a job. A far smaller portion of adults in SNAP are subject to such a requirement: Many SNAP recipients are elderly or disabled and thus not expected to work, and the requirement is not imposed on households that include dependent children. Medicaid does not have work requirements, although Arkansas imposed a work requirement on some childless adults who receive Medicaid benefits in 2018. (Several other states began implementing work requirements for Medicaid recipients, but Arkansas was the only state that terminated Medicaid benefits because of insufficient employment.)3

To make work more feasible and profitable, the federal government provides funds (often directly to the states) for work supports, such as subsidized child care and workforce development services. Those services are primarily funded by the Child Care Development Fund (CCDF), Title 1 of the Workforce Innovation and Opportunity Act (WIOA), and TANF. (All those funding sources focus assistance on people with low income, although not exclusively on TANF, SNAP, and Medicaid recipients.)

In 2019, the CCDF funded $8 billion of subsidized child care; by providing state-run care for dependent children, those programs enabled the parents to work, train, or search for a job.4 That same year, Title 1 of WIOA funded $5 billion of workforce development services, including job-search assistance, job training, and subsidized employment. TANF provided $3 billion for subsidized child care and $3 billion for workforce development services in 2019. Other programs that provide work supports to families in TANF, SNAP, and Medicaid and that also affect people’s incentives to work (such as Head Start, the child tax credit, and the earned income tax credit, or EITC) are beyond the scope of this report.5 (CBO used 2019 as a proxy for what work requirements and supports will look like after the public health emergency declaration related to the coronavirus pandemic is lifted.)

Changes to Work Requirements and Work Supports During the 1990s

The most significant changes to employment of participants in means-tested programs occurred in the 1990s, when work requirements and work supports were substantially expanded for many participants. The changes were implemented through a series of executive actions followed by enactment of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996. Those legislative changes are collectively referred to as welfare reform.

Before those changes were implemented, the government provided cash payments to qualifying recipients through Aid to Families With Dependent Children (AFDC). Into the early 1990s, that program had only minimal work requirements. From 1993 through 1996, most states imposed their own work requirements on AFDC participants by using waivers provided by the Bush and Clinton Administrations. In 1997, as a result of PRWORA, TANF replaced AFDC. For a family to receive cash payments from TANF, all able-bodied parents in it generally must participate in work-related activities. PRWORA also imposed a work requirement on able-bodied adults without dependents in SNAP.

Welfare reform substantially increased the amount of work supports available to participants in means-tested programs. PRWORA consolidated four child care assistance programs into the CCDF and added $1 billion in funding. (All figures are in 2019 dollars.) It also allowed states to reallocate TANF funding from cash payments to work supports and other services. The states have used that discretion to drastically change the types of assistance TANF provides. In 1996, for example, about 84 percent (or $31 billion) of the federal and state funding for the programs that preceded TANF was spent on recurring cash payments, whereas about 5 percent (or $2 billion) was spent on work supports (see Figure 1-1). By 2019, states had allocated about 51 percent (or $14 billion) of TANF funding to work supports. In addition, states reallocated funding for recurring cash payments to a wide array of other services, leaving only about 23 percent (or $7 billion) of TANF funding for those recurring cash payments in 2019.6

Welfare reform coincided with a large increase in the EITC, which also supports work. The Omnibus Budget Reconciliation Act of 1993 roughly tripled the maximum credit for families with two or more children and roughly doubled the maximum credit for families with one child. Those increases were phased in from 1994 through 1996. In addition, policymakers created the child tax credit in 1998. That credit was available to few working families with low income before 2001, however.

Changes in Federal Spending and Enrollment

Over the past few decades, federal spending on SNAP and Medicaid has increased substantially, whereas spending on AFDC/TANF has fallen drastically (see Figure 1-2). In 1989, the federal government spent $63 billion on Medicaid, compared with roughly $20 billion each on SNAP (which was known as the Food Stamp program at that time) and AFDC. (Again, all figures are in 2019 dollars.)

Medicaid spending exceeded spending on the other programs in 1989 largely because health care coverage was much more costly than other benefits, a trend that has persisted. Spending per enrollee and the number of enrollees in Medicaid have increased substantially since 1989, bringing the program’s total federal spending to $409 billion in 2019 (in addition to the $221 billion states spent on the program in that year). Federal spending on SNAP has also increased (to $60 billion in 2019), driven mostly by a rise in the number of recipients.7 For Medicaid and SNAP, funding has been adjusted over the years so that benefits are available to everyone who applies for and qualifies for the programs (see Box 1-1). Spending on SNAP has also fluctuated because of changes in food prices and how those changes affect the benefits provided.

Funding for TANF, CCDF, and WIOA is handled differently. Lawmakers furnish a specific amount of money for those programs each year, which might not be sufficient to provide benefits to all qualified applicants. Since TANF was implemented in 1997, lawmakers have not increased the nominal amount of the state family assistance grant, which provides states with most of their funding for the program; that value has been and remains at about $16.5 billion. Because the amount has not been raised to account for inflation, in effect the value of the program’s funding has fallen by about 30 percent since 1997.8 (To receive all that funding, states are required to spend a certain minimum amount of their own funds on the program. That amount is also not adjusted for inflation; it has been and remains at about $10 billion.) Lawmakers have increased funding for CCDF and WIOA on multiple occasions. Those nominal increases have elevated the inflation-adjusted value of CCDF and approximately maintained it for WIOA.

Enrollment in Medicaid and SNAP has risen substantially over the past three decades, but enrollment in AFDC/TANF has plummeted (see Figure 1-3). In 1989, Medicaid and SNAP had about 20 million recipients each in an average month, and about 10 million people received cash payments through AFDC. Over the subsequent 30 years, enrollment has changed for each program.

• Medicaid. Enrollment has skyrocketed as lawmakers have repeatedly expanded eligibility for the program, including 2014’s expansion under the Affordable Care Act. The number of Medicaid recipients has roughly tripled since 1989, reaching 75 million (or about one-quarter of the U.S. population) during an average month in 2019.
• SNAP. Participation rose substantially in the 2000s, primarily as a result of outreach initiatives. In general, participation in the program tends to fluctuate, rising during and after recessions and diminishing when the unemployment rate is low.9
• TANF. Participation has dropped drastically since the onset of welfare reform, having fallen by 85 percent from 1993 to 2019. Some of that decrease can be attributed to rising earnings among single mothers, but it primarily has been driven by declining participation among families whose income is low enough for them to qualify for the program. PRWORA contributed to the decline in the participation rate through the changes it made to AFDC/TANF.10

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Chapter 2Effects of Work Requirements on People’s Employment and Income

The effects of work requirements vary among participants in different means-tested programs. Most of the research conducted on those effects has focused on work requirements in the Temporary Assistance for Needy Families program and its predecessor, Aid to Families With Dependent Children, in the 1990s, when welfare reform greatly altered those programs. Evidence of the effects of work requirements in the Supplemental Nutrition Assistance Program and Medicaid is more limited.

Overall, available evidence indicates that the effects of work requirements on employment and income probably differ among the three programs.1 In addition, the gain in employment among program participants who are subject to work requirements is probably offset in part by temporary reductions in employment among people who are not subject to the requirements.2 The analysis in this chapter is mostly based on data from the annual supplement to the Census Bureau’s Current Population Survey, so the numbers provided are for calendar years.

TANF

Nationwide, most adults in TANF are required to participate in work-related activities. Specifically, the federal government requires a certain percentage of able-bodied parents of children receiving monthly cash payments—50 percent, before adjustments are made—to either have sufficient hours of employment or participate in approved activities that could lead to employment, such as vocational training. Any state that does not meet that work standard risks having its federal funding for the program reduced, so states typically decrease or terminate a family’s benefits if the parent’s work hours are not sufficient. Many states have chosen to impose more stringent work requirements even when they do not appear to be at risk of violating the work standard.

In general, those work requirements have increased employment, which has substantially boosted the income of some single mothers.3 (Most TANF recipients are in families headed by single mothers.) The number of people receiving cash payments in TANF has declined by about 85 percent since the mid-1990s, however, and many single mothers have very low income because they are not working or receiving assistance. (This analysis focuses on parents who do not receive disability benefits, because they are most likely to be subject to the work requirements.)

Employment

Most TANF families are headed by single mothers with no education beyond high school. Employment among that group rose substantially in the 1990s, in part because of the widespread imposition of work requirements. In the years leading up to welfare reform, single women without education beyond high school were far less likely to be employed if they had a child (see Figure 2-1).4 From 1993 to 2000, though, the employment rate for less-educated single mothers increased by 16 percentage points (rising from 52 percent to 68 percent), whereas the employment rate of their childless counterparts increased by only 4 percentage points. During those years, many states added work requirements to AFDC (from 1993 to 1996), all states transitioned from AFDC to TANF (in 1997), and states that did not have work requirements already in place started imposing them in TANF (from 1997 to 1999).

Although work requirements accounted for some of the 16 percentage-point increase in employment from 1993 to 2000, most of the increase was probably the result of other policy changes (see Box 2-1). Experimental evaluations conducted in AFDC waiver programs during the 1990s indicate that work requirements similar to those in TANF, when combined with increases in work supports, increased the employment rate by about 5 percentage points over five years.5

TANF’s work requirements have continued to boost employment for the single parents who have entered the program in recent years, according to the limited evidence that is available. Since 2000, the employment rate of single mothers without education beyond high school has remained relatively steady, moving in tandem with the rate of their childless counterparts. But the changes to work requirements have been gradual enough that their effects on employment are obscured by 20 years of changes in the economy and other labor market policies.6

To bolster the available evidence, the Congressional Budget Office analyzed Alabama’s extension of its work requirement to parents of young children and found that it increased their employment rate by 11 percentage points.7 That increase is similar in size to the increase of 10 percentage points that occurred during the first year after parents entered the AFDC waiver experiments.8 However, the overall size of the increase in employment was modest because TANF serves far fewer families than AFDC did.9 Research on the effects of recent changes to work requirements made in other states is scant.

Income

Work requirements in TANF have had a small effect on average income for single mothers. According to studies from the 1990s, that is because increases in their earnings and in the earned income tax credit roughly equaled reductions in cash payments and food assistance.10 Those findings are consistent with trends in the data showing that the average cash income of single mothers with no education beyond high school has generally moved in parallel with the average for their childless counterparts over the past 30 years (see Figure 2-2).

The effect on the income of single mothers has probably been uneven, though. In recent years, single mothers who found work while in TANF saw their cash income rise to an average of about $1,300 per month at the point they left the program, but mothers who left the program without a job had very little cash income.11

Income of Former TANF Recipients Who Found Work. About half of single mothers are employed when they leave TANF, enabling some of their families to rise out of poverty. Studies of families that left TANF in the late 1990s documented their income in subsequent years. About half of the families with a working adult had monthly cash income (in 2019 dollars) above $1,716, which was the poverty threshold for a single parent with two children in 2019. The primary source of that income was the parent’s earnings, and some parents had a partner with substantial earnings as well. Earnings for those families grew modestly in later years, on average.12

Work requirements have raised the income of employed single mothers by increasing how quickly they found a job, which reduced the amount of time they spent in AFDC/TANF. Between the early stages of welfare reform in 1993 and PRWORA’s implementation in 1997, the percentage of mothers who had earnings 24 months after entering the program rose from about 31 percent to about 46 percent (see Figure 2-3).13 That increase in earnings boosted their income, but some of the increase was offset by a decline in the cash payments they received. From 1993 to 1997, the share of families headed by single mothers who were still receiving cash payments from AFDC/TANF 24 months after entering the program fell from about 65 percent to about 35 percent. Over the following years, most single mothers continued to leave the program within 24 months. About half of those mothers had earnings. For most of them, the increase in earnings was larger than the reduction in benefits from leaving TANF. In addition, about 25 percent of single mothers who had earnings 24 months after entering the program were still receiving cash payments.

Income of Families Without Earnings or Cash Assistance. About half of single mothers are not employed when they stop receiving cash assistance, and the share of single mothers without earnings or cash assistance from AFDC/TANF has risen substantially since welfare reform began.14 Work requirements have probably contributed to that increase in two ways: Families that do not meet those requirements are removed from TANF, and other families are deterred from entering the program. However, the low levels of participation in TANF appear to be primarily driven by other changes made to AFDC/TANF by PRWORA.

Trends in the Data. In the early 1990s, nearly all less-educated single mothers received recurring cash payments if they had not worked for an extended period. As the number of families receiving cash assistance plummeted, though, the share of less-educated single mothers who did not have income from work or AFDC/TANF rose from close to zero in 1993 to 9 percent in 2000, CBO estimates (see Figure 2-4). Over that period, participation in AFDC/TANF declined among those who had earnings, so the portion of less-educated single mothers who received cash payments fell by about 34 percentage points in total. In comparison, the portion of less-educated single mothers who had earnings (whether they participated in AFDC/TANF or not) increased by about 14 percentage points from 1993 to 2000.

Over the next two decades, the share of less-educated single mothers who did not have income from work or TANF continued growing, albeit more gradually. Reductions in TANF receipt were no longer countered by substantial increases in employment, leaving one-in-seven less-educated single mothers without income from work or TANF in 2019. (That estimate is highly uncertain because of imprecision in the underlying data.)15

Sources of Income. In recent years, most single mothers without earnings or cash assistance reported being in deep poverty. They had little cash income, although they typically received benefits through SNAP to purchase food. About 39 percent of those mothers lived with an adult who reported working, typically the children’s (unwed) father. Other mothers reported receiving cash from people who they did not live with or were not related to; the most common forms of assistance were child support (11 percent) and help from friends or relatives (11 percent). The mothers might understate cash income from those sources, which could help explain why single mothers tend to report spending substantially more income than they report receiving.16

The Role of Work Requirements. Work requirements probably increase the number of single mothers without earnings or cash assistance by removing them from TANF when they are not employed. Work requirements can affect that number by changing the length of time nonworking mothers receive assistance and by changing whether those mothers are employed when they stop receiving assistance. The expansion of Alabama’s work requirement in 2018 appears to have had little effect on the latter variable, but it did reduce the length of time families received assistance by about a month during the first year after they entered the program, on average. Thus, the work requirement probably caused the number of families without earnings or cash assistance to increase modestly. Other research finds evidence of a larger increase in the number of such families stemming from a more stringent work requirement implemented when the labor market was weaker.17 In addition, the AFDC waiver experiments showed that work requirements often increase the number of families in deep poverty, and deep poverty is common among families without earnings or cash assistance.18

Although some single mothers end up disconnected from employment and cash payments because they are removed from TANF for not complying with its work requirements, most are probably disconnected because they do not apply for TANF or because their application is rejected. Before welfare reform, most single mothers whose income and assets were low enough to qualify for recurring cash payments received that assistance. But TANF participation among that group has fallen over the past three decades, from about 80 percent to roughly 25 percent.19 Many single mothers with sufficiently low income and assets are not entering the program because they are ineligible for other reasons or because they do not complete the application process.

Work requirements may have increased the number of single mothers without earnings or cash assistance by stopping some of them from enrolling in TANF. Work requirements can reduce entry into TANF by discouraging parents from applying or by causing them to be ineligible. The expansion of Alabama’s work requirement does not appear to have had an immediate effect on the number of families entering the program. Repeated violation of the work requirement can lead to families’ being ineligible to enter the program for a year, however. (Ten other states impose ineligibility periods of a year or more for repeated violations of the work requirement; six of those states permanently bar families from reentering the program.) Thus, TANF’s work requirements probably reduce entry into the program by mothers without earnings by removing them from the program when they are not working and then barring their reentry. However, the low levels of participation in TANF appear to be primarily driven by other changes made to AFDC/TANF by PRWORA.20

SNAP

The federal government places two work requirements on adults in SNAP. First, most able-bodied nonelderly adults who are not working at least 30 hours a week or caring for a child under age 6 must register for work—that is, notify their state’s employment office that they are available to work—and accept a suitable job if one is offered. Second, able-bodied adults under the age of 50 who do not live with dependent children (so-called ABAWDs, or able-bodied adults without dependents) are generally limited to 3 months of benefits in any 36-month period unless they are working at least 80 hours per month or in job training.

ABAWDs accounted for 7 percent of SNAP recipients in 2019 and a larger percentage in years when many localities waived the work requirement.21 Waiving of the work requirement—mainly because of adverse economic conditions—has occurred frequently over the past 14 years.22 This report focuses on the work requirement for ABAWDs because of the lack of research on the income and employment of other SNAP recipients who must register for work.

Employment

The work requirement for ABAWDs slightly increases the employment of the oldest of the workers who are subject to it. Most studies of SNAP’s work requirement compare employment of ABAWDs in their late 40s with that of able-bodied adults without dependents who are just over 49 because those two groups are similar in their age and education but differ in whether they are subject to the work requirement. Using data for four states (Colorado, Pennsylvania, Missouri, and Virginia), those studies estimate that the employment rate is 1 to 4 percentage points higher among the group of ABAWDs subject to the requirement.23 SNAP participants between the ages of 45 and 49 account for only about 15 percent of workers who are subject to the work requirement, though, so those findings might not apply more broadly.

SNAP’s work requirement might induce younger ABAWDs to work more, but it probably boosts employment less than TANF’s work requirements do. Younger SNAP recipients might be more likely to seek employment because they will be ineligible for benefits for more years if they do not (unlike, say, a recipient who is 48 and thus subject to the work requirement for only two more years). SNAP’s work requirement is probably less effective than TANF’s requirement, however, because most SNAP recipients do not receive intensive case-management services. Those services, typically provided one on one by a caseworker, can boost the effectiveness of work requirements by monitoring progress, assigning work supports, and providing job referrals. One study of unemployment insurance found that a 40-minute meeting with a caseworker reduced the duration of unemployment by 5 percent, on average.24

Income

SNAP’s work requirement probably reduces the average income of ABAWDs by causing many of them to stop receiving benefits. Studies of recipients who are near the age of 50 found that the work requirement reduced the number of ABAWDs receiving benefits by 22 percent, 31 percent, and 53 percent in Pennsylvania, Missouri, and Virginia, respectively. (The work requirement did not appear to change the number of ABAWDs receiving benefits in Colorado.) Most of those ABAWDs lost SNAP benefits because they did not demonstrate sufficient participation in work-related activities. That reduction in benefits appears larger than the increase in earnings among the smaller percentage of ABAWDs who worked more because of the work requirement.

SNAP’s work requirement results in many ABAWDs having very low income because SNAP benefits had been their primary source of income. Most ABAWDs who stop receiving benefits from SNAP have few or no other sources of income, and many of them are homeless.25 Only about 30 percent of ABAWDs have any earnings—and none of those people are eligible to receive cash payments through TANF.26 (In contrast, most TANF recipients who lose cash payments because of noncompliance with the program’s work requirements still receive full SNAP benefits because they are not ABAWDs.)

Medicaid

Although federal law does not impose any work requirements on Medicaid recipients, states have sought waivers to do so. In 2018, the Trump Administration began approving requests from states to waive the entitlement to Medicaid in order to experiment with work requirements. Most of the waivers required ABAWDs to perform work-related activities for at least 80 hours a month to retain their health insurance coverage. The Administration approved waivers for 11 states, but implementation has been halted for various reasons: The courts set aside four of the approvals, six waivers have not been implemented, and the only state that implemented a work requirement in 2020 suspended it after two months because of the pandemic. (In 2021, the Biden Administration rescinded all the approvals.)

Employment

States’ limited experience with work requirements in Medicaid indicates that they cause a substantial portion of adults who are not exempt from them to lose coverage, and they appear to have little effect on employment. Only Arkansas had a work requirement in place for more than a few months—from June 2018 to March 2019, when it was set aside by the courts. Under that requirement, ABAWDs lost Medicaid coverage if they did not document sufficient hours spent in work-related activities for three months in the same year. Over the seven months of 2018 that the requirement was in effect, about 23 percent of Medicaid recipients who were subject to it lost coverage for failure to comply.

Researchers who designed and conducted a phone survey targeted at measuring employment among Medicaid recipients in Arkansas after the work requirement took effect found mixed results. The employment rate decreased slightly using one statistical approach and increased a bit using another approach; in both cases, though, the sample size was too small to rule out no change or a sizable change.27

Income and Expenses

Arkansas’ work requirement probably reduced families’ resources overall because it caused a large reduction in Medicaid coverage. In addition, the number of hours that recipients worked did not appear to increase, which suggests that their earnings did not rise. The targeted phone survey used by researchers to measure employment indicates that the work requirement substantially increased the number of adults who were uninsured by terminating their Medicaid coverage. Instead of having most of their medical care covered by Medicaid, many of the affected adults had to pay for most of it themselves. The work requirement appears to have roughly doubled the portion of those adults who reported having serious problems paying their medical bills, according to the researchers.28

The combination of a large reduction in Medicaid receipt and a small or negligible effect on employment among adults subject to the work requirement might have been driven by two factors. First, many employed participants might have been unaware of the requirement, or they might have found it onerous to demonstrate compliance. The targeted survey indicates that about 35 percent of Medicaid recipients in the age range subject to the work requirement were not aware of it. Second, other studies have shown that even modest increases in the effort required to demonstrate eligibility for means-tested benefits can cause large declines in the number of recipients.29 A lack of awareness and burdensome reporting could explain why only about 9 percent of Medicaid recipients who needed to demonstrate compliance filed a report. (In most cases, the administrators of the program were able to verify that recipients were in compliance without contacting them.)

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Chapter 3Effects of Work Supports on People’s Employment and Income

Two of the most common ways that the federal government supports work among participants in Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program, and Medicaid are by subsidizing child care and funding workforce development services. Those work supports can boost the employment of recipients and thus increase their income. Employment gains among program participants might hold down employment among people who do not have access to those work supports, though, because they compete for the same types of jobs.

Subsidized Child Care

The federal government primarily funds subsidized child care through the Child Care Development Fund, which the states administer. The CCDF provides subsidies to low-income families who are working or preparing to work. Recipients pay about 5 percent of their income for child care, on average, and the subsidy covers the remainder.

The most compelling research on the effects of subsidized child care on employment and income comes from a study of Child Care Development Block Grant recipients. That study’s findings can be extrapolated to recipients in TANF, SNAP, and Medicaid. Subsidized child care confers two main benefits: It increases earnings by enabling recipients to work more, and it boosts consumption by reducing the amount recipients spend on child care.

Employment

Subsidized child care has boosted the employment of low-income single parents, who represent about 80 percent of CCDF recipients. Most data do not indicate the direction of causality—that is, whether people are working because they are receiving a subsidy or receiving a subsidy because they are working. The latter explanation probably prevails often in states that have employment as an eligibility requirement, but the subsidies boost employment in other instances.

One study addresses that issue by recording whether single mothers were working before they applied for subsidized child care. The researchers found that the subsidies provided by the Child Care Development Block Grant—now a major component of the CCDF—increased the employment rate of single mothers with very low income by 8 to 25 percentage points.1 That research is based on a 1988 survey of single mothers in Kentucky who did not have to work to receive cash payments.

The Congress boosted CCDF funding in March 2018, allowing many states to substantially decrease the length of their waitlists for subsidized child care.2 By February 2020, there was one wait-listed child for every 12 children who received a CCDF subsidy.3 Additional funding for subsidized child care would probably benefit participants in Medicaid and SNAP and increase their employment more than it would assist participants in TANF. That is because most states already give priority for child care subsidies to parents who are subject to TANF’s work requirements.

Recent boosts to CCDF funding probably have increased employment less than might be suggested by the Kentucky study. As that study demonstrates, applicants are more likely to work once they get through the waitlist for subsidized child care, but the potential to increase employment by reducing waitlists has diminished because the lists have gotten shorter. Shorter waitlists indicate that fewer parents have been delaying work because child care subsidies are not available. However, because some states continue to use increases in CCDF funding to reduce their waitlists, such funding continues to boost employment, although the effect is probably small.

In addition to reducing waitlists, states have responded to the recent boost in CCDF funding by expanding eligibility to families with higher income and by reducing the amount recipients pay out of pocket for child care. Research indicates that such policies do not increase employment as much as subsidies that are provided to single parents with very low income.4

Income and Expenses

Subsidized child care substantially increases the resources available to some low-income families. It boosts earnings for some single parents by enabling them to work, and it bolsters consumption for some parents who would have worked anyway by reducing the amount they spend on child care.

The average subsidy funded by CCDF is about $500 per month, which is about one-third of the average monthly income for a single parent and child at the poverty threshold. The size of the average increase in resources from subsidized child care is much harder to determine and highly uncertain because researchers have provided little indication of how many recipients would have purchased child care in the absence of the subsidy. In many instances, the subsidy probably had little effect on a family’s resources because it replaced care that would have been provided by a relative for little or no charge. About 68 percent of working single parents who were in TANF, SNAP, or Medicaid received free informal care in an average week from 2013 through 2016, typically from a child’s grandparent.5 In contrast, only about 23 percent of families in those programs were paying for child care without any subsidy during those years, and that share has probably decreased as a result of the CCDF’s recent expansions.

Workforce Development Services

This report focuses on three common types of workforce development services: job-search assistance, job training, and subsidized employment. Researchers have typically analyzed how those services affect the employment and income of TANF recipients and participants in two of the largest workforce development programs, the Adult and Dislocated Worker programs. Participants in those two programs are broadly similar to the able-bodied nonelderly adults in SNAP and Medicaid in that many of them have low income, little education, and sporadic employment.6

Job-Search Assistance

Intensive job-search assistance increases employment and income. In the 2010s, the Department of Labor (DOL) conducted a national experimental evaluation of the intensive job-search assistance provided through the Adult and Dislocated Worker programs.7 In the year following the receipt of assistance, people who had been assigned to intensive job-search assistance and counseling earned about $2,200 (or 18 percent) more, on average, than people who had only been given access to online tools and literature with little direct assistance from staff. (The experiment did not evaluate the effects of that less intensive assistance.)

That substantial increase in earnings resulted from a combination of a higher employment rate and better paying jobs. The gains from intensive job-search assistance could be smaller among participants in TANF, SNAP, and Medicaid because they face more barriers to employment, such as not having graduated from high school. But intensive job-search assistance appears to also have boosted the employment of less-educated recipients in the Aid to Families With Dependent Children’s experimental evaluations. Intensive job-search assistance was a component of all the experimental evaluations of AFDC work requirements that were found to boost employment.8

Job Training

Job training provided by the Adult and Dislocated Worker programs has not been shown to increase participants’ employment or earnings. DOL’s national experimental evaluation found that recipients of such training tended to earn less during the training period than people who were provided job-search assistance immediately. In addition, after the training and job-search assistance were completed, the earnings of those two groups were similar, on average. Likewise, experimental evaluations of AFDC recipients indicate that programs focusing on immediate job-search assistance generally boost employment and earnings more than programs that first provide vocational training or education.9

One possible explanation is that the training did not align well with the demands of local employers. In DOL’s experiment, only about 40 percent of participants in occupation-specific training found a job in that occupation.10 Since DOL conducted its evaluation, the Congress has made several modifications to those programs that are intended to better align job training with the needs of local employers.11

Recent research demonstrates that job training provided by smaller programs can increase employment and income when it focuses on occupations that are in high demand locally and that have the potential for career advancement.12 Such programs differ from the Adult and Dislocated Worker programs in that they are administered by community-based organizations. Whether those programs would increase employment and income if implemented on a national scale is unclear. But the findings suggest that the Congress’s recent attempts to focus job training on the needs of local employers may have led to federally provided job training that increases participants’ employment and income.

Subsidized Employment

The federal government provides funding for subsidized employment to the states, which use it to temporarily cover some or all of the costs of compensation paid by a participant’s employer (usually a private firm). That strategy has been used to boost employment during recessions and to help participants with few skills progress toward unsubsidized employment.

Subsidized employment increases workers’ employment and earnings, though the gains are usually temporary. Many recipients of subsidized employment would not have been employed otherwise, either because jobs were scarce or because they lacked job skills. The subsidies boosted their income by raising their earnings. Most studies have found that those gains disappeared once the subsidies ended.13 However, an evaluation of 13 recent programs found that 6 of them generated more persistent and substantial increases in earnings for the affected workers.14

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Chapter 4Factors That Affect How Work Requirements and Work Supports Change People’s Employment and Income

The extent to which work requirements and work supports boost employment and income probably depends on many factors. When policymakers consider proposals that aim to increase employment and income among participants of means-tested programs through work requirements or work supports, it is important to consider three factors—the extent to which participants are already engaged in work-related activities, barriers to work, and economic conditions—and how those factors could change over time.

Employment, training, and job-search assistance are already widespread among some groups of participants in means-tested programs, which limits the extent to which work requirements can raise employment. Many program participants who are not engaged in work-related activities report having multiple conditions that make employment difficult, such as health issues or child care responsibilities.1 The ability of low-income adults to find and keep employment also depends on the health of the economy.

Participation in Work-Related Activities in the Absence of Work Requirements and Work Supports

The ability of work requirements and work supports to boost the employment of recipients is limited by the extent to which the recipients would participate in work-related activities in the absence of those provisions. Because of that constraint, expansions of work requirements and work supports in the Supplemental Nutrition Assistance Program or Medicaid could be less effective than that expansion was decades earlier in the Aid to Families With Dependent Children program. In 1993, about 55 percent of AFDC recipients reported not working, searching for work, training for a job, or being a student (see Figure 4-1). In contrast, from 2013 through 2016, about 30 percent of SNAP and Medicaid recipients reported not participating in at least one of those activities. Because the employment rate among SNAP and Medicaid recipients is much higher than it was for AFDC recipients, it has less room to increase further.

When work requirements are added to programs in which many recipients are already working enough hours to meet the requirements, they are likely to reduce recipients’ total income. That is because those requirements are unlikely to increase their earnings but can reduce the benefits they receive. Employed adults must document their compliance with the work requirements (typically each month or every few months), a process that can be arduous and time-consuming. Some employed adults lose their benefits because they do not submit the required information, either because they find doing so too onerous or because they are not aware of the requirement.2 Thus, when work requirements are imposed on recipients among whom employment is more common—such as those in SNAP and Medicaid—the reduction in benefits is more likely to exceed any increase in earnings.

Barriers to Work

Work requirements are less likely to lead to employment and more likely to reduce income, including benefits, when applied to people who have conditions that make it difficult to find and keep a job. Participants in Temporary Assistance for Needy Families, SNAP, and Medicaid who are not working or preparing to work often report having such conditions.3 Many of them report having a disability that limits their ability to work, such as physical or mental health issues. Other common barriers to employment include caring for young children or not having a high school diploma or equivalent degree.4

In a 2014 survey, about 70 percent of recipients in TANF and SNAP who were not working or preparing to work reported having at least one barrier to employment, and about 20 percent reported having more than one (see Figure 4-2). Such barriers were also common among their counterparts in Medicaid, but less so. Under the stringent work requirements in TANF, recipients who report having those barriers are much less likely to be employed when they leave the program. The employment rate for former TANF recipients who report having multiple barriers to employment is about 35 percent, compared with about 70 percent for former recipients who report having none of those employment barriers.

Work supports can have a larger effect on employment when they are directed at people who face barriers to finding and keeping jobs instead of all participants. For example, subsidized child care can boost employment more when it is targeted at people who are not working because they cannot afford adequate care. In contrast, extending child care subsidies to people with higher income would probably have a smaller effect on employment because those people are more likely to be able to afford child care without a subsidy. Similarly, job training can boost employment more when it is directed at people who are unlikely to find a job because they lack marketable skills. Of the 11 approaches to getting AFDC recipients working that were evaluated in the 1990s, the largest increase in employment came from assigning the most disadvantaged participants to training before they began searching for a job.5 However, even in that program many people remained unemployed, which is indicative of the limits of both work requirements and work supports.

A 2015 survey of SNAP recipients provides detailed data on the barriers to employment faced by recipients of means-tested benefits.6 As in the 2014 survey, physical and mental health issues are pervasive among those recipients. They constitute the most common barrier to employment, even though recipients of Supplemental Security Income and Social Security were excluded from the survey (see Figure 4-3). The 2015 survey also excluded recipients who were caring for an incapacitated adult or a child under age 6 or who were participating in a drug or alcohol treatment program; still, 11 percent of respondents reported a lack of child care as a barrier to employment, indicating that not having access to before- and after-school care can limit employment. Other reported barriers, such as a lack of education or transportation, could be addressed by workforce development programs. Overall, about 79 percent of the surveyed SNAP recipients reported facing at least one barrier to employment, and 48 percent reported more than one.

Economic Conditions

When economic conditions are poor, work requirements can have adverse effects on participants in means-tested programs. In particular, those requirements can substantially reduce program participation while boosting employment only a little, and they can reduce average income because the lost benefits are not offset by additional earnings. When jobs become harder to find, work requirements are difficult to meet through employment. At those times, if the requirements are not eased, they put families at greater risk of losing benefits before they can find work—and they are less likely to spur recipients to find work.

In recent years, TANF’s work requirements have probably reduced the average income of recipients during periods of high unemployment. To examine the effects of work requirements during such periods, the Congressional Budget Office used data from the Department of Health and Human Services that cover 2012 through 2018.7 Like other job seekers, parents in TANF find jobs far less frequently when the local unemployment rate is elevated. Yet the rate at which those parents lose cash payments does not decline substantially at such times.8 Instead, states terminate more families’ benefits for violations of the work requirements (see Figure 4-4). Those terminations probably contribute to fewer families’ being employed when they stop receiving cash payments, which leads to lower income. Between 2012 and 2018, the average cash income of families in the month they stopped receiving assistance was $485 (in 2019 dollars) when the unemployment rate was 6 percent or higher, compared with $697 during periods of lower unemployment.

During economic downturns, policymakers are sometimes able to waive or reduce work requirements to lessen the negative effects on recipients’ employment and income. Federal law allows states to waive SNAP’s work requirement for able-bodied adults without dependents, for example, in areas where the unemployment rate exceeds 10 percent or is more than 20 percent above the national average. In addition, policymakers temporarily reduced the work requirements in TANF and SNAP during the 2020 recession.9 But TANF has fixed funding that constrains states’ ability to provide benefits to families for a longer period by relaxing its work requirements during economic downturns. Ninety-five percent of federal funding for TANF is provided through the State Family Assistance Grant, which remains at about $16.5 billion regardless of economic conditions. Thus, it is more difficult for states to fund extended TANF benefits in response to an increase in economic hardship than it is for states to expand assistance through SNAP or Medicaid, both of which generally receive enough federal funding to provide benefits to all eligible people.

When economic conditions deteriorate, some work supports probably become more effective than others at boosting employment. Subsidized employment and job training, for instance, can build skills at times when participants are unlikely to gain experience through an unsubsidized job because so few are available. (When jobs are plentiful, those work supports are probably more likely to replace unsubsidized employment.) In contrast, subsidized child care might boost employment less when jobs are scarce. That is because fewer of the people who would work more if they received subsidized child care would be able to find additional work.

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Chapter 5Options for Changing Work Requirements and Work Supports

Changing the stringency of work requirements and funding for work supports would affect the employment and income of the families served by Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program, and Medicaid. By altering program participation and average benefit amounts, policy changes could also affect federal spending.1

The Congressional Budget Office has examined seven options that policymakers could pursue to expand or reduce work requirements or work supports. The options are assumed to take effect at the beginning of fiscal year 2023. This report gives CBO’s conclusions about the options’ broad effects on participation, employment, income, and spending. In many cases, the magnitude of the effects is highly uncertain.

Two Options That Would Expand Work Requirements

CBO examined two of the many ways in which lawmakers could expand work requirements to promote employment and reduce federal spending (see Table 5-1, top panel). In general, expanding work requirements would cause some newly covered recipients to work more, and most of those recipients would see their earnings rise by more than their benefits fell. But other recipients would be left without earnings or benefits because they did not comply with the new requirements. The reduction in benefits would lower federal spending if the work requirements were imposed on recipients of SNAP or Medicaid because the federal government funds a fixed percentage of those benefits.

Require Able-Bodied Medicaid Recipients Without Dependents to Work

The first option that CBO examined would require all states to impose work requirements on their Medicaid recipients. Under this policy, which would be similar to the requirements imposed in Arkansas, able-bodied adults who have no dependents and who are between the ages of 19 and 49 would lose Medicaid coverage if they did not participate in work-related activities for at least 80 hours per month for three or more months over the course of a year. Adults would be exempt from the requirements if they have dependents, receive benefits from Supplemental Security Income or Disability Insurance, are pregnant, or have certain mental or physical health conditions. In addition to employment, hours spent in school, training for a job, searching for a job, or performing community service would count toward the 80-hour minimum. About 30 million people would be potentially subject to the work requirements each year, though many of them would qualify for an exemption.

This option would substantially increase the amount that people who lost Medicaid coverage would pay out of pocket for medical services, and it would increase employment very slightly. By CBO’s estimate, a very small portion of adults who were subject to the new requirements would work more hours to avoid losing insurance through Medicaid. Employment would not increase much because many Medicaid recipients have limited access to work supports and do not receive intensive case-management services. For every recipient who worked more, several recipients would lose Medicaid coverage because they failed to demonstrate compliance, and many of those adults would become uninsured. They would forgo some health care and pay more out of pocket for the care they did use, leaving them with less money to spend on nonmedical goods and services, on average. The increase in medical expenses from the loss of insurance coverage under this option is far more certain than the change in employment.

This option would decrease federal spending by about $135 billion from 2023 to 2031, CBO estimates. Spending would fall by about $15 billion per year, on average, because about 2.2 million adults would lose Medicaid coverage. That reduction in enrollment represents a substantial portion of the adults who would be subject to the work requirements. (Many other adults would be exempt.)

Expand SNAP’s Work Requirement While Providing More Employment and Training Services

Under current law, only able-bodied adults who do not have dependents and who are under the age of 50 (ABAWDs) risk losing SNAP benefits if they do not spend 20 hours a week, on average, participating in work-related activities. This second option that CBO examined would potentially extend that requirement to about 10 million able-bodied adults between the ages of 18 and 49 who have dependents, though many of them would qualify for an exemption.2 (Other members of those adults’ households would not be at risk of losing benefits because of the requirement.) Participants would receive additional employment and training services to boost their chances of finding a job.

This option would reduce federal spending if the decrease in spending on SNAP benefits exceeded the increase in the program’s administrative costs, which include the cost of providing additional employment and training services. If this option increased that spending substantially, it could push up spending overall. Spending on SNAP benefits would fall primarily because of reductions in benefits for adults who did not comply with the work requirement. (Spending on benefits would also fall for adults whose earnings rose because they worked more to meet the requirement.) To help adults comply with the work requirement, the option would substantially increase federal funding for SNAP’s employment and training programs and would require states to offer case-management services to all adults subject to it. The states would not be required to match any of the additional federal funding for such programs. In 2019, the federal government provided $124 million in such unmatched funding for employment and training programs.

In all likelihood, this option would modestly increase employment among the additional recipients who would become subject to the expanded work requirement. Its effect on employment would probably exceed that of the option that would impose a work requirement on Medicaid recipients because SNAP recipients would be offered more work supports. (Some states would probably not be prepared to offer those supports for several years.) But the evidence of employment increases from the work requirement for ABAWDs suggests that this option would boost employment only a little if recipients were not provided with intensive case-management services, such as assistance provided in person by a trained caseworker. The effects of this option on employment and earnings are also highly uncertain because of the lack of research on SNAP’s employment and training programs.

Under this option, income would decline, on average, for households with adults who were not exempt from the work requirement. Many of those households have few other resources. In particular, only about 53 percent of SNAP households with children had earnings in 2019. Many of the nonworking households whose benefits would decrease under this option would have very low income. For example, a single parent with two children who was not working would have his or her maximum monthly SNAP benefit reduced from about $658 to around $459 in 2022 (excluding the emergency allotments that will expire once the current public health emergency declaration is lifted); in many cases, that payment would still be the family’s primary source of income because few families receive cash payments from TANF. Other adults would probably work more under this option, but the size of the increase in their earnings from the combination of the expanded work requirement and work supports is very uncertain. According to CBO’s assessment, that increase in earnings would be smaller than the reduction in benefits, thus decreasing families’ income, on average.

Two Options That Would Reduce Work Requirements

Lawmakers could reduce work requirements in many ways to boost the income of the poorest families. This analysis examines two of them (see Table 5-1, bottom panel).

In general, if work requirements were lessened, many newly exempt recipients would receive benefits for a longer period, and fewer of those recipients would work.3 During periods of high unemployment, the boost in income from extended benefits would probably be larger than the reduction in earnings from less work. Generally, the increase in benefits would lead to higher federal spending for SNAP and Medicaid but not for TANF.

Eliminate Hours-Worked Criteria for ABAWDs’ Continued SNAP Eligibility

Under this option, able-bodied adults without dependents would no longer be limited to 3 months of benefits in any 36-month period if they were not working at least 20 hours per week or in job training. Eliminating that hours-worked criteria would increase spending on SNAP by boosting the number of people receiving benefits. About 5 million fewer people would be potentially subject to the work requirement each year, though many of them are exempt from it under current law. This option would increase federal spending by providing benefits to more people.

Among the people who would no longer be subject to SNAP’s work requirement, this option would probably decrease employment slightly—but it would substantially increase income for the many SNAP recipients who would no longer lose benefits because of the work requirement. A much smaller number of people would have lower income from working less because they would no longer be at risk of losing SNAP benefits. But the specific size of the decrease in employment (and the resulting effect on earnings) is highly uncertain. In contrast, this option would clearly reduce the number of nonworking ABAWDs with very low income by providing them with more assistance to purchase food, and it would probably increase ABAWDs’ income, on average.

Prohibit States From Imposing TANF’s Work Requirements on Single Parents With a Child Younger Than One

Although states are allowed to exclude from TANF’s work requirements single parents with a child who has yet to turn one, about half of states choose to apply those requirements to some or all of those parents. Under this option, states would not be allowed to reduce the benefits given to those parents for insufficient participation in work-related activities. That change would reduce the number of TANF recipients whose families were potentially subject to the work requirements by about 50,000 each year, CBO estimates, though many of those families would have been exempt under current law. The resulting increase in the number of TANF recipients would not change federal funding for the program, which is set at a fixed amount.

To better understand the potential implications of this option on employment and income, CBO examined the experience of TANF recipients in Alabama. In October 2017, that state stopped exempting from TANF’s work requirements the single parents of children between the ages of 6 months and 11 months.4 Even though this option would make a change in the opposite direction (eliminating instead of imposing the work requirements on parents with a young child), the effects are probably comparable in size. CBO used data provided by the Department of Health and Human Services for this particular analysis.

This option would decrease employment among the parents subject to it by slowing the rate at which they found jobs. Alabama’s application of its work requirement to single parents of children between the ages of 6 months and 11 months substantially increased their employment.5 Although raising the age threshold back to 12 months in Alabama might lower employment to its previous level, this option would be unlikely to have an effect that large on employment nationwide. The unemployment rate in Alabama was about 4 percent when it implemented the change in work requirements, whereas this option would probably exempt mothers in areas of the country where jobs were scarce as well as in areas where they were plentiful.

Alabama’s application of its work requirement to single parents of children under age one appears to have increased their average cash income during the year after they entered TANF. Average cash income increased because the additional earnings for some families were larger than the loss of cash payments for families who did not meet the work requirement. This option, which would reverse such a policy in a number of states, would have effects in the opposite direction.

Nevertheless, CBO expects that this option would not change recipients’ income much, on average. Although raising the age threshold back to 12 months in Alabama might lower average cash income in that state to its previous level, the net effect of such a change on earnings nationwide would probably be much smaller, for two reasons. First, jobs would not be as plentiful in some of the states that would be forced to raise the threshold, which would decrease the number of recipients that could find work under current law and thus reduce the income loss under this policy. Second, Alabama provides smaller cash payments than most other states, so families who, because of this option, stayed in the program longer in those other states would see a larger increase in payments.

This option would reduce the number of families with very low income, in CBO’s estimation. Many of the parents who would not work regardless of the requirement would be spared from having very low income because they would remain eligible for cash payments. Other parents would have lower income because they would choose to work less in the absence of the work requirement, but eligibility for cash payments would spare many of them from having very low income.

Two Options That Would Expand Work Supports

To promote employment and increase the income of poor families, lawmakers could expand work supports for participants in means-tested programs. In general, expanding work supports would increase employment and boost consumption because it would reduce recipients’ spending on child care and job preparation as well as increase their earnings. (The effect on consumption would be greater than that from expanding work requirements.) Expanding work supports would push up federal spending if the funding was not diverted from other services, however. Although increases in earnings from expanded work supports might reduce spending on means-tested benefits, those reductions would be unlikely to offset a large portion of the spending on the work supports. Among the many ways that lawmakers could expand work supports, CBO examined two options (see Table 5-2, top panel).

Increase Funding for Subsidized Child Care to Support More TANF, SNAP, and Medicaid Recipients

To make subsidized child care available to more parents in TANF, SNAP, and Medicaid, this option would increase federal funding for the discretionary component of the Child Care Development Fund by $3 billion per year (which represents 50 percent of nonsupplemental funding).6 In response to that increase in federal funding for child care, states could reduce the amount paid by the many single parents in those three programs who already receive subsidies. In addition, states could use a portion of the additional federal funding to assist some of the single parents in those programs who pay for unsubsidized child care despite meeting the federal requirements for the CCDF. By expanding subsidized child care for hundreds of thousands of parents each year, this option would increase federal spending by about $26 billion from 2023 to 2031, CBO estimates.

Under this option, states would provide subsidies to more program participants and increase the size of the subsidies, which would reduce participants’ share of the cost of child care and probably help them obtain higher-quality care. Beginning in 2018, lawmakers increased funding for the CCDF by 41 percent, and by 2019 the states had used that funding to raise spending about 34 percent above its level in 2017. As a result, the number of subsidy recipients rose by about 7 percent, and the number of children on waitlists for subsidized child care fell by about 53 percent.

States primarily increased their spending in 2019 by boosting child care subsidies. States increased the subsidies by decreasing the amount that parents have to contribute and by raising the maximum rate a child care provider can charge and still be eligible for a subsidy.7 Raising the maximum rate allowed parents to select more expensive providers and thus probably obtain higher-quality care.

This option would increase employment slightly among the parents who received more benefits through the CCDF. The increase in employment would be concentrated among recipients who would not have received a subsidy under current law, and the 2018 expansion indicates that they would constitute a modest portion of the recipients affected by the expansion. In addition to enabling more parents to work immediately, this option would allow more parents to undertake job training and job searching by making more subsidies available to parents who are preparing to work.

Some recipients of TANF, SNAP, and Medicaid would have substantially more resources to spend on goods and services other than child care under this option. In addition to the boost in earnings from more employment, parents would tend to spend less on child care. The number of parents paying for unsubsidized care would fall, and some states would use the additional funding to reduce copayments tied to subsidized care, which would benefit the parents who were already receiving subsidies.

Increase Funding for TANF’s Work Supports When Unemployment Is High

Under current law, federal funding for TANF changes little in response to economic conditions.8 To develop the workforce more during periods of weak economic growth—when jobs are scarce—this option would increase a state’s TANF funding when its unemployment rate was high. Specifically, funding would rise by 10 percent when a state’s unemployment rate was above 6 percent, 20 percent when it was above 7 percent, and 30 percent when the rate exceeded 8 percent.

The increase in funding would be focused on periods when unemployment was widespread. For example, if this option had been in effect during 2009 and 2010, when the national unemployment rate peaked at 9.9 percent, it would have increased funding in 47 states by a total of $9 billion. In contrast, the option would have increased funding in only one state in 2018 and 2019, when the national unemployment rate fell to a low of 3.6 percent.

The additional funding would be used to cover 80 percent of increases in spending on job training, subsidized employment, and recurring cash payments that occur during the period of high unemployment. Other uses of the funds would be prohibited. Constraints on how the funding is spent would be similar to those that accompanied the emergency contingency fund used in the wake of the 2007–2009 recession. This option would affect tens of thousands of program participants each year, and it would increase federal spending by $5 billion from 2023 to 2031, CBO estimates.9

States would cover the remaining 20 percent of additional spending on job training, subsidized employment, and recurring cash payments, but they would not have to increase their own total spending on TANF. Instead, they could offset their additional spending on those services by spending less on other TANF services.10 Thus, even if states found it difficult to allocate more of their own revenues to TANF, they could still receive the additional funding. Program requirements would stipulate that the funding be spent promptly on services that increase participants’ job skills or income.

This option would probably raise employment eventually by bolstering participants’ job skills. But the initial effect on employment in each state would depend on which services it chose to expand. On the one hand, employment could fall because some recipients of job training would have worked otherwise and because additional spending on cash payments would make some people work less. But those two effects would probably be modest because few recipients would be able to find work during periods of high unemployment. On the other hand, employment could rise initially because some recipients of subsidized employment would not have been hired had the employer had to bear all the cost.11 Eventually, the skills that recipients developed through job training and subsidized employment would probably help them find slightly more work, on average, across the various state programs.12

This option would increase recipients’ income in the short term and most likely in the long term as well. Additional spending on subsidized employment and cash payments would boost their income immediately, and the skills they learned through subsidized employment and job training would probably lead to higher future earnings, on average.

One Option That Would Decrease Work Supports

One way to reduce federal spending would be to decrease the work supports provided through means-tested programs. In general, decreasing work supports would reduce recipients’ employment, lower their consumption (by causing them to spend more on child care and job preparation), and decrease their earnings. If, instead, funding was shifted from work supports to cash payments for nonworking families, the number of families in deep poverty could be reduced. Federal spending would be unchanged in that case, however (see Table 5-2, bottom panel). CBO analyzed that option—even though it is not representative of the typical effects of decreasing work supports—because it is the only recent proposal for reducing work supports that the agency identified.

Require States to Spend at Least 20 Percent of TANF’s Funding on Cash Payments

This option would require states to spend at least 20 percent of TANF’s total funding, excluding administrative and systems costs, on recurring cash payments for recipients—reversing a modest portion of the downward shift in that portion of funding that has occurred over the past 25 years. Hundreds of thousands of TANF recipients would be affected each year by that change, and their income would increase substantially as a result. This option would not affect federal spending.

To cover the increased cost of the cash payments, some states would probably reduce spending on other TANF-funded services; other states might spend more of their own funds on TANF as a whole. States would probably offset most of the increase in spending on cash payments by reducing spending on work supports and social services. In 2019, states that spent less than 20 percent of their TANF funding on recurring cash payments spent about 40 percent on subsidized child care and an additional 15 percent on other work supports. Furthermore, they allocated about 30 percent toward social services for children, including initiatives aimed at boosting educational attainment of parents, promoting family preservation and reunification, and providing guidance for parents on child health and development.

This option would expand the resources of low-income families by increasing the amount of cash assistance they received. If this option had been in effect in 2019, the 27 states that apportioned less than 20 percent of their TANF funding to cash payments would have had to increase spending on those payments by $1.1 billion, which constitutes an 18 percent increase in the total cash payments provided by all states—and 10 of them would have had to more than double their spending on those payments. States could provide more cash assistance in two ways: by paying families more or by making payments to more families (a task they could accomplish by loosening eligibility standards and conducting outreach to increase the percentage of eligible families that apply for benefits).

The increase in cash payments would substantially boost the income of some of the poorest families in the affected states. In the 27 states that spent less than 20 percent of their TANF funding on cash assistance, about 35 percent of the families who receive those payments report being in deep poverty. One reason income is so low in those states is that the states provide little cash assistance to recipients—families in those states receive $321 per month, on average, compared with $508 per month in other states. In addition to making larger payments to some recipients, the 27 states could provide benefits to more families in poverty. Currently, those states provide cash assistance to only about 6 percent of the families of single parents who are in poverty.

This option would decrease employment by reducing work supports and lessening recipients’ incentive to work. The number of people who would no longer work would probably be small compared with the number of people who would receive larger cash payments. The size of the change in employment is highly uncertain, though, because it would depend on how states chose to increase their spending on cash assistance. Increasing the amount of the payments to nonworking recipients and boosting the number of nonworking recipients who got those payments would decrease employment. But some states might choose to make cash payments available to working recipients for longer periods, which could increase employment.

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Appendix ASources of Income for Families 24 Months After They Start Receiving Cash Assistance

The Temporary Assistance for Needy Families (TANF) program emphasizes reducing recipients’ dependence on government benefits by promoting self-sufficiency through employment. Its work requirements, which were enacted into law in 1996 as part of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), are intended to help families more quickly replace cash payments with earnings. By law, states are required to ensure that most recipients are working within 24 months of first receiving cash assistance. To meet that requirement, states impose work requirements on most parents before they have been in the program for 24 months.

This appendix describes how the Congressional Budget Office used data from the Survey of Income and Program Participation (SIPP) to evaluate the extent to which TANF’s work requirements increased the portion of families that were able to replace cash payments with earnings in two years.1

The SIPP Data That CBO Used

The SIPP is a nationally representative survey of U.S. households that is designed as a series of panels. For each panel, the Census Bureau continually interviews survey respondents in the same households—every four months in most panels—for periods ranging from 32 months to 64 months. CBO analyzed the SIPP panels that began in 1990, 1991, 1992, 1993, 1996, 2001, 2004, 2008, and 2014. The largest panel includes around 50,000 households, and the smallest one includes about 15,000 households.

In each interview, survey respondents were asked about their employment, income, and participation in means-tested programs, including Aid to Families With Dependent Children (AFDC, the program that preceded TANF and was in place until 1997), TANF, and the Supplemental Nutrition Assistance Program (SNAP). Because far fewer respondents participate in TANF than SNAP or AFDC, estimates for that program are less certain.

Researchers have shown that participation in AFDC/TANF is sometimes misreported in the SIPP.2 To improve the accuracy of its analysis, CBO’s sample focused on single mothers—the group that constitutes the vast majority of adults who receive benefits from TANF, according to administrative data. Single fathers and married parents who report being in TANF are probably more likely to have misreported their participation.

CBO’s Approach to Analyzing the SIPP Data

CBO estimated the effects of work requirements on families’ sources of income by comparing changes in those income sources for single mothers in TANF and for single mothers in SNAP in selected years in the 1990s and 2000s. That period encompasses the years during which welfare reform was most active (the mid-1990s). In those years, policymakers undertook a series of actions—including a large expansion of work requirements in AFDC/TANF—to encourage employment. Several states expanded work requirements in AFDC starting in 1994; by 1997, many states had implemented TANF’s broad work requirements. Thus, CBO compared sources of income in 1993 (the final year before those changes occurred) with those in 1997 and in later years for which data were available.

For sources of income, CBO focused on cash payments and income from employment 24 months after single mothers first started receiving cash payments from either AFDC or TANF. CBO relied on self-reported data to mark the start of assistance. Many single mothers were already receiving payments from AFDC/TANF or SNAP in the first month they responded to the survey; for those recipients, the date of their first response was considered their start of assistance.

CBO aggregated responses about sources of income 24 months after assistance began across all participants in a particular program within a panel. Aggregating fewer months of data (by taking an average for each year, for example) would result in imprecise estimates because few respondents entered TANF in some years. To determine which date to associate with each data panel, CBO took the average of the dates at which respondents entered the program and added 12 months to get the midpoint between the start of assistance and the period in which the agency evaluated sources of income. That date determined whether the estimates from that panel would be included in the period before or after welfare reform. For the 1992 panel, that date was at the end of January 1993; for the 1996 panel, it fell in the middle of May 1997. Thus, the 1992 panel was the last one in the prepolicy period, and the 1996 panel was the first one in the postpolicy period.

Families’ sources of income could have changed from 1993 to 1997 as a result of factors other than work requirements, such as the expansion of the earned income tax credit (EITC) or the strengthening economy. To evaluate whether the changes in sources of income were caused by the work requirements, CBO compared those changes for TANF recipients and SNAP recipients. (SNAP did not impose work requirements on single mothers, but those women were eligible for the EITC just like their counterparts in TANF were.) Specifically, CBO focused on single mothers in SNAP who were not in TANF. Single mothers enrolled in both programs were excluded from the SNAP sample because they would have been subject to TANF’s work requirements. That approach also enabled CBO to determine whether the strengthening economy caused the changes in the sources of income: Single mothers in both TANF and SNAP would probably have responded to economic conditions similarly because those participants did not differ much in their age, educational attainment, and other characteristics measured in the data.

Families’ Sources of Income 24 Months After Receiving Cash Assistance

The AFDC/TANF work requirements substantially reduced the number of single mothers who continued to receive cash payments two years after entering the program. The prevalence of those longer spells in AFDC/TANF fell by half from 1993 to 1997 and remained low in subsequent years (see Figure A-1). Although the prevalence of longer spells fell by 30 percentage points among AFDC/TANF participants, it fell by only 8 percentage points for SNAP recipients who were not in TANF. That contrast suggests that the drop in the prevalence of longer periods of cash assistance was mostly the result of changes to AFDC/TANF policies, not the EITC or strengthening economy.

The AFDC/TANF work requirements appear to have temporarily decreased the number of single mothers who continued to receive nutrition assistance two years after entering SNAP. Mothers who entered both AFDC/TANF and SNAP 24 months earlier were 19 percentage points less likely to still be receiving benefits through SNAP in 1997 than they were in 1993, even though SNAP did not impose work requirements on families with children (see Figure A-2). One likely reason for the decline is that the work requirements added to AFDC increased the earnings of some participants enough that they no longer qualified for SNAP. But many of the parents who stopped receiving benefits from both programs appeared to still be eligible for SNAP because they were not employed. In 1993, about 58 percent of nonworking single mothers who left AFDC/TANF also left SNAP at the same time; that number fell to only 41 percent in 1997.3 In subsequent years, about 17 percent of nonworking single mothers who left TANF also left SNAP at the same time, and the prevalence of longer spells in SNAP rose back to its pre-PRWORA level, according to CBO’s analysis of SIPP data.

TANF’s work requirements led to a higher employment rate for single mothers two years after they entered the program. The employment rate for mothers who had entered TANF two years earlier rose by about 14 percentage points from 1993 to 1997 (see Figure A-3). The strong economic conditions of the late 1990s do not appear to have had a large direct effect on employment because the employment rate among single mothers in SNAP who were not subject to TANF’s work requirements changed little. In subsequent years, employment among single parents who had participated in TANF remained elevated, whereas the employment rate for their counterparts in SNAP remained relatively low.

The increase in employment for single parents two years after entering TANF was smaller than the decrease in their continued receipt of cash assistance, which indicates a rise in the number of families with neither earnings nor cash payments. Even though employment rates rose by 14 percentage points from 1993 to 1997, the percentage of single parents still receiving cash payments two years after entering the program fell by 30 percentage points. Those results are consistent with other evidence indicating that TANF’s work requirements contributed to the increase in the number of families with neither earnings nor cash assistance.

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Appendix BThe Effects of Work Requirements on People’s Employment and Income in Recent Years

Within the past few years, states have imposed work requirements more widely, including during periods of high unemployment and on participants in the Temporary Assistance for Needy Families (TANF) program who have children under the age of one. To continue receiving benefits, program participants must work or participate in work-related activities.

The Congressional Budget Office used administrative data from the Department of Health and Human Services (HHS) to estimate the effects of work requirements in TANF on recipients’ employment and income in recent years and during periods of high unemployment.1 The analysis presented here supplements the limited evidence on how work requirements have affected employment and income since 2000.

The HHS Data That CBO Used

The administrative data that HHS collects give a detailed description of the economic situations for many families in TANF and track changes in those situations. State agencies that administer the TANF programs report the data to HHS to demonstrate compliance with federal requirements, including the work standard and the five-year limit on cash payments.

This analysis is based on data from 2012 to 2018 for TANF recipients in 14 states.2 The states that CBO included in the sample provided records for all their TANF recipients (which no states did before 2012), and family identifiers enabled CBO to observe how the circumstances of those families changed over time while they were in TANF. CBO used the fine details in the data, such as recipients’ dates of birth, to confirm that family identifiers were used consistently in the 14 states.

CBO could not use data for the other 36 states because they were subject to at least one of three limitations.

• First, only 28 states and the District of Columbia provided data for all their recipients. The other 22 states provided data for a small portion of recipients. Because those samples are redrawn each month, CBO cannot track changes in the circumstances of those recipients and the length of their spells—or months of consecutive assistance—in TANF.
• Second, of the 28 states that provided data for all their recipients, several frequently transferred recipients to other cash assistance programs for which CBO does not have data.
• Third, CBO could not confirm that the family identifiers were unique and used consistently for several states; use of data from those states might have obscured changes in the circumstances of recipients in those states.

The main data file from HHS includes monthly records of families’ participation in work-related activities, earnings, other sources of income, and demographic traits. The sources of cash income included are earnings, child support, and benefits from TANF, Social Security, Supplemental Security Income, unemployment insurance, and workers’ compensation. Also included are benefits received from the Supplemental Nutrition Assistance Program (SNAP) and subsidies for child care.

HHS also provided data files that record the circumstances of TANF recipients when they leave the program, including their reason for leaving and their income in the month they stop receiving cash payments. Those data allowed CBO to confirm that the TANF spell ended in the month following the last month that the family appeared in the main file.

Effects of Work Requirements When the Unemployment Rate Is High

During periods of adverse economic conditions, work requirements can have negative effects on program participants. Those requirements can substantially lessen program participation while boosting employment only a little and reducing recipients’ average income. When work becomes harder to find, it can be difficult for recipients to meet those requirements through employment. If the work requirements are not eased at those times, more families are at risk of losing benefits before they can find work.

To examine how the effects of work requirements on employment vary with economic conditions, CBO looked at recipients’ employment, income, and program participation over a certain period. Specifically, CBO estimated how those factors varied with the unemployment rate across 708 counties in 9 selected states between 2012 and 2018.3 To explore whether that variation was the result of TANF’s work requirements, CBO examined whether families were more likely when the unemployment rate was high to have their TANF spells end because they violated the work requirements.4

CBO found that TANF’s work requirements probably boosted recipients’ employment less when the unemployment rate for their county was high. In particular, only 4.8 percent of job seekers in TANF found employment each month when their county’s unemployment rate was 6 percent or higher, compared with 8.6 percent when the rate was below 6 percent. That reduction in employment occurred even though states continued to impose work requirements on most adult TANF recipients. About 36 percent of those recipients were exempted from the work requirements when the unemployment rate was 6 percent or higher. (When the rate was below 6 percent, about 31 percent of recipients were exempted.)

In addition, CBO found that TANF’s work requirements probably reduced the average income of recipients during periods of high unemployment by halting cash payments to more families with little or no earnings. The percentage of spells ending because of work-requirement violations rose from 6 percent when the unemployment rate was below 6 percent to 18 percent when the unemployment rate was 6 percent or higher. Those violations reduced the extent to which additional cash payments offset the reduction in earnings from less employment. Families only received cash assistance for about one month longer, on average, when the unemployment rate was 6 percent or higher than when the unemployment rate was below 6 percent, even though job seekers in TANF took nine more months to find a job, on average, when the unemployment rate was higher, CBO estimates.

During periods of high unemployment, TANF’s work requirements caused a large portion of the families leaving the program to have very low income. When the unemployment rate was 6 percent or higher, 18 percent of families leaving TANF were expelled for violating the work requirements, CBO found, and their average cash income was $153 in the month after they lost benefits, which is less than 10 percent of the poverty threshold for a family of three. If SNAP benefits are included, average monthly income for those families rose to $569. In contrast, when the unemployment rate was lower than 6 percent, the share of families leaving TANF that were expelled for violating the work requirement was 5 percent.

Effects of Work Requirements on Families With Young Children

Although states are allowed to exclude from the work standard single parents with a child under the age of one, about half of states choose to apply work requirements to some or all of those parents. CBO examined how expanding work requirements to those parents affected their employment and income by comparing trends in outcomes for families who were subject to the expansion with families who were not. CBO found that expanding work requirements to parents who entered TANF with a child younger than one increased their employment but had little effect on their income, on average.

How CBO Analyzed the Effects of Work Requirements on Families With Young Children

To estimate the effects of work requirements on the employment and income of families with children younger than one year of age, CBO examined the recent experiences of TANF recipients in Alabama. In 2017, Alabama was one of 25 states that provided work-requirement exemptions to single parents whose youngest child was less than one year old. At the beginning of 2018, though, Alabama stopped providing exemptions to nearly all single parents who had a child between the ages of 6 months and 11 months. CBO used two approaches to examine the effects of that policy change on the employment and income of TANF recipients.

First, CBO examined the effects on families while they were in TANF and in the month after they left the program. To do that, the agency compared the employment and income of single parents who had a child between the ages of 6 months and 11 months in 2018 with the employment and income of single parents who had a child in that age range in 2017. The agency compared those changes in employment and income with changes in those outcomes among single parents whose youngest child was older to adjust for differences that were driven by other factors (such as economic conditions) instead of the expansion of the work requirement. That approach illustrates the effects of the expansion, but it does not fully capture the reduction in income from lost benefits because families remained in the sample for only one month after they stopped receiving cash payments. CBO thus used a second, more comprehensive, approach, which examined employment and income in the months after families left TANF as well as while they were in it.

Using that second approach, CBO estimated the effects of Alabama’s work-requirement expansion over the year following families’ entry into TANF in 2018. Whether a family was subject to the expansion of the work requirement was determined by the age of its youngest child when it entered TANF. Nearly all single parents with a child between the ages of 6 months and 11 months in 2018 were subject to the expansion, as were single parents with a child between the ages of zero and 5 months if they remained in the program after that child reached 6 months of age.

CBO compared the employment and income in 2017 and 2018 of families whose youngest child was not older than 11 months when the family entered TANF. For families that were in TANF for less than a year, employment and income for the remainder of the year were set equal to their value in the month after those families left the program.5 As with the first approach, CBO compared the changes in employment and income among the parents of young children with those changes among the parents of older children in TANF. By examining changes in employment and income among single parents of older children, CBO intended to capture the effects of changes in economic conditions or policy changes other than the expansion of the work requirement.6

What CBO’s Analysis Found

Using the first approach, CBO determined that Alabama’s expansion of TANF’s work requirements in 2018 increased the employment rate of single parents whose youngest child was between the ages of 6 months and 11 months by 11 percentage points during the months they were in the program (see Figure B-1). Employment rose because families started searching for work sooner and found jobs faster when subject to the work requirement.

Employment also rose among parents of children between the ages of 12 months and 16 months. That change appears to be the result of the expansion’s having subjected some of those parents to work requirements for more months, because the employment rates differed only among parents who entered TANF before their youngest child turned 12 months old.

The rise in employment was probably the result of the work requirement and not other possibilities, such as changes in the sample studied, the presence of other policies (subsidized child care, for instance), or economic conditions. Specifically:

• The employment rate at program exit stayed roughly the same from 2017 to 2018. That shows that the employment increase was not driven by nonworking parents’ being expelled from the program for violating the work requirement.
• The percentage of parents with a child between the ages of 6 months and 11 months who received subsidized child care increased by 10 percentage points, but that rise was the result of more employment, not the cause of it. In both 2017 and 2018, parents generally only received subsidized child care if they were working or searching for a job. The expansion of the work requirement does not appear to have changed their access to subsidies: Alabama gave subsidies to about 45 percent of parents who were in the labor force and had a child between the ages of 6 months and 11 months both before and after the expansion. That indicates that the employment increase was not driven by an increase in subsidized child care.
• If the employment increase had been driven by changes in other policies or economic conditions, then employment would probably also have increased among single parents who were not subject to the expansion because their children were slightly older when they entered TANF. That did not happen, which shows that the employment increase was probably not driven by changes in other policies or economic conditions.

The expansion of the work requirement had countervailing effects on the average cash income of families with children between the ages of 6 months and 11 months. On the one hand, average cash income for families with young children rose while they were in the program because of additional earnings from more employment (see Figure B-2). On the other hand, earnings at program exit appear to have fallen slightly, and the expansion reduced the amount of cash assistance families received. TANF benefits decreased primarily because violations of the work requirement reduced the number of months that families remained in the program (see Figure B-3).7

The increases in employment among participants do not appear to stem from a reduction in the number of people (or a decrease in the number of less-skilled people) entering the program. If entry into the program had declined substantially, as it did after enactment of the Personal Responsibility and Work Opportunity Reconciliation Act, then unmeasured changes in employment and income among families who were deterred from entry might offset the increases experienced by participants. But the parents of children between the ages of 6 months and 11 months continued to account for about 21 percent of entrants in 2018 (see Figure B-4). Even if entry did not decline for that group overall, a reduction in entry among less-skilled parents could have inflated the employment rate and average income. However, the expansion of the work requirement does not appear to have substantially decreased the frequency with which parents who have little education entered the program.

Using the second approach, CBO found that TANF’s work requirements increased employment over the year after families with young children entered the program. For single parents of children who were under one year of age upon entry into TANF, CBO estimates that the expansion of Alabama’s work requirement increased their employment rate by 6 percentage points while they remained in TANF. Over the year after they entered the program, some of that initial increase in employment was offset by rates of employment that were similar for families after they left TANF; averaging those rates brings the estimated effect on the employment rate down to an increase of about 4 percentage points.

Also using the second approach, CBO found that TANF’s work requirements might have increased the average cash income of families with young children over the year after they entered the program. But higher average earnings while in the program were partly offset by a reduction in cash payments because some people were in the program for a shorter time.

A Comparison of CBO’s Findings Under the Two Approaches

The estimated effects on employment tend to be smaller under the second approach than under the first because the second approach concentrates less on the months in which families were subject to the expansion of the work requirement.

The first approach focuses on the period when families were directly subject to the expansion because they had a child between the ages of 6 months and 11 months. The second approach expands the examination to all months of assistance for any families that could be subject to the expansion for at least one month during their spell in the program. As a result, the number of months examined using the second approach was 137 percent higher than the number under the first approach. Although the increase in the employment rate was smaller for that broader group, the increase in the months of employment was larger—primarily because the employment rate rose among parents who had a child between the ages of 12 months and 16 months and who had been subject to the work requirement earlier as a result of the expansion.

A Comparison of CBO’s Findings With Results of the AFDC Waiver Experiments

In the 1990s, a series of evaluations were conducted on waiver programs in Aid to Families With Dependent Children (AFDC). The results from those AFDC waiver experiments have remained a primary source of evidence on the effects of work requirements.8 CBO’s estimates of the effect of Alabama’s work-requirement expansion on employment and income are similar to the results from the experimental evaluations once adjustments are made for differences in the way the requirements were expanded.

The experimental evaluations generally measured the effect of fully implemented work requirements by comparing income and employment for a group in which almost everyone was subject to the requirement and a group in which no one was. In contrast, the single parents who entered Alabama’s TANF program with a child under the age of 6 months in 2018 were rarely subject to the requirement until their child reached 6 months of age. In addition, the single parents who entered the program with a child under the age of 12 months in 2017 were typically subject to the requirement once their child reached 12 months of age. Among single parents who entered the program with a child under 12 months of age, the portion of months within a year that they were subject to the work requirement increased by 0.41 (or 5 months). That increase would have been more than twice as large (almost 12 months) if almost everyone was subject to the requirement in 2018 and no one was in 2017.

The estimate of the effect on employment from Alabama’s work-requirement expansion is consistent with the estimate from the AFDC waiver experiments. CBO estimates that the employment rate increased by about 4 percentage points over the first year after single parents entered TANF in Alabama. Thus, full implementation of a work requirement in 2018 would have boosted employment by about 9 percentage points if the increase in employment had been proportional to the change in the percentage of single parents subject to the work requirement. The average of estimates from the AFDC waiver experiments that focused on labor force attachment was about 10 percentage points.

CBO found more evidence of an increase in families’ average cash income from Alabama’s work-requirement expansion than the evaluations of the AFDC waiver experiments found. Most of the difference in those estimates can be explained by the larger gains in earnings for participants in Alabama’s work-requirement expansion, and some can be explained by the smaller reduction in cash payments for those same participants. The reduction in cash assistance was smaller because Alabama provides smaller monthly cash payments than the programs in the AFDC waiver experiments provided. In contrast, the reduction in the number of months that cash assistance was received was larger in CBO’s analysis than in the AFDC waiver experiments.

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