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Incentives, Challenges, and Dilemmas of TANF

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B. L. Wolfe

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Abstract

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 changed the U.S. welfare system dramatically. Its primary goal was to reduce dependency by moving most of those receiving cash welfare into the work force. One tool to accomplish this objective was a change in the incentives facing actual and potential recipients. States were granted flexibility in how to accomplish this objective. This paper evaluates the program in four states in terms of efficiency and equity. It looks briefly at resulting labor force participation and incomes of those most directly affected by welfare reforms. The analysis highlights the difficulty of simultaneously providing incentives to work and incentives to increase individuals’ labor market productivity while maintaining a minimal safety net and avoiding high marginal rates of taxation. None of the states studied is able to avoid a “poverty trap” in its program. The need to coordinate the benefit and withdrawal schedule of programs designed to help this population flows from the analysis.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1209-00.

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Handle: RePEc:wop:wispod:1209-00

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert A. Moffitt, 1999. "The Effect of Pre-PRWORA Waivers on AFDC Caseloads and Female Earnings, Income, and Labor Force Behavior," JCPR Working Papers 89, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Sandra K. Danziger & Mary Corcoran & Sheldon Danziger & Colleen M. Heflin & Ariel Kalil & Judith Levine & Daniel Rosen & Kristin S. Seefeldt & Kristine Siefert & Richard M. Tolman, 1999. "Barriers to the Employment of Welfare Recipients," JCPR Working Papers 90, Northwestern University/University of Chicago Joint Center for Poverty Research.
  3. David N. Figlio & James P. Ziliak, 1999. "Welfare Reform, the Business Cycle, and the Decline in AFDC Caseloads," JCPR Working Papers 77, Northwestern University/University of Chicago Joint Center for Poverty Research.
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  1. Robert Drago & Rosanna Scutella & Amy Varner, 2002. "Work and Family Directions in the US and Australia: A Policy Research Agenda," Melbourne Institute Working Paper Series wp2002n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  2. Wolfgang Ochel, 2001. "Welfare to Work in the US: A Model for Germany?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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