Thirty years ago this month, President Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), popularly known as welfare reform. When the legislation was signed, no one could have known how profoundly this bipartisan reform would reshape the U.S. welfare system and the lives of the mothers and children who depended on it.
After 30 years, low-income children today are better off than at any time before 1996, due in large part to welfare reform.
It is easy to forget that the 1970s, 1980s, and early 1990s brought many failed promises of welfare reforms from presidents, Congress and federal administrations. Reform cynics likely wondered whether PRWORA would become yet another failed attempt at reform, or if it would finally transform a broken system.
Three decades later, the evidence is clear. Unlike previous reform attempts, PRWORA successfully ended the country’s traditional cash welfare program, transitioning the focus of the nation’s cash welfare program away from dependence toward employment and self-reliance. This created new pathways out of poverty and dependency, leading to better outcomes for poor children and families.
This truth is shared well beyond conservative circles. Princeton University professor and well-respected economist Janet Currie gave a talk in 2016 at the left-leaning Brookings Institution for the 20th anniversary of PRWORA. She argued that the positive trends in child outcomes since the 1996 reform had largely been ignored in public discourse.
When referring to the increased well-being of low-income children, she said: “We can see this in mortality rates, high school graduation rates, test scores, teen pregnancy and drug use, among other metrics. Positive trends are even more pronounced for African American children.” Many of these positive markers remain today, despite claims to the contrary.
Two changes were fundamental in achieving this: reforming the federal-state financing structure for cash welfare, and shifting the incentives embedded in the program by encouraging work and discouraging nonmarital childbearing.
Before PRWORA, the traditional cash welfare program, Aid to Families With Dependent Children (AFDC), had operated for almost six decades, sending monthly checks to mostly low-income single mothers and their children. AFDC discouraged both employment and marriage as each raised family income, resulting in the threat of reduced or terminated government aid.
PRWORA replaced this system of bad incentives and poor outcomes with a new system that emphasized work and personal responsibility — the Temporary Assistance for Needy Families (TANF) program.
PRWORA made three specific changes to alter AFDC’s incentive structure. It financed the program through a block grant, giving states broad latitude within federal guidelines for spending rather than sending a per capita amount for every family enrolled.
Next, PRWORA established work engagement requirements for states that distributed traditional cash welfare, and finally it set federal time limits for individuals to receive welfare checks. Together, these features represented a shift away from cash aid that discouraged employment and marriage toward a system that gave states flexibility to counteract these disincentives.
This resulted in a dramatic drop in cash welfare receipt. By 1998, the number of AFDC/TANF recipients had fallen more than 30%. But contrary to claims that PRWORA would be disastrous for children, the opposite has transpired.
While cash welfare diminished in the lives of poor families, it was replaced by earnings and other supports tied to employment. Programs such as the Earned Income Tax Credit (EITC) and the Supplemental Nutrition Assistance Program (or SNAP) typically complemented earnings rather than replaced them, leading to a reconfigured safety net rather than an overall diminishment.
In a recent analysis, we found that when considering the full safety net package, roughly the same share of poor unmarried families received some assistance in 2023 as they did in 1994, prior to PRWORA. The difference — much came from the EITC and SNAP, rather than cash welfare.
Critics will argue that these dynamics left poor families insufficiently supported. However, the evidence tells a different story. The 2019 National Academies of Science report on child poverty examined child poverty rates from 1967-2019, concluding that “When measured by the anchored Supplemental Poverty Measure (SPM), [child poverty rates] fell by nearly half over that period, due to the increases in government benefits.” Importantly, most of these declines happened after welfare reform in 1996 when TANF was declining dramatically.
The 1996 welfare reform law fundamentally changed how the federal government provided cash assistance to poor families in the United States. Three decades later, welfare reform’s principles provide a foundation for thinking about how future safety net policy reforms can promote employment and self-reliance, resulting in better outcomes for poor children. We must give states financial incentives to run better programs, set clear expectations for employment among work-capable individuals, and ensure assistance is temporary and targeted.