Temporary Assistance for Needy Families (TANF): The Work Participation Standard and Engagement in Welfare-to-Work Activities

Summary

The 1996 welfare reform law (P.L. 104-193) created the Temporary Assistance for Needy Families (TANF) block grant. TANF’s predecessor program, Aid to Families with Dependent Children (AFDC), historically assisted non-working single mothers. The debates leading to the 1996 law focused on how to move those single mothers from welfare to work.

TANF provides states with flexibility in how they design their programs. It has national goals, one of which is ending dependence of needy parents on government benefits by, in part, promoting job preparation and work. To enforce that goal, TANF requires that 50% of each state’s TANF families with an adult recipient include a member who is either working or engaged in welfare-to-work activities. There are credits that states may receive that lower the 50% goal for states that have reduced caseloads or spend from their own funds more than the amount required under TANF. Thus, there are four different routes for states to meet the work participation standard: (1) caseload reduction (i.e., reducing the number of families receiving TANF assistance); (2) excess state spending; (3) providing assistance to those already working (“unsubsidized employment”); and (4) engaging otherwise non-employed recipients in welfare-to-work activities, such as job search, education and training, community service, work experience, and subsidized employment.

The main performance measure for TANF is the work participation rate (WPR), which measures the share of families in the caseload with a member who is either working or engaged in welfare-to-work activities. The WPR is compared annually to the state’s after-credit numerical goal to determine whether it met the work participation standard. The national average WPR fluctuated around 30% from FY2002 through FY2011. Most states met the work participation standard through a combination of caseload reduction, excess spending credits, and a WPR below 50%. Over that period, about half of the national WPR was comprised of recipients in unsubsidized jobs.

In recent years, the national TANF average WPR has increased; it approached 50% for the first time in FY2015. This increase is due to states using TANF dollars to implement “earnings supplement” programs, separate from the regular TANF cash assistance programs. Earnings supplement programs provide benefits, usually small ones ($10 to $50 per month), to families with working parents who are not in regular state TANF assistance programs. Some earnings supplement programs provide benefits to those who left regular state TANF cash assistance programs; others provide benefits to families without any necessary connection to regular TANF cash assistance. Despite this, families who receive these TANF-funded benefits are counted toward the WPR.

Throughout the history of TANF, participation in welfare-to-work activities has been relatively modest. In FY2015, out of a monthly average of 743,000 non-employed TANF work-eligible individuals, 143,000 (less than 1 in 5) were reported as engaged in welfare-to-work activities.

TANF now has a record of 20 years, highlighted by (1) caseload reduction, with particularly large caseload declines in the early years; (2) an increase in the share of families receiving assistance with a parent who is employed; and (3) modest rates of participation in welfare-to-work activities among those who are not otherwise employed. If policymakers wish to increase engagement of non-employed recipients, a number of questions would be raised—including whether TANF’s flexibility with the performance standards structure provides sufficient incentives to increase engagement, or whether other program models, such as a separate program dedicated to work activities for assistance recipients, should be considered.