Few domestic issues have generated as much attention over the past decade as welfare reform. Persistent dissatisfaction with the Aid to Families with Dependent Children (AFDC) program — the nation’s principal safety net for poor families — spurred the enactment in August 1996 of the Personal Responsibility and Work Opportunity Reconciliation Act. Among its provisions, the law replaced AFDC with a block grant program, Temporary Assistance for Needy Families (TANF), and created financial incentives for states to run mandatory, work-focused welfare-to-work programs.

Welfare-to-work programs provide services such as job search assistance, education, and training to help welfare recipients prepare for and find jobs. States have run versions of these programs to serve part of the welfare caseload for the past three decades. Various facets of the 1996 law, however, magnify the need for effective strategies to move people more quickly into jobs and off welfare. First, states may not use federal funds to support most families for longer than five years and may impose even shorter time limits on assistance (they may also elect to use state funds to support families beyond five years). Second, to prevent reductions in their block grants, states must meet demanding "participation standards" by engaging large proportions of TANF recipients in work or work-related activities. To meet these standards, most states will have to engage a wider cross section of the caseload in work or program activities than they did previously. Third, states’ TANF plans must include how the states will require recipients to work after two years of assistance.

As states and localities transform their welfare-to-work programs in response to the federal legislation, the need to learn about programs that have moved substantial numbers of people into work and off welfare increases. The two-year findings presented in this report show the Portland, Oregon, welfare-to-work program run between early 1993 and mid 1996 to be among the most successful large-scale mandatory welfare-to-work programs studied, producing large increases in employment and earnings and equally large reductions in welfare receipt for a broad cross section of the welfare caseload. The positive effects remained very strong at the end of the two-year period studied, and preliminary data suggest they will continue into the third year.

This report is the latest from an evaluation of mandatory welfare-to-work programs in seven sites called the National Evaluation of Welfare-to-Work Strategies (NEWWS Evaluation), conducted by the Manpower Demonstration Research Corporation (MDRC) under contract to the U.S. Department of Health and Human Services, with support from the U.S. Department of Education. The report examines the mandatory welfare-to-work program run in Portland (Multnomah and Washington counties). Through the program, Portland provided employment and support services to a broad cross section of the AFDC caseload, including parents with children as young as one year old. These people were required to participate in program activities or face reductions in their welfare grants. Although the program studied was designed and implemented prior to the 1996 reform, its overarching goal was similar to that of the new law: to foster the self-sufficiency of adult recipients through increased employment and decreased welfare receipt. (The program that Portland is running under the 1996 welfare reform law includes some key features of the program studied in this report.)

This report describes the implementation, participation patterns, and cost of the Portland program, and presents estimates of the effects of the program on employment, earnings, and welfare receipt during the two years following people’s entry into the program. To determine the effects of Portland’s program, 5,547 single-parent AFDC applicants and recipients aged 21 and over who attended a program orientation between February 1993 and December 1994 were randomly assigned to either a program group, eligible for program services and subject to participation requirements, or a control group, not eligible for services and not subject to participation requirements (although they could participate in other services in the community). Because randomization makes the two groups similar at the start, any differences in average subsequent outcomes (such as two-year earnings) can be confidently attributed to the effects of the program. These differences, known as program impacts, will be discussed later in the summary and are statistically significant unless otherwise noted.

Overview of the Findings

The Portland program was run through a cooperative partnership between the welfare department and various local service providers. Most program services were provided by the local community colleges and were of high quality. The program was strongly employment-focused: staff communicated that the primary program goal was to help people move into jobs, and job search was the most common activity. However, in contrast to many employment-focused programs, participants were encouraged to look for and take "good" jobs — full-time, paying above the minimum wage, with benefits and potential for advancement. Also, Portland’s program utilized a more mixed services strategy than is typically implemented by strongly employment-focused programs. Staff assigned many people to short-term education, vocational training, work experience, and life skills training to improve their employability. Some people were deferred from program participation, although the program did work with at least some people traditionally defined as the most disadvantaged portion of the caseload. The per person cost of the program was moderate, relative to other welfare-to-work programs of the 1990s.

Follow-up of more than two years is needed to fully assess the success of a welfare-to-work program, but at the two-year mark Portland’s program produced effects (impacts) on employment, earnings, and welfare receipt that were among the largest ever found for large-scale mandatory programs.

• The Portland program substantially increased employment and produced unusually large increases in earnings. The program raised employment levels by 11 percentage points over two years (relative to the control group). More than one out of every four welfare recipients who normally would not have worked in an unsubsidized job during the two-year follow-up period did so as a result of the program. In addition, two-year earnings were increased by over $1,800 per sample member, a 35 percent increase over the control group’s earnings. These earnings gains are the largest found in the National Evaluation of Welfare-to-Work Strategies and approach the largest gains found for a large-scale mandatory program (those in the Riverside, California, GAIN program of the late 1980s).
• Unlike many programs that produce immediate impacts on employment and earnings, the Portland program increased job quality. At the end of two years, the program increased the proportion of people working at full-time jobs by 13 percentage points and, among those employed (a nonexperimental comparison), increased average hourly pay by $0.86. It increased the proportion of people with employer-provided health benefits by 10 percentage points.
• The program reduced welfare expenditures by 17 percent over the two-year follow-up period. Relative to the average total welfare payments that people in the control group received over the two years, the program reduced per person expenditures by almost $1,200. By the end of the follow-up period, only 41 percent of program group members were receiving welfare compared to 53 percent of control group members, a decrease of 12 percentage points.
• Portland’s impacts were widespread: both recipients with relatively few barriers to employment and those typically considered very hard to place achieved employment and earnings gains and AFDC reductions. Few other programs have attained such consistent impacts. Employment, earnings, and AFDC impacts were produced for those who entered the program with a high school diploma or GED (high school equivalency certificate) and those who had neither credential, as well as for the "most disadvantaged" (sample members who entered without a high school diploma or GED, had not worked during the prior year, and had received AFDC for at least two years prior to program entry).
• Over the two-year follow-up period, program group members’ average combined income from earnings, AFDC, and Food Stamps was not substantially higher than that of control group members. However, more positive results at the end of the follow-up period suggest that the program group may become financially better off in the future. Program group members’ two-year earnings gains were largely offset by losses in AFDC and Food Stamps. Quarterly impact trends suggest that income gains may emerge in the third year of follow-up.

Portland’s program was unusually successful in moving people into jobs, increasing their earnings, and moving them off welfare. This success occurred in a specific context: Portland’s caseload was predominantly white, minimizing the chances of racial discrimination in the labor market; a high percentage of the caseload entered the program with a high school diploma or GED certificate; and Portland’s economy was very strong during the study period, with low unemployment and substantial job growth.