Stephen Pollard: Mr Clinton's 'tough love' welfare reform passes the test of time

Five years ago this month, President Clinton signed legislation which would, we were told, end America's claim to being a civilised country. After vetoing the Bill twice, in August 1996, he signed the Personal Responsibility and Work Opportunity Reconciliation Act, the most significant of the "tough love" welfare reforms. According to critics of the Act, "wages will go down, families will fracture, millions of children will be more miserable than ever", as The New Republic put it at the time.

The US media carried warnings of a return to the 1930s, with families being put on the streets in the absence of any government assistance. Those who supported the reforms were portrayed as hard-hearted right-wingers who cared not a jot for the poor – President Clinton excepted: his signature being viewed as an unavoidable political capitulation to a Republican Congress. Three of his senior officials none the less resigned in protest.

Last week, the US Department of Health and Human Services issued its annual Indicators of Welfare Dependency report. Its findings have been barely noticed; hardly surprising, since they show that the media and critics were wrong. The welfare reforms have been a stunning success.

Since August 1996, the number of welfare recipients has fallen from 12.2 million to 5.8 million – the largest decline in history and the lowest percentage of the US population on welfare since 1965. The poverty rate has fallen, more former welfare recipients are working and the number of Americans dependent on the main welfare programme, Temporary Assistance for Needy Families (TANF) is down. We can learn from what has happened in the US: welfare rolls are down because former recipients are now in work.

Welfare reform has long been an even bigger theme in American public policy debates than in Britain. But the story has, for many years, been as depressingly unsuccessful in both countries. The 1996 legislation, however, fundamentally changed the structure of US welfare programmes and the way that welfare is delivered. Since the 1930s, the cornerstone of US welfare was Aid to Families with Dependent Children (AFDC). Under AFDC, a family was entitled to welfare as long as it had a child under 18 living at home. Reforms concentrated on job training programmes, leaving the basic income guarantee intact.

In 1996, AFDC was replaced with Temporary Assistance for Needy Families. Instead of welfare being an entitlement, TANF's philosophy is that welfare is a helping hand – and a temporary one at that. Benefits are restricted to five years and recipients must fulfil a strict work requirement. The legislation also replaced hand-outs with specific help for families moving from welfare to work, such as increased funding for child care. After the five-year limit has been passed, welfare assistance can continue, but it must be via tailored programmes or through non-cash benefits and vouchers. Those who are incapable of work are covered by different schemes.

The 1996 reforms have, unlike any of their predecessors, had a dramatic and entirely beneficial impact. They have helped make the able-bodied self-sufficient and, crucially, reduced many of the anti-social conditions often associated with welfare dependency. In poor neighbourhoods there has been a substantial decrease in crime, drug abuse and teenage pregnancy and a big increase in employment.

Between the passage of the legislation in August 1996 and September 2000, the numbers on welfare declined by 50 per cent. Some 3.2 per cent of the US population receive TANF, down from the 5.4 per cent who received AFDC in 1996. Crucially, this is not, as opponents of the legislation suggested, simply because welfare has been withdrawn and they have been thrown on to the streets. It is because they have moved from welfare to work.

In 1998, the latest year for which there are figures, only 3.8 per cent of the US population received more than half of their total income from welfare – down from 5.8 per cent in 1993. Participation in the workforce has increased considerably among TANF families. In 1998, 56 per cent of TANF recipients lived in families with at least one member working, up from 43 per cent in 1993. Most of the women heading families previously on AFDC are now in work – and the proportion of single mothers who work has increased spectacularly.

Now that those who have been on TANF since 1996 are coming up against the five-year limit, the likelihood is that even more will find work. For those who do not – and are capable of working – welfare still exists, but at a lower level.

Critics argue that these figures prove nothing, and that of course welfare rolls have fallen, given the unprecedented economic boom which the US has enjoyed. In the four years from August 1996 to September 2000, unemployment fell from 5.5 per cent to 4 per cent – so it should be no surprise that the number of families on welfare fell by 50 per cent. But in the last such economic boom, in the 1980s, there was no such fall: between 1983 and 1989, unemployment fell from 9.6 to 5.3 per cent; welfare numbers rose.

The most extensive study of the figures, by June O'Neill, former director of the Congressional Budget Office, shows that it was indeed the reforms rather than the general economic climate that has made the difference. Using regression analysis to interpret the latest figures in combination with the US Current Population Survey, tracking 80,000 single mothers between 1983 and 2000, Ms O'Neill found that the economy accounts for less than 20 per cent of the changes in either welfare or work participation rates since the 1996 reforms. The reforms account for more than half of the fall in welfare numbers and more than 60 per cent of the rise in employment among single mothers – and 83 per cent of the rise among single back mothers.

Simulating the effects of a recession that raised unemployment to the 1993 level of nearly 7 per cent, Ms O'Neill found that, even with such a sharp increase in unemployment, only 5 per cent more single mothers would return to welfare (20 per cent from 15 per cent) – still far less than the 35 per cent rate in 1993. The most encouraging aspect of the reforms has been their impact on those thought most vulnerable and dependent on welfare. Between 1996 and 2000, the proportion of all single mothers in work rose from 63 to 73 per cent. But the rises among black mothers (from 50 to 67 per cent), Hispanics, young (19-29) mothers and mothers of young children were even more dramatic.

The lesson for the Blair Government is clear. Between January 1994 and September 2000, eight-and-a-half million people left US welfare rolls – a fall from 5.5 to 2.1 per cent of the population. They are not on the streets. They are in work.

Stephenipollard@cs.com