Employment, Earnings, and Recidivism among Georgia's TANF Leave-5: Findings from the TANF Follow-Up System Georgia Department of Human Resources Division of Family and Children Services December, 1999 Acknowledgments This report was prepared by Nancy Bross under contract t o the Georgia Department of Human Resources. She would like t o thank the staff of the Evaluation and Reporting Section, Division of Family and Children Services, for their continuing support of the development and maintenance of the TANF Follow-Up System and for their assistance in the preparation of this report. Executive summary The TANF Follow-Up System tracks the employment, earnings, and recidivism of adults leaving TANF using administrative data from the Department of Human Resources' management information system for TANF and the Georgia Department of Labor's Unemployment Insurance (UI) wage record files. This report contains information on leavers and their outcomes from January, 1997 through the end of 1998. Because a full year of follow-up data is available for those who left TANF in 1997, it looks at their experiences in depth. Findings Approximately 65 percent of the adults who left TANF had wages reported t o the UI system during the quarter in which they left. Over time, quarterly employment rates consistently fell in the range from 57 t o 6 0 percent. Seventy-five percent of the 1997 leavers worked at some time during the year following their exit from TANF. Average quarterly earnings rose throughout 1997 and 1998. In part, this trend was due t o favorable labor market conditions, but it is also clear that the longer former recipients stay off TANF, the greater their average earnings. Among the 1997 leavers who worked during the year following exit, average annual earnings were $8,189. Their total earnings for the year were over $259,000,000. Recidivism rates rose in the first three quarters after recipients left TANF but leveled off at approximately 12 t o 15 percent within each quarter. Recidivism did not increase at the end of the first year off TANF, when transitional benefits expire. However, leavers with younger children were more likely t o return t o TANF. Among the 1997 leavers, 20 percent returned t o TANF at some time during the year following exit. Among the 1997 leavers, employment rates were essentially the same across four types of counties: urban, suburban, rural growth, and rural decline. Earnings were higher in urban - and especially suburban - counties than in rural counties. In spite of comparable employment rates and average earnings, recidivism was much higher in declining rural counties than in those characterized by growth. Among the 1997 leavers with earnings in the year after they left TANF, 5 0 percent had earnings that exceeded the TANF gross income eligibility ceiling, and 21 percent had annual earnings that exceeded the federal poverty level. However, these rates were strongly related t o family size, and were substantially higher among smaller families. Data on industry of employment revealed that 78 percent of the 1997 leavers who were employed one year after leaving TANF worked in the service industry or in wholesale or retail trade. Eating and drinking places accounted for more employment than any other type of establishment, followed by personnel supply services. While many individual leavers were working in industries that offer higher wages and opportunities for advancement, the overall picture was of employment in low skill, low wage jobs. Introduction Georgia began implementation of Temporary Aid for Needy Families (TANF) on January 1, 1997. With TANF came more stringent work requirements for welfare recipients, a lifetime limit i n receipt of welfare payments, and an end t o the concept of entitlement. Welfare recipients are leaving public assistance at unprecedented rates, but are they prepared t o find and keep jobs that will support them and their families? In order t o answer this question, the Georgia Department of Human Resources (DHR) developed a comprehensive research strategy. This report provides findings from one component of that strategy - the TANF Follow-up System. It looks at employment, earnings, and recidivism among adults who left TANF during 1997 and 1998. Methodology The TANF Follow-up System is a data base containing information on adult recipients from closed TANF cases. It matches DHR data on TANF recipients t o quarterly earnings data from the Georgia Department of Labor. Identifying Adult Leavers. The event that triggers inclusion in follow-up is case closure. In fact, however, because families may go on and off TANF as their circumstances change or they go in and out of compliance with program requirements, it is not always clear when a case is truly "closed." Therefore, for purposes of follow-up, a case is considered closed when no benefit is received in t w o successive months. Recipients are added t o the follow-up system the first time they meet the criterion for inclusion during a calendar year. Should they receive additional benefits at a later date, they are considered recidivists. However, they only appear once in the follow-up file for that year. Only those adults who were actually TANF recipients (i.e. included in the TANF grant) are addressed in this report. Excluded are adults who received a benefit on behalf of a dependent child but who did not, themselves, receive a benefit under TANF. Also excluded are other adult household members not included in the TANF grant. Data. All of the data in the TANF Follow-Up System come from administrative data systems. The advantages of such data are low cost and continuity over time. The disadvantage is that neither what is collected nor how it is organized and maintained are likely t o be ideal for research purposes. Data on recipients, households, and status at case closure for 1997 come from DHR's PARIS system. During 1998, DHR made a gradual transition t o SUCCESS, its new management information system. Consequently, data for 1998 come from both systems. SUCCESS expands the scope of data available for future research and evaluation. However, the data used in this report are limited to information common t o both systems. Data on employment and earnings come from the Unemployment Insurance wage record. This record is a report of quarterly earnings submitted by all employers in the state whose workers are covered under the U1 system. UI earnings data provide a low-cost way of tracking employment over time. However, they have t w o important limitations. First, UI earnings data are only available for those jobs covered under the Unemployment Insurance system. Notable exclusions are federal jobs and self-employment, including informal work arrangements. For example, if a TANF leaver supplements her income by providing occasional childcare t o a neighbor, the resulting earnings are unlikely t o be reported t o the UI system. In addition, the earnings of Georgians who work in neighboring states are not included in Georgia's UI data base. Therefore, UI data consistently underestimate employment and earnings (especially in interstate labor markets) and the figures contained in this report reflect minimum levels of employment and earnings among former TANF recipients. Second, because of the time required for employer reporting and State processing of UI earnings data, complete data on earnings for any quarter are not available until three quarters later. Therefore, in this report, data on employment in the exit quarter are available for all adult recipients who left TANF during 1997 and 1998. However, post-exit earnings data are only available through the last quarter of 1998. Leavers are considered t o have been employed in a particular quarter if they had reported earnings for that quarter. However, no information is available on wage levels, number of hours worked, or whether employment was continuous. Data on recidivism come from PARIS and SUCCESS files of active TANF recipients. This report includes data on recidivism through the end of 1998. However, the process of capturing data on recidivism did not begin until October, 1997. Consequently, recidivism data for the earliest leavers are not complete. In general, data are organized by quarterly exit cohorts. Seven quarters of follow-up data are available for the first exit cohort (January through March, 1997), but no follow-up data are available yet for the last (October through December, 1998). Overview of TANF Leavers and Outcomes Leaver Characteristics. The Figure 1 characteristics of the adults leaving TANF remained essentially the same Distribution of Leavers by Age over the period from January, 1997 50% through December, 1998. Over 9 6 percent of the leavers were women, 40% and almost all of them were the parents or step parents of the dependent 30% children in their assistance unit. The average age of adult leavers was approximately 30, and about 70% were under the age of 35. (See Figure 1.) 10% 0 1997 Family composition has important 0% lI= implications for employment and self- 18-24 25-34 35-44 45-55 55;ndOlder sufficiency. The number of children in Age Group each assistance unit ranged from 0' t o 12. The average number of dependent children was 1.9, and approximately three-quarters of the leavers had fewer than three children. (See Figure 2.) A majority of the leavers had children under the age of 6. (See Figure 3.) Figure 2 Number of Children in TANF Grant 1 Figure 3 Age of Youngest Child I Number of Children Age Group Characteristics of the 1997 and 1998 adult TANF leavers are summarized in Table 1, below. ' A parent may receive TANF when he or she has a child who is receiving disability payments and is eligible on the basis of income. The disabled child is not included in the grant. Table 1 Characteristics of Adult TANF Leavers by Year Characteristic Number of Leavers Women Average Age White Black Other Minority Average Number of Dependent Children Average Age of Youngest Child 1997 42,094 96.1 % 30.3% 30.6% 67.4% 2.0% 1.8 5.8 J 1998 42,963 96.5% 29.6% 25.0% 73.3% 1.7% 2.0 5.4 Employment. No data are available on reasons for case closure, although why a case closes has implications for the likelihood that an adult leaver will either return t o TANF or have earnings reported t o the State's Unemployment Insurance program. For example, recipients that move outside of Georgia or marry and stay home with their children are unlikely t o appear in either system. Employment rates among adult leavers - both in their exit quarters and in the quarters that follow - have proven t o be highly consistent over time. Table 2 shows employment rates, by quarterly exit cohorts, over a t w o year period. During this period, approximately 65 percent of all leavers were employed during their exit quarter - the quarter in which they left TANF. In subsequent quarters, employment rates declined slightly, leveling off in the range of 57 to 6 0 percent. Employment rates appear t o be unaffected by seasonal variation. Earnings. Average earnings for each exit cohort, across post-exit quarters, are shown in Table 3. These earnings increased substantially over time. For example, among those who left TANF during January through March of 1997, average earnings increased by $1,59 1 over seven post-exit quarters. Two effects are reflected in this increase. First, average earnings increased generally during this time period. For example, average earnings in the first post-exit quarter were $830 higher for the cohort that left TANF during the months of July t o September, 1998 than for those who left during January through March of 1997. This effect is greater than one would expect t o see due t o simple inflation and is probably due t o increasing wage competition or increased hours of work in a tight labor market. Table 3 Average Earnings among Employed Leavers by Post-Exit Quarter But this effect does not account for the entire increase seen. When comparisons are made across the same calendar quarter, it becomes clear that the longer a cohort has been off TANF, the higher its earnings. The shaded cells in Table 3 illustrate this effect. All of these cells contain earnings from the fourth quarter of 1998, so economic conditions are constant across post-exit quarters. However, between the first and the seventh post-exit quarter, average earnings increased by $761. Increased earnings due t o longer time off TANF are probably due t o increased work experience and greater connection t o the labor force among these former recipients. Over time, leavers may work for more hours, higher wages, or both. Recidivism. Recidivism rates are the other side of employment, as those who cannot sustain themselves and their families through employment return to welfare dependency. For those who left TANF during 1997 and 1998, recidivism rates were lowest in the first post-exit quarter and increased over time, leveling off in the range of 12 t o 15 percent. Table 4 Recidivism Rates by Exit Cohort and Post-Exit Quarter Exit Cohort Jan - Mar '97 Apr - Jun '97 Jul - Sep '97 0 c t - Dec '97 Jan - Mar '98 Apr - Jun '98 Jut - Sep '98 NA: Not available. 1 * N A NA 5.3% 6.0% 3.0% 5.7% 7.4% 2"d NA 12.5% 11.7% 10.7% 9.9% 14.3% Post-Exit Quarter 3"' 4"' 5'" 14.1% 13.2% 12.3% 13.7% 13.0% 12.4% 14.2% 14.6% 15.8% 12.2% 14.2% 13.8% 6"' 11.9% 12.8% 7'" 12.1% Outcomes of 1997 Leavers in the Year Following Exit Because a full year of follow-up data on the 42,094 adults who left TANF during 1997 is now available, it is possible t o look closely at their em-ploy- ment and earnings in the first year following exit, and how they relate t o who they are, where they lived, the industries in which they worked, and whether they returned t o TANF. Figure 4 Total UI-Reported Earnings by Post-Exit Quarter rso.~.oool I Seventy-five percent of the adults who left TANF had earnings reported to the Georgia UI system during at least one quarter of the following year. Among those who worked in covered employment, average annual earnings were $8,189. Total reported annual earnings increased steadily over time and totaled $259,020,900. p a s t a Quarter Employment in the exit quarter was strongly predictive of subsequent employment and earnings. Among those with earnings in their exit quarters, 95 percent worked during the following year, compared t o 4 0 percent of those who did not have earnings in their exit quarters. (See Table 5, below.) Table 5 Outcomes of 1997 TANF Leavers by Employment Status at Exit Outcome Percentage of Leavers Had Earnings in Following Year Average Annual Earnings (All Leavers) Average Annual Earnings (Those with Earnings Only) Average Number of Quarters Worked (All) Employed in Exit Quarter Yes No 64.5% 35.5% 94.7% 39.7% $8,521 $1,857 $8,999 3.2 $4,679 .9 Because the follow-up system did not begin to capture recidivism data until October, 1997, recidivism data are not complete for those who left TANF during the first half of 1997. However, among those who left Figure 5 TANF during the period from July through December, 1997, only 20 percent Year 1 Distribution of Employment and Recidivism returned t o TANF at any time in the following year. Those who did return NO WOWNUReturn received benefits for an average of 5 months. Figure 5 shows the relationship between employment and recidivism in ~ e t u wmotk the year following exit. Twenty percent of the leavers neither had reported earnings nor returned t o TANF. On WorklNo Return meturn average, these leavers were older and had older children. (See Table 6.) Whites were disproportionately repre- sented in this group, and very few were employed during the quarter in which they left TANF. In general, it appears that they left TANF for reasons other than employment, such as relocation, marriage, support from other family members, or receipt of disability payments. Table 6 Leaver Characteristics by Employment and Recidivism in the Year Following Exit Characteristic Outcomes in Year Following Exit Employed Not Employed Returned to TANF Did Not Return Returned to TANF Did Not Return Average Age 27.6 29.7 28.4 33.3 Average Number of Children 1.9 1.8 1.7 1.6 Average Age of Youngest Child 4.6 5.5 5.6 6.9 Employment Rate in Exit Quarter 78.7% 81.8% 22.7% 12.8% White Black Other Minority 17.0% 82.3% .7% 27.5% 70.8% 1.7% 28.4% 69.9% 1.7% 40.5% 55.8% 3.7% Note: Data in this table are based on adults who left TANF during the period from July through December, 1997. Sixty percent of all leavers worked during the following year and did not receive benefits at any time during that period, while sixteen percent both worked and received benefits during the year. Outcomes and Demographic Characteristics. Age was associated with both employment and earnings. (See Table 7.) Specifically, employment rates were highest among the youngest leavers and declined steadily with increasing age. Among those age 18 t o 24, 81 percent were employed during the following year, compared with only 26 percent age 55 and older. However, average earnings were highest among those age 25 t o 44. Table 7 Employment and Earnings in the First Year after Exit by Age Group Age Group 18 to 24 Employed 81.3% Returned to TANF* 27.2 Average Annual Earnings of Employed $7,198 25 to 34 &- 77.9% 18.3 $8,627 35 to 44 69.0% 16.0 $8,620 45 to 54 50.7% 11.5 $8,476 55 and Older 26.4% 6.8 $7,736 All Leavers 75.1 % 19.9 $8,189 * Based on those who left during the period from July through December, 1997, only. Differences in outcomes across ethnic groups were also substantial. Both employment and recidivism rates were highest among Black leavers. Average earnings among those who worked were highest among members of other minority groups, and lowest among White leavers. (See Table 8.) Figure 6 Recidivism Rate by Age of Youngest Child and Ethnicity 40%- One would expect t o see an inverse relationship between employment or earnings and recidivism rates. The fact 1%' that that is not the case suggests that other factors have an effect on return 0% Black t o TANF, and that such factors may