Economic Conditions and Welfare Reform edited by Sheldon H. Danziger, Kalamazoo, Michigan: W.E. Upjohn Institute for Employment Research, 1999, 321 pp. + vii, ISBN 0-88099-199-2.

This volume of papers by some of the best labour economists in the US could hardly be more timely. Just when the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) is coming up for its five-year Congressional reauthorization and when the five-year lifetime limits on Temporary Assistance to Needy Families (TANF) are almost due, the American economy has begun to slow down. Whether the unexpectedly large declines in the U.S. welfare rolls during the 1990s can be sustained during a recession is anyone’s guess, but these authors use the evidence available as of November 1998 to provide an educated one. The outlook is not sanguine. Three guiding questions structure the book. Chapters in the first part consider why caseloads are falling, a trend that preceded the actual 1996 welfare reform in the United States. The second section has two papers asking what happens to those who do leave welfare. Most go to work, but do not escape poverty. The final set of papers asks how the states are responding to their newly devolved responsibilities. Economic conditions affect all three of these issues, and the contributions assess the likely impact of rising unemployment and other economic factors on caseloads, recipients, and state policy. Several observations about the volume as a whole are in order. First, the authors are meticulous in noting the limitations of their methodologies, never mistaking speculation for fact. They forthrightly posit the assumptions underlying their projected impacts of a changing business cycle, including the inadequacy of the unemployment rate as a measure of labour demand, and indicate the direction of bias in their estimates. Magnitudes of predicted effects are conservatively understated, and many chapters address the same question with several specifications, lag structures, measurement periods, or data sets. Even if the predictions are tentative, comparisons of models and methods make the conclusions more reliable, trustworthy, and useful to policy makers aiming to “reform welfare reform.” Second, the admitted limitations of the available evidence are serious. This collection represents one of the earliest attempts to assess welfare reform empirically. Hardly two years had passed since PRWORA, although some states received earlier waivers similar to welfare reform. In some studies, pre-1996 data were the only ones available. In others, only sub-sets of welfare recipients or unrepresentative AFDC exits could be examined. As Wallace and Blank’s chapter notes, “estimates that use historical evidence on the AFDC program are probably unreliable. This is particularly true with regard to macroeconomic effects.” Recently enacted time limits, hard sanctions, diversion, and state budget constraints will all make it harder to return to TANF during the next recession than in earlier downturns. Finally, in the absence of a national effort to evaluate the course of welfare reform systematically across all fifty states, the relative success of various program designs will be difficult to estimate. Nevertheless, these economists expertly answer the three questions posed to them about the likely impacts of an economic downturn on caseloads, recipients, and policies. First, few dispute the prediction that caseloads will rise in the next recession. They only differ over how much. Much of Part One is devoted to reconciling different estimates of the relative impacts of macroeconomic and welfare reform effects on past caseloads and projecting them into the future. Irrespective of control variables considered, both the Council of Economic Advisors and Rebecca Blank have found stronger program effects than Ziliak and colleagues who, by modeling the dynamics differently, attribute most of the caseload trends to unemployment and scarcely none to program changes. Bartik and Eberts also show that caseloads are sensitive to job loss and a changing industry …