E C O N O M I C R E P O R T O F T H E P R E S I D E N T

The 1996 welfare reform law invested an additional $4 billion over 6 yearsto provide more child care assistance for families moving from welfare towork and for other low-income parents. (Child care assistance is discussedfurther below.) The new State Children’s Health Insurance Program providesfunds to help States expand health care coverage of uninsured children, andnew Medicaid rules allow States to expand Medicaid to cover more lowincomefamilies who work, including more two-parent families.Finally, Individual Development Accounts (IDAs) empower low-incomefamilies to save for a first home, to enroll in postsecondary education, or tostart a new business.As a result of welfare reform and the strong economy, by June 1999 thenumber of welfare recipients nationwide had fallen to 6.9 million, 51 percentless than in 1993. That number represents 2.5 percent of the total population,the lowest proportion since 1967. All 50 States met the overall workparticipation requirements of the welfare reform legislation. Twenty-sevenStates were awarded bonus funds for their superior results in reformingwelfare. Reports by the 46 States competing for the bonus indicate that morethan 1.3 million welfare recipients nationwide went to work in the12-month period from October 1997 through September 1998. Retentionrates are also promising: 80 percent of those who got jobs were still working3 months later. States reported an average earnings increase of 23 percent forformer welfare recipients, from $2,088 in the first quarter of employment to$2,571 in the third quarter. Among those remaining on welfare, theproportion working has nearly quadrupled, from 7 percent in 1992 to27 percent in 1998.At least one independent study confirms these conclusions, finding thatalmost 70 percent of welfare leavers said they went off welfare because ofincreased earnings or a new job. When women move to paying jobs, theydevelop the skills needed to produce higher sustainable incomes over theirlifetimes and to reduce the intergenerational cycle of dependency. In addition,the Administration’s initiative to reduce teen pregnancy (Box 5-4) playsa role in breaking the cycle of dependency and increasing the well-being offamilies by reducing the number of children born to teen mothers.Social Security and MedicareSocial Security is a key source of income for most recipients: in 1996 it wasthe main source of income for 66 percent of beneficiaries; it represented atleast 90 percent of income for 30 percent of beneficiaries; it was the solesource of income for 18 percent. Social Security benefits provide 81 percentof total income for those in the lowest fifth of the income distribution of theelderly, and they are the largest single source of income for all but theChapter 5 | 187