An Evaluation of the 1981 AFDC Changes

Pursuant to a congressional request, GAO evaluated changes that the Omnibus Budget Reconciliation Act of 1981 made to the Aid to Families with Dependent Children (AFDC) Program to: (1) estimate the effect of the changes on the national AFDC case load and outlays; (2) determine whether the changes in the treatment of earned income influenced the work effort of either the cases that the act removed from AFDC or the cases that remained; and (3) ascertain the economic well-being of affected AFDC families.

GAO found that state welfare offices administered AFDC, and the Social Security Administration provided partial funding, but eligibility and payment standards varied greatly from state to state. Most of the recipients affected were working and able to remain independent of welfare, but because the act's effects were concentrated on working AFDC recipients, the total case load changed little. However, earners whose grants had been reduced and who were in AFDC a year later experienced substantial real-income losses, including the loss of earnings plus AFDC and food stamps. Those whose AFDC grants were reduced, but not terminated, received an increase in food-stamp benefits. GAO found that wage levels and employment opportunities were at least as important as program incentives for enabling AFDC recipients to gain independence from welfare.