Do Welfare Sanctions Help or Hurt the Poor? Estimating the Causal Effect of Sanctioning on Client Earnings

This article examines the effect of financial sanctions for noncompliance on the earnings of TANF clients. Current research on TANF sanctioning is descriptive, and few studies estimate the effect of sanctions on client outcomes. To estimate the causal effect of sanctioning, we utilize longitudinal data from Florida and a difference-in-difference propensity-score matching estimator. We compare the growth in earnings of sanctioned clients to a comparable sample of nonsanctioned clients four quarters after exiting TANF and find that sanctioning has a statistically significant negative effect on earnings among TANF clients. The effect is consistent across racial groups, larger among clients with at least 12 years of schooling, and generally increases with the frequency of sanctioning. The finding that sanctioned clients exhibit significantly lower growth in earnings than similar nonsanctioned clients suggests that sanctioning may serve to undermine TANF’s goals of reducing welfare use and improving earnings in severely disadvantaged families. Personal Responsibility and Work Opportunity Reconciliation Ac The t of 1996 ðPRWORAÞ fulfilled President Bill Clinton’s promise to “endwelfare as we know it” ðNoble 1998, 127Þ. PRWORA abolished themain cash assistance program for low-income families, Aid to Families with Dependent Children ðAFDCÞ, which was used mostly by single mothers and had been in place since the Social Security Act of 1935. In its place, the 1996 law created the Temporary Assistance for Needy Families ðTANFÞ program, a block grant that allows states to use public funds in a variety of ways beyond providing cash assistance. The new TANF program included several key policy meaSocial Service Review (December 2013). © 2013 by The University of Chicago. All rights reserved. 0037-7961/2013/8704-0002$10.00