Turning Welfare into a Work Support

Six-Year Impacts on Parents and Children from the Minnesota Family Investment Program

| Lisa Gennetian, Cynthia Miller, Jared Smith

The Minnesota Family Investment Program (MFIP) originated, in 1994, as a new vision of a welfare system that would encourage work, reduce reliance on public assistance, and reduce poverty. The program differed from the existing Aid to Families with Dependent Children (AFDC) system in two key ways: It included financial incentives to “make work pay” by allowing families to keep more of their welfare benefit when they worked, and it required longer-term welfare recipients to work or participate in employment services.

This report updates the MFIP story in two ways. First, it examines whether the program’s effects held up in the longer term, through six years after study entry (earlier studies reported on effects after three years). A primary question of interest is whether MFIP, after it effectively ended in its original form in 1998, provided families with a permanent advantage, increasing their employment or self-sufficiency in the long term, or whether its effects faded after the program ended. Second, the report presents new findings on MFIP’s effects on outcomes that were not available or that could not be reliably measured at the three-year point, such as school records data to measure children’s school achievement. Results are presented separately for single-parent families and for two-parent families. 

Key Findings

  • For the full sample of single-parent families, MFIP increased employment, earnings, welfare receipt, and income up through Year 4 of the follow-up period, after which MFIP’s effects on economic outcomes dissipated. In two-parent families, through Year 4 of the follow-up period, MFIP reduced employment among second earners, usually women; however, the reduction in family earnings was offset by higher welfare benefits, resulting in no effects on family income.
  • MFIP’s economic effects persisted up until Year 6 for several of the most disadvantaged groups of single parents, including those with little employment history, long-term welfare receipt, and no high school diploma or General Educational Development (GED) certificate and those with a combination of these characteristics.
  • Among the full sample of single-parent families, MFIP had no overall effect on the elementary school achievement of very young children, but, in line with results for parents, positive effects did occur for several subgroups of young children for whom data are available — notably children of long-term recipients and of the most disadvantaged families. The program had no effect on elementary school achievement of young children in two-parent families.
  • By Year 6, marriage rates were similar for MFIP and AFDC single-parent families overall, but the small positive effect MFIP had at the three-year point did persist for some subgroups of single-parent families. For two-parent families, MFIP’s effects on divorce varied by the prior welfare history of the two-parent family, with small reductions occurring among recipient families and an opposite pattern occurring among newer applicants, leading to no overall effect.

By using welfare payments to supplement the low earnings of welfare recipients who took jobs, Minnesota was able to increase employment, income, and children’s school performance in the three-year period during which the MFIP program operated. Encouragingly, these efforts may persist even after the program ended for the most disadvantaged, who would have been less likely to work in the absence of MFIP. However, to achieve these gains, Minnesota spent somewhat more than it would have under the AFDC welfare system.