SOCIAL SCIENCE RESEARCH 19, 175-203 (1%))

The Effect of Welfare Guarantees on Children’s

Educational Attainment

AMY C. BUTLER
State University of New York at Bliffulo

This paper addresses the question of whether higher welfare benefit levels help
or hurt poor children in the long run. The effect of the AFDC guarantee on the
number of years of schooling children completed by 1985 is examined with
longitudinal survey data from the Panel Study of Income Dynamics. The findings
indicate that higher AFDC guarantees available to children following the sepa-
ration of their parents are associated with higher educational attainment. The
findings suggest that, rather than creating a negative environment for children,
welfare is used by the family in positive ways as are other resources available
to the family, such as the family’s own income and help from friends and relatives.
The overall effect of the welfare guarantee is due mainly to the impact of the
guarantee on increasing the likelihood that children complete 1 to 4 years of
postsecondary school. D 1990 Academic press. hc.

Underlying many ideological and political arguments both for and

against a generous welfare policy are assumptions about the long-term
effect of welfare on children. An assumption made by advocates of higher
welfare benefits is that we “invest” in the future generation by guar-
anteeing an adequate income for children today. In contrast, others,
most notably George Gilder and Charles Murray, argue that welfare
undermines the work ethic and relieves the poor of responsibility for
their own actions (Murray, 1984; Gilder, 1981). Children learn that failure
is rewarded with government largess; only the chump works hard. Thus,
it would be better, according to those who hold these views, to keep
welfare benefits low (or to eliminate welfare completely) and to thereby
force the poor to finish school, to work, to marry and stay married, and
to limit their family size-in short, to behave in ways which will alleviate
their poverty in the long run. An additional element implicit in many
arguments against liberal welfare policies is that welfare undermines
recipients’ self-esteem; children growing up on welfare do not develop
sufficient ambition and self-confidence and are therefore unlikely to be-

Address correspondence and reprint requests to Amy C. Butler, School of Social Work,
SUNY at Buffalo, Buffalo, NY 14260.
175
0049-089X/90 $3.00
Copyright 0 1990 by Academic Press, Inc.
All rights of reproduction in any form reserved.
176 AMY C. BUTLER

come self-supporting adults. Yet the long-term consequences of welfare

for children have hardly been studied and we therefore do not know
whether relatively generous welfare benefits help or harm children in the
long run. Decisions by state legislators about whether or not to raise
benefit levels in the Aid to Families with Dependent Children (AFDC)
program and debates over national standards for AFDC guarantees would
both benefit from empirically based knowledge on this issue.’
This study explores one aspect of the long-term effect of welfare benefit
levels on children: whether higher welfare benefit levels available to
single-parent families increase or decrease children’s eventual educa-
tional attainment. Children’s educational attainment represents an im-
portant class of outcomes that has been neglected by previous research
on the behavioral effects of welfare. Although the primary purpose of
the AFDC program is to aid poor children, most research on the impact
of welfare policy has focused on the behavior of adults, such as their
labor-force participation, marital decisions, living arrangements, and pro-
gram participation. It is important to broaden the scope of the empirical
research to encompass consequences for children so that we can judge
whether higher or lower benefits would be effective in improving the
quality of their lives. Children’s educational attainment is an important
outcome measure: first, because it represents the cumulative effect of
many childhood experiences which welfare may have influenced; second,
because it is an important predictor of a child’s future economic well-
being: and third. because policy-makers, whatever their political per-
suasion, agree on the value of education. This study focuses on children
in single-parent families once headed by two parents, excluding, because
of limitations of the data, children of unmarried mothers. Thus the study
provides only a partial test of the hypothesis that welfare benefit levels
have an impact on the educational attainment of children in single-parent
families.
I begin with a discussion of the theoretical underpinnings of arguments
that higher welfare benefits help (or hurt) children’s educational attain-
ment. Three theoretical models provide a useful framework for thinking
about the effect of welfare on children and they will help us place the
empirical findings in perspective. The literature on the determinants of
educational attainment and research on the impact of welfare on other
aspects of life will be discussed in this context. Next, I summarize the
existing research on the impact of welfare benefit levels and welfare
receipt on children’s educational performance and attainment. I then test
the hypothesis that the AFDC guarantee has an effect on the educational

I The terms “welfare benefit levels.” “welfare guarantees,” and “AFDC guarantees”
are used here interchangeably to mean the amount of money available from the AFDC
program for a single-parent family with no other source of income.
 WELFARE AND CHILDREN’S EDUCATION 177

attainment of children in single-parent families once headed by two par-

ents, using data from a nationally representative longitudinal survey.
THEORETICAL ISSUES AND EXISTING EMPIRICAL SUPPORT
Model 1: Welfare Is Invested in Children
The first model is derived from the economic literature and posits that
parents want to promote the present and future well-being of their chil-
dren and will use available resources toward this end. This model is
consistent with Becker’s “treatise on the family,” in which parents invest
in their children’s human capital (health and education) because the rate
of return is high and parents will reap economic and psychic rewards
(Becker, 1981). Thus, it follows that poor parents will use the additional
income provided by welfare to promote, among other things, their chil-
dren’s educational attainment. Investing in human capital should be seen
more broadly than merely paying for the direct costs of schooling. In-
vestments in human capital include promoting children’s physical and
psychological well-being which increases their potential for high aca-
demic performance. Higher family income may be used to improve nu-
trition and living conditions. Higher income may make it possible for a
single mother to stay home instead of working outside the home, if she
deems that necessary for her children’s well-being. Higher income may
be used to buy educational material and to pay costs associated with
extracurricular activities, such as Boy and Girl Scout fees. Higher income
will make it less necessary for poor children to drop out of school in
order to help support the family or to care for younger siblings. A version
of this model underlies much of the liberal effort to increase welfare
benefits: if we provide more money to the poor it will be used by the
family in ways that will promote the child’s present and future well-
being.
Researchers have consistently found a positive association between
family income and children’s educational attainment net of other soci-
oeconomic factors (Sewell and Hauser, 1975; Alexander, Eckland, and
Griffin, 1975; Sewell, Hauser, and Wolf, 1980; Jencks, Smith, Acland,
Bane, Cohen, Gintis, Heyns, and Michelson, 1983; Alwin and Thornton,
1984; Hill and Duncan, 1987). Moreover, the lower educational attain-
ment of children in single-parent families has been attributed largely to
the lower incomes in such families (Shaw, 1982; McLanahan, 1985;
Milne, Myers, Rosenthal, and Ginsburg, 1986). However, the association
between family income and children’s education may be spurious; chil-
dren in higher-income families may complete more years of school than
other children because of the higher value their parents place on hard
work and monetary success, not because of the higher family income
per se. If the observed relationship between family income and children’s
educational attainment is entirely due to unmeasured family character-
178 AMY C. BUTLER

istics, then higher welfare guarantees will not promote educational at-
tainment because they provide only money, not the necessary motivation
or values.
Model 2: Welfare Changes the Incentive Structure
Murray (1984) popularized the idea that welfare has altered incentives
in ways that have hurt the poor. By providing welfare to people who
do not work and who are not married, he argues, we reward these
behaviors and thereby increase the probability that they occur. But in
the long run, the ability of a family to escape poverty still requires a
commitment to employment and marriage. Therefore welfare does the
poor a disservice by encouraging them to behave in ways contrary to
their long-term interests. Murray’s argument is consistent with the ar-
gument articulated in the preceding model, in that parents are seen to
behave in ways which promote (they think) their children’s well-being.
Murray’s twist is to suggest that the welfare system causes parents to
misjudge what is in the children’s best interest.
The argument that welfare changes incentives in a way that hurts the
poor in the long run can be applied directly to children’s educational
attainment. Higher welfare benefits decrease the relative returns to
schooling, especially for daughters. The income advantage of getting an
education is less when the dollar value of one of the alternatives to
work-in this case, welfare-is increased. This is particularly true during
the first years of employment in entry-level jobs, where the low wages
may not exceed benefits from a generous welfare policy. This is less
true in later years when workers with educational credentials may be
promoted to positions which pay far more than that which is available
from welfare. Consequently, generous welfare may make education look
less valuable to children and may make them more likely to drop out of
school, even though this is not in their long-term interest.
Higher welfare benefit levels may lower children’s educational attain-
ment indirectly through their effect on the labor-market behavior of the
parents. The Negative Income Tax (NIT) experiments provided fairly
conclusive evidence that higher income guarantees (the amount of money
given a family with no other source of income) decrease the hours people
work (Keeley, Robins, Spiegelman, and West, 1978; Moffitt, 1979; RO-
bins, 1985) (see Burtless (1986) for a review). Compared to people in
the control groups, there was a greater tendency for people subject to
NIT guarantees to leave their jobs, and when out of work, to remain
not working for longer periods of time (Robins et al. 1980). When parents
work less, children are undoubtedly affected in turn, but whether children
are thereby helped or harmed is not known. Working mothers may pro-
vide a positive role model for their children, especially their daughters.
On the other hand, working mothers have less time to teach, nurture,
 WELFARE AND CHILDREN’S EDUCATION 179

and supervise their children. Research on the effect of mothers’ em-

ployment on children’s educational achievement has produced incon-
sistent findings. Some studies have found a negative effect of mothers’
employment on children’s educational achievement and attainment
(Mercy and Steelman, 1982; Krein, 1986; Krein and Beller, 1988), while
other studies have found no effect (Leibowitz, 1977; Sewell et al., 1980;
D’Amico, Haurin, and Mott, 1983; Alwin and Thornton, 1984; Kinard
and Reinherz, 1986). There is some evidence that mothers’ employment
has a positive effect on the educational achievement of black children
in single-parent families (Milne et al., 1986; for a review of the literature
see Heyns, 1982). But even if the research findings were consistent, one
should hesitate to generalize these findings to children whose mothers’
employment decisions are contingent on welfare benefit levels. Thus, it
is by no means obvious whether the indirect effect of welfare benefit
levels on children’s educational attainment through lowering the amount
mothers work is positive or negative.
Higher welfare benefit levels may lower children’s educational attain-
ment indirectly through their effect on the mother’s marital behavior.
Research on the effect of experimental income guarantees and AFDC
guarantees on marriage and female headship indicates that higher guar-
antees may encourage the dissolution of marriages to a modest degree,
discourage remarriage, and increase the proportion of young single moth-
ers who head their own households, rather than living with their parents
(Hannan, Tuma, and Groeneveld, 1977; Tuma, Hannan, and Groeneveld,
1979 (but see Cain [1986] for a critique); Hutchens, 1979; Ellwood and
Bane, 1984). We know that children whose parents separate do not
complete as many years of school as do children whose parents remain
married (Duncan, Featherman, and Duncan, 1972; Shaw, 1982; Mc-
Lanahan, 1985; Krein, 1986; Krein and Beller, 1988), and therefore higher
welfare guarantees may reduce children’s educational attainment by in-
creasing the probability that children live in single-parent families. How-
ever, children whose parents’ marriage is sufficiently unstable to be
affected by the size of the AFDC guarantee may be no worse off if their
parents separate than if they remain together. Peterson and Zill (1986),
for example, find that conflict between parents in intact families is as
detrimental for children as is the separation of the parents, in terms of
depression, antisocial or impulsive behavior, and problems in school.
In summary, more generous welfare benefits lower the incentive for
children to do well in school and lower the incentives for their parents
to work, to marry, and to stay married. The research indicates that
indeed people do work less and there are more single-parent families as
a consequence of higher benefit levels. But we do not know whether
children’s educational attainment is promoted or whether it suffers. The
180 AMYC.BUTLER

supposition that welfare changes the incentive structure so as to cause

children to be worse off in the long run remains an empirical question.
Model 3: Welfare Undermines Self-Esteem and Efficacy
Welfare may reduce children’s educational attainment by undermining
their self-esteem and their sense of control over their lives. This may
come about for two reasons. First, the stigma of being on welfare may
reduce children’s sense of self-worth. Second, the receipt of welfare and
the families’ involvement with the welfare system and its Catch 22 rules
may reduce their sense of control over their lives and create a psycho-
logical dependence on welfare (see Garhnkel and McLanahan (1986: 37-
43) for a review of the literature). Under these conditions, the children
are unlikely to develop the confidence and ambition necessary to excel
at school. This model is derived from psychological theory and can be
seen as a process of learned helplessness, in which people who lose
control over their lives tend to lapse into an acceptance of their condition
(for a summary of this literature see Kane 119871).
The research shows that when welfare guarantees are higher, families
are more likely to receive welfare and to remain on welfare for longer
periods of time (Ashenfelter, 1983; Hutchens, 1981; Plotnick, 1983; Bane
and Ellwood, 1983; O’Neill, Wolf, Bassi, and Hannan, 1984). Therefore,
if welfare creates a psychological dependency, it follows that when wel-
fare guarantees are higher and more families go on welfare, more families
will become dependent on welfare. But based on analysis of three years
of data from the Seattle-Denver NIT experiment, Plant (1984) concludes
that persistent welfare use is due mainly to low earnings received by the
poor, rather than to disincentives to leaving the rolls created by welfare
policy itself. Blank (1986), also using Seattle-Denver NIT data, but
focusing on the control group’s use of AFDC, also found no evidence
that welfare use is self-perpetuating. She concludes that “long spells are
neither created nor lengthened by the use of AFDC itself” (p. 30).
Hill and Ponza (1983), analyzing PSID data, examined the effect of
“welfare dependency” in childhood (defined as a high proportion of
family income derived from welfare) on “welfare dependency” of daugh-
ters and on the number of hours sons work per year during early adult-
hood. The researchers found a positive association for whites, but no
association for blacks. McLanahan (1988), also analyzing the PSID, but
focusing only on daughters’ welfare use, reports similar findings. But
neither employment opportunities, AFDC eligibility criteria, nor the gen-
erosity of state AFDC programs were controlled in either McLanahan’s
or Hill and Ponza’s analyses and these may be important omissions.
Daughters and parents may be more likely to receive welfare benefits
because they live in a state where eligibility criteria are less stringent,
not because welfare receipt in childhood creates attitudes that encourage
 WELFARE AND CHILDREN’S EDUCATION 181

welfare use in adulthood. Likewise, states which offer more generous

AFDC benefits to poor families will attract both parents and daughters
to the program, again causing a spurious relationship between parents’
and daughters’ welfare use. Also, poor local economic conditions may
explain why both parents and children turn to welfare. Thus, it remains
an empirical question whether or not welfare creates intergenerational
welfare dependency.
The impact of welfare on psychological well-being is not always as-
sumed to be negative. Perlman (1960) observes that adequate welfare
benefits may mitigate the crippling impact of poverty on the development
of children’s sense of self. It is poverty, she argues, that creates a sense
of helplessness and hopelessness; adequate welfare can prevent psycho-
logical dependency and promote self-realization by providing a floor of
income security. The guarantee of an income that will cover the costs
of food, clothing, and shelter frees mothers from the constant worry
about whether the rent can be paid or whether the family will run out
of food before the month is over. The income security provided by
welfare allows the mother and children to focus on the future, rather
than being forced to live one day at a time.
The Effects of Welfare on Children’s Educational Attainment:
Existing Evidence
What little we know about the impact of welfare benefit levels on
children’s educational attainment is derived primarily from the somewhat
contradictory findings of a series of Negative Income Tax experiments
that were conducted in the early 1970s in several sites across the country.
Based on analysis of data from the Gary NIT experiment, Maynard and
Murnane (1979) report that the availability of income guarantees pro-
duced higher reading scores for fourth and sixth graders, compared to
controls. However, the experimental treatments were also associated
with lower academic grades for ninth and tenth graders and with more
absences among ninth graders. Maller (1977), reporting on the results of
the New Jersey-Pennsylvania NIT experiment, found that the children
in the experimental treatment groups were considerably more likely to
complete high school than were children in the control group. In the
North Carolina and Iowa NIT experiments, income guarantees were
associated with improved school performance for North Carolina ele-
mentary school students, but no such association was found for ele-
mentary school students in Iowa or for high-school students at either
experimental site (Maynard, 1977).
There are several reasons to expect that welfare will have a stronger
impact on children’s educational attainment than the NIT treatments did.
First, welfare guarantees may cushion the impact of the family’s most
severe financial crises, which, even if brief, may leave lasting scars on
182 AMY C. BUTLER

children. The NIT studies may have missed the full effect of income
guarantees in mitigating the negative impact of financial crises because
the NIT families’ financial crises may not have coincided with the 3-
year experiments. Second, the effect of welfare guarantees on children’s
educational attainment may be greatest for families who need financial
assistance year after year. AFDC benefits can be received for longer
than the 3-year experimental treatments and thus may have a greater
impact on school performance. Third, the effect of welfare guarantees
on children’s school performance is likely to have a long-term, cumulative
effect, because poverty-induced difficulties in lower grades (which wel-
fare may mitigate or exacerbate) may create more severe performance
problems in higher grades. If this is the case, then the effect of welfare
guarantees may not be large enough to measure until the end of the
children’s educational career. Finally, if relatively generous welfare guar-
antees lead mothers to spurn work and remarriage in favor of welfare
receipt and present children with similar alternatives for their own future,
then the full impact of the guarantees on children’s educational attainment
will not be apparent in short-term experiments. There are a number of
reasons, therefore, to examine the effect of welfare benefit levels on
educational attainment directly, rather than relying on the results of the
NIT experiments.
Hill and Duncan (1987) examined the impact of welfare use on chil-
dren’s educational attainment and found that, after controlling for family
assets and nonwelfare income, the receipt of welfare had a negative
effect on daughters’ (but not sons’) educational attainment. The amount
of income received from welfare, however, did not affect children’s
educational attainment, which suggests that being on welfare has a neg-
ative effect on educational attainment, but whether the family receives
small or large amounts of welfare does not matter. Using the same data,
McLanahan (1985) found that, after controlling for total family income,
white children whose families received welfare were less likely than other
white children to be enrolled in school at age 17 and to graduate from
high school. However, black children whose families received welfare
were just as likely as other black children to be enrolled in school at
age 17 and were more likely to graduate from high school. But as Hill
and Duncan (1987) observe, the problem with using welfare receipt or
amount of welfare received as an independent variable (as opposed to
the welfare guarantee, which is a policy parameter) is that people who
use welfare may be different from those who do not in ways that are
not measured. Relevant unmeasured differences include differences
among families in intelligence, talent, motivation, and values. The ab-
sence of these variables from the model may produce a spurious cor-
relation between welfare receipt and the educational attainment of
children.
 WELFARE AND CHILDREN’S EDUCATION 183

In summary, existing research provides contradictory information on

how welfare affects children’s education attainment. But each of the
studies has serious limitations, either because short-term experimental
treatments are an imperfect proxy for welfare, or because welfare receipt
as an independent variable confounds the effect of welfare with the effect
of unmeasured family characteristics which are correlated with welfare
receipt. The present study avoids these pitfalls by examining the effect
of the size of the AFDC guarantee on children’s educational attainment.
The AFDC guarantee is a policy parameter and we are, therefore, asking
whether or not a relatively generous welfare policy promotes the edu-
cational attainment of children. This study estimates the overall effect
of welfare on educational attainment and, more specifically, on the grade
levels at which the guarantee has its largest impact.
METHOD
The Sample
The data for this study come from the Panel Study of Income Dynamics
(PSID), a longitudinal, nationally representative survey that covers an
18-year period, from 1968 through 1985.* The PSID data are supple-
mented with state AFDC guarantees from 1970 through 1982,3 county
unemployment rates,4 the 1979 median county income for two-parent
families with children under 18 years of age,’ and the 1980 state high-
school and college graduation rates for persons 18-24 years of age.6 The
data were analyzed using the OSIRIS software package.
The sample consists of 574 children who satisfied the following con-
ditions: (1) the child’s mother was divorced, separated, or widowed
between 1968 and 1982,’ (2) the child had reached age 19 by 1985, (3)
’ The PSID dataset is available from the Inter-University Consortium for Political and
Social Research. P.O. Box 1248. Ann Arbor, MI 48106.
’ Sources: Standards for Basic Needs. 1969-1976, U.S. DHEW, and Characteristics of
Sfate Plans for AFDC, annual 1977-84. U.S. DHHS.
’ The PSID includes data on county unemployment rate, but it is a bracketed variable.
More precise data was supplemented from the following sources: (1) 1970. county un-
employment rate at time of Census, from Census of the Population 1970, U.S. Bureau of
the Census; (2) 1975. yearly average county unemployment rate, from Table A, State and
Metropolitan Area Data Book, 1982, U.S. Bureau of the Census; (3) 1976-1979. 198l-
1984. yearly average county unemployment rate, from Employment and Unemploymenr
in States and Local Areas, annual, U.S. BLS; (4) 1980, county unemployment rate at time
of Census, from Table 176, from General Social and Economic Characteristics, 1980 Census
of the Population, U.S. Bureau of the Census.
’ Source: Table 180. from U.S. Bureau of the Census, 1980 Censas of the Population,
General Social and Economic Characteristics.
b Source. Table 239, from U.S. Bureau of the Census. 1980 Censas of the Population,
General Sociul and Economic Characteristics.
’ Children of never-married women were not included because they became eligible for
welfare before the earliest year for which PSID data was available. Therefore. measures
184 AMY C. BUTLER

the child was no older than 16 when the mother became a single parent,
and (4) the child was from a family whose income the year before the
dissolution of the marriage was less than four times the poverty level.
The purpose of the fourth condition is to target the analysis on those
children who were most likely to be affected by the AFDC guarantee.
No single-parent family in the PSID with a preseparation family income
of more than four times the poverty level received AFDC during the
period under study; therefore, the bias introduced by excluding them
should be minimal.’
The sample includes both children whose families did and did not
receive AFDC because children may be affected by the size of the
guarantee whether or not they actually received benefits. The size of the
guarantee determines not just how much welfare a family receives; it
also affects whether the family receives benefits at all (Ashenfelter, 1983).
Higher guarantees both attract eligible families to the AFDC program
and increase the probability that a family with some income of their own
will be eligible for benefits. A mother, for example, may choose to
remarry instead of apply for welfare, because she considers the available
benefits inadequate to support her family. In this case, the size of the
guarantee has had an impact on the children, although the family receives
no welfare. A working poor family may be ineligible for welfare and thus
receive no benefits, whereas an identical family with a higher available
guarantee would be eligible for welfare. Again, the size of the guarantee
has had an impact on both working poor families, even though only one
of the families receives welfare. Therefore, the sample must include
children who may have needed welfare but did not receive it, to cover
all children affected by the guarantee. The sample used in this study
undoubtedly retains some children whose families would not receive
welfare under any existing guarantee, either because of personal pref-
erence of because they would not be eligible even under the most gen-
erous of current welfare plans. These children are not affected by the
guarantee, and their presence in the sample will dilute the overall effect
of the guarantee.
Dependent Variable
The dependent variable, educational attainment, is measured by the
number of years of schooling the child completed by 1985. It is examined

of family characteristics before the family was eligible cannot be obtained. In addition,
we do not know what states the children lived during their first years of life, and con-
sequently, we do not know the welfare guarantee available to them during those years.
* The income selection criterion must be independent of the size of the guarantee. Thus,
the criterion used is income before the family became headed by a single parent, because
the income of single-parent families may have been affected by the size of the guarantee.
 WELFARE AND CHILDREN’S EDUCATION 185

first as a continuous variable and later as a series of dichotomous vari-

ables. Children who received their GED but no further education are
considered to have completed 12 years of school. The means and standard
deviations of educational attainment and all other varibles used in the
analyses are shown in Table 1.
Independent Variable
The AFDC guarantee varies considerably across states and across time
and therefore will be included as a continuous independent variable. The
AFDC guarantee is measured by taking an average of the state maximum
monthly AFDC benefit available to a family of four during the 5 years
following the dissolution of the parents’ marriage. The values for the 5-
year average AFDC guarantee depend on the year in which the children’s
parents separated and on the state(s) in which the children lived during
the 5 years following the parents’ separation. The figures have been
adjusted for inflation using the consumer price index and are reported
in 1988 dollars. As Table 1 shows, the average guarantee available to
the families during the 5 years following the separation of the parents
is $646 per month for a family of four, in 1988 dollars. (The real value
of the AFDC guarantee has been declining since the early 1970s and
few states now provide a guarantee this high.)
It is important to stress that the independent variable is not whether
or not a family received welfare, but rather a policy variable representing
the relative generosity of the state welfare program during a 5-year pe-
riod. Whether or not a family actually receives welfare and how much
they receive depends in part on their employment income, other sources
of income, family size, and living arrangements, all of which may be
influenced by the AFDC guarantee. In a study of welfare using survey
data rather than experimental manipulation, policy parameters are the
only truly exogenous welfare variables.
The AFDC guarantee for a family of four is used for families of all
sizes for several reasons. First, information on maximum benefits for
families of different sizes is not available for all years covered in this
study. Second, families change in size, perhaps as much as several times
a year, making it impossible to calculate the AFDC dollars available to
each family for each year. Third, changes in family size may themselves
be a result of the amount of welfare available to the family. Therefore,
if actual benefits available to the family are used as a measure, then the
advantage of using a policy variable as the independent variable (it is
exogenous) is lost because the measure confounds the policy parameter
with the behavior of the family affected by the policy. Instead of thinking
of the AFDC guarantee in terms of dollars available to the family, it is
useful to think of the guarantee as the standard of living the state is
willing to guarantee for single-parent families. Indeed, state maximum
 TABLE 1
Names, Descriptions, Means, and Standard Deviations of Variables Used in the Analyses of Children in Single-Parent Families E

Standard
Variable name Description Mean deviation

Educational attainment Highest grade of school the child had completed by 12.01 1.71
1985.
Grade level completed I = yes
9th .974 .I6
10th .934 .25
11th .846 .36
12th ,740 .44
13th Sample limited to children age 20 and older .263 .44
14th Sample limited to children age 21 and older ,197 .40
15th Sample limited to children age 22 and older ,111 .3l
16th Sample limited to children age 23 and older .I08 .3l 0
AFDC guarantee Five year average of the maximum AFDC benefit $645.66 213.93
available per month for a family of four. measured
in 1988 dollars.
Age in 1985 Age of child in 1985; dummy variables.
26-32 .24 .43
23-25 .24 .43
21-22 .23 .42
19-20 .28 .45
Family characteristics
Mother’s education Highest grade mother had completed at the time of IO.81 2.35
the separation.
Family income/needs Family income divided by the poverty standard. 2.01 1.03
measured the year preceding the separation of the
child’s parents.
Number of siblings Number of siblings measured at the time of the par- 3.58 2.21
ents’ separation
 Hours mother worked Number of hours the mother worked the year pre- 832.80 851.83
ceding the separation.
Age of youngest child Age of the youngest child in the family at the time 6.87 3.73
of the separation.
Race Family’s race; dummy variables.
White .70 .46
Black .25 .44
Other .05 .22
Community characteristics
County unemployment rate County unemployment rate measured when the child 7.23% 3.03
was 16 years old (BLS).
Median family income 1979 median county income for two-parent families $22.796.83 4114.53
with children under age 18, from the 1980 Census.
State high-school graduation rate Percentage of 18-24 year olds who were high-school 76.19% 3.50
graduates in 1980, by state, from the 1980 Census.
State college graduation rate Percentage of 18-24 year olds who were college 6.42% 1.28
graduates in 1980, by state, from the 1980 Census.
Friends and relatives who can help
in an emergency
Time Dummy variables: see Appendix, Ql and Q2.
No one close by .24 .43
Only one person close by .16 .37
Two or more people close by .60 .49
Time; someone far away 1 = yes; see Appendix. Q3. .66 .47
Money (dummies) Dummy variables; see Appendix, Q4 and Q4a.
Can’t get money .38 .48
Can borrow money .48 SO
Can have money as gift .14 .35
Family helped friends and relatives
Spent time 1 = yes; see Appendix. Q5. .29 .46
Provided money 1 = yes; see Appendix, Q6. .24 .43
188 AMY C. BUTLER

benefits increase with family size, not so much to reward or to punish

additional children as to allow families to maintain a given minimum
standard of living. Therefore, the higher the guarantee for a family of
four, the higher the benefits received by participating families of all sizes.
Other researchers have also found the AFDC guarantee for a family of
four to be the single most useful indicator of welfare benefits.’
Control Variables
Family Characteristics
Family characteristics included as controls are mother’s education,
number of siblings, the family’s income relative to their needs,” the
number of hours the mother worked outside the home, race, and the
age of the youngest child in the family. With the exception of race, the
family characteristics are all potentially influenced by the size of the
AFDC guarantee: the size of the guarantee may affect the family’s income
and whether the mother gets additional education, how much she works,
and whether she has additional children; indeed, these are some of the
ways through which the guarantee may ultimately affect children’s ed-
ucational attainment. The indicators of family characteristics, therefore,
are measured the year before the family became headed by a single
parent and thus before the family became eligible for AFDC benefits.
Dummies for child’s age in 1985 are also included as controls because
a child’s educational attainment by 1985 will depend on how old the
child was at the time.
Resource Networks
A second set of control variables consists of resources available to
the family from friends and relatives and resources provided by the family
to nonfamily members-either money or services. These indicators rep-
resent both resources available to the family from sources other than
work and welfare, and drains on the family income and on the mother’s
time available for work and for her children. The size and strength of
resource networks may vary regionally and may be correlated with the
size of the AFDC guarantee. If we can make the assumption that regional
variation in resource networks is due primarily to cultural and historical
factors and is not caused by the size of the AFDC guarantee, then we
should control for resource networks when we evaluate the impact of
the AFDC guarantee on children’s educational attainment.
Seven questions were asked in the 1980 wave of the PSID survey

9 See Ellwood and Bane (1984: Appendix B) and Hutchens (1981).

” The income/needs variable was constructed by the PSID staff. Needs were calculated
based on family size and composition. The measure of needs is similar, although not
identical, to the federal poverty line (See pp. DI-7. Economic Behavior Program (1984)).
 WELFARE AND CHILDREN’S EDUCATION 189

which measure whether resources were available from friends and rel-
atives and whether resources were given to friends and relatives (see
the Appendix for the exact wording of the questions). Note that the
questions refer to the availability of help from other people, not whether
the family actually received help from others. The reason for this dis-
tinction is similar to the reason for using measures of the amount of
welfare available rather than the amount of welfare received. Measures
of the utilization of resources from outside the family confound their
availability with the family’s actual need: thus, children in families who
receive help from others may complete fewer years of school, not because
resources were available, but because the families were so poor as to
require assistance.
The resource questions were only asked in the 1980 wave of the PSID
surveys and analyses using the resource network controls will therefore
be limited to children whose parents had separated before 1980, in order
that the measures of resources do not include resources available from
the absent father’s friends and relatives, except in cases where those
people continue to maintain close ties to the family after the separation.
In addition, only children who turned 19 after 1980 are included in these
analyses, so that the resource variables will more accurately reflect the
strength of resource networks that existed when the children lived at
home and had not yet completed their education. Because the inclusion
of the resource network control variables (I) requires that we make the
assumption that the AFDC guarantee is not a causal factor in determining
regional variation in the strength of resource networks, and (2) reduces
the sample size, analyses will be run separately with and without the
resource network controls.
Community Characteristics
Community factors may influence children’s educational attainment in
four broad ways. First. community factors, such as high unemployment
or low wages, may have an impact on children’s educational attainment
through their effect on the level and stability of family income. Second,
community factors such as the socioeconomic status and aspirations of
classmates and other children in the neighborhood may have a positive
effect on children’s educational aspirations and consequently on their
educational attainment. There is some evidence that attending school
with high socioeconomic classmates and growing up in high socioeco-
nomic neighborhoods may raise children’s educational attainment (Mayer
and Jencks, 1989). Third, communities may vary in their demand for
workers with specific educational credentials, which in turn may affect
the years of schooling children complete. Fourth, communities may vary
in their support for education at particular levels. For example, variation
in the accessibility of junior and 4-year colleges (their proximity, tuition
190 AMY C. BUTLER

costs, and the selectivity of their admissions requirements) may in turn

affect the proportion of children who attend college. The amount of
resources available for elementary and secondary education may influ-
ence the quality of teaching and school facilities, and ultimately the
children’s educational attainment. However, research on the effects of
schools on children’s educational achievement and attainment shows that
differences in school resources (e.g., per pupil expenditures, teacher
training and experience, class size) account for little consistent difference
in outcomes for children.” Nevertheless, educationally relevant com-
munity factors may be associated with the AFDC guarantee and should
therefore be controlled. Four control variables are included in this study
to reflect potentially relevant community influences.
First, the county unemployment rate is included as a control variable.
The county unemployment rate may influence children’s education in
several ways. A high county unemployment rate reflects a greater prob-
ability that the mother will be unemployed, as well as a smaller prob-
ability that the mother will remarry an employed man who can help
support the family, both of which lead to a greater likelihood that the
children will live in poverty. In addition, a high unemployment rate may
discourage children from continuing in school by creating many examples
of people who have finished high school or college and yet have no job.
On the other hand, high unemployment rates may lead teenagers to stay
in school. since, as Duncan observes (1974), there are fewer job oppor-
tunities for unskilled and inexperienced teenaged workers. During the
1970s and the early 1980s high unemployment rates were particularly
prevalent in the industrial states which have higher than average AFDC
guarantees, and it is therefore important to control for the effects of
unemployment on educational attainment so as not to attribute these
effects to the AFDC guarantee. County unemployment rates are obtained
from the Bureau of Labor Statistics and measured when the child is 16-
years-old, a time when he or she may be considering whether or not to
drop out of school.
The second control variable for community factors is the 1979 median
county income for two-parent families with children under 18 years of
age. This variable is obtained from published Census data and is intended
to control for variations in the socioeconomic status of children who
may attend the same schools as the children in single-parent families,
but who are not directly affected by the size of the AFDC guarantee.
The median county income is also a control for public expenditures for
education because it is an indicator of the tax base on which the level
of school expenditures depends.

‘I For discussion and debate on the impact of schools on educational attainment. see
Jencks et al. (1972). Mosteller and Moynihan (1972). and Sewell, Hauser. and Featherman
(1976).
 WELFARE AND CHILDREN’S EDUCATION 191

The last two controls for community factors are the percentages of
1% and 24-year-olds in each state who are high-school graduates and
who are college graduates, obtained from the 1980 Census. The state
high-school and college graduation rates control for the academic
achievement of other children in the community who may influence the
child’s own aspirations and achievement. They are also a proxy for the
quality of the local schools, the accessibility of community colleges and
4-year colleges, and for other local economic and cultural factors which
affect the educational attainment of children in the community. Ideally
we would want measures of state high-school and college graduation
rates for children in two-parent families who were never eligible for
welfare and who therefore were never influenced by welfare benefit
levels. If indeed the AFDC guarantee affects children’s educational at-
tainment, then controlling for percentages of all young adults who are
high-school and college graduates will bias the estimate of the effect of
the AFDC guarantee towards zero. The inclusion of the Census rates as
controls, therefore, provides a conservative test of the hypothesis that
AFDC guarantees affect children’s educational attainment.
As an additional check on whether the estimated effect of the AFDC
guarantee on children’s educational attainment is “real” or spurious, the
analyses will be run for both children in single-parent families and for
children in intact families. If the research design has effectively controlled
for correlated factors, we should find that the AFDC guarantee has no
effect on the educational attainment of children in intact families, because
these children have never been eligible for AFDC benefits by virtue of
having grown up with two parents present in the household. Children in
intact families are defined here as children in families in which there was
no divorce, separation, or death of either parent before the youngest
child in the family had reached 17 years of age.”
Method of Analysis
In the first stage of the analysis, Ordinary Least Squares (OLS) regres-
sion is used to estimate the effect of the AFDC guarantee on years of

” Only children from intact families in which the average family income for 1975 and
1976 was less than four times the poverty level were included in the sample. Under certain
conditions, children in two-parent families are eligible for AFDC-UP. Approximately 3%
of the children in intact families in the PSID sample received AFDC benefits and these
children were dropped from the analyses. The AFDC guarantee was measured for children
in intact families using the average S-year maximum AFDC benefit available to an eligible
family when the child was I2 to I6 years old. Family income/needs was averaged for the
years the child was I I and I2 years old. The hours the mother worked is an average for
the years 1975 and 1976. Mother’s educational attainment and number of siblings were
measured in 1976. The age of the youngest child at the time of the separation is not included
because it has no meaning for intact families.
192 AMY C. BUTLER

education children had completed by 1985. I then explore which levels

of educational attainment are most strongly influenced by the size of the
AFDC guarantee. To do this, I estimate the effect of the guarantee on
a series of dichotomous dependent variables, using Maximum Likelihood
Estimation with a logistic response model.
RESULTS
Description of the Sample
The children in the sample ranged from 2- to 16-years-old at the time
of their parents’ separation. Their mothers ranged in age from 19 to 54
years at the time of the separation, but few of the mothers were very
young; only 5.9% of the children had mothers who were younger than
25 at the time of the separation. Most mothers (60%) had not remarried
within 5 years after separation.
Forty-four percent of the children in the sample received AFDC after
their families became single-parent families. More than half of the chil-
dren (59%) who received AFDC benefits did so for 2 years or less.
Presumably welfare was used to carry their families through the initial
financial crisis following separation; indeed, more than half of the children
(62%) who received AFDC got it within 1 year after their parents sep-
arated. Although more than half of the children did not receive AFDC
benefits after their parents separated, they still may have been affected
by the AFDC guarantee, since, as discussed previously, the size of the
guarantee itself is an important determinant of whether or not a family
receives AFDC benefits or pursues other options.
About one-fifth of the children had been poor before their families
became female-headed; 16% of the children had mothers with a ninth-
grade education or less; 28% of the children had five or more siblings.
On the other hand, 24% of the children had family incomes that were
three to four times the poverty level before separation. 17% of the chil-
dren had mothers with some college education, and 35% of the children
had two or fewer siblings. The sample, therefore, contains children from
a wide range of family circumstances; by no means are the children
predominantly lower class in origin.
Almost 70% of the children are white, nonHispanic, 25% are black,
and the remaining 5% are mostly Hispanic. Two-thirds of the children’s
mothers worked the year before the separation, but only about 12%
worked 40 hours or more per week for the entire year. The county
unemployment rate when the child was 16 ranged from I to 20%, but
fell largely in the 5-10% range.
impact of AFDC on Years of Education
The results of OLS regression show that the AFDC guarantee has a
positive and statistically significant effect on the educational attainment
 WELFARE AND CHILDREN’S EDUCATION 193

of children from single-parent families. Table 2, column 1, shows that

an increase of $100 per month in the AFDC guarantee for a family of
four (in 1988 dollars) is associated with a predicted increase of 0.095
years of completed education after age, family characteristics, and com-
munity characteristics have been controlled (p s .05). Mother’s education
and family preseparation income/needs are associated with higher ed-
ucational attainment for the child. Neither number of siblings, number
of hours the mother worked before the separation, race, age of the
youngest child in the family at the time of the separation, nor any of

TABLE 2
Nonstandardized Regression Coefficients and Their Standard Errors for Children in
Single-Parent Families and Children in Intact Families; The Dependent Variable Is Edu-
cational Attainment in 1985

Single parent Two parents

Variable b SE b SE

Constant 10.06 10.84

AFDC guarantee (in $lOO/month) .095* (.045) ,002 (.034)
Age in 1985 (dummies)
26-32 .89*** (.22) 1.18*** C.16)
23-25 .89*** (33 .15*** t.16)
21-22 .29 (.19) .42* C.18)
19-20 - - - -
Family characteristics
Mother’s education .25*** (.03) .17*** t.03
Family income/needs .18* C.08) .36*** (.06)
Number of siblings .Ol (.03) - .08*** C.02)
Hours mother worked (in 1000
h/v) .02 (.W - .06 (.W
Age of youngest child .Ol C.02) n.a.
Race (dummies)
White - - - -
Black -.04 (.17) .09 t.18)
Other -.26 C.32) .60** C.22)
Community characteristics
County unemployment rate - .Ol (.03) - .Ol (.02)
(in 1% units)
Median family income (in .02 C.02) - .Ol (.Ol)
$lOOO/yr.)
State high-school graduation -.04 (.03) - .03 (.W
rate (in 1% units)
State college graduation rate .08 C.06) 15*** (.04)
(in 1% units)
N 574 1,483
P .2345 .1711
Adj. RZ .2139 .1632

*P s .05; ** p s .Ol; *** p s .OOl.

194 AMY C. BUTLER

the community characteristics has a statistically significant impact on

children’s educational attainment.
The significance of the age controls shows, not surprisingly, that chil-
dren 23 years old or older in 1985 have completed more years of education
than have children age 19 to 22 years. This suggests that we may be
unable to observe the full effect of the welfare guarantee for children 22
years old and younger because many of these children had not completed
their education by 1985. To explore the impact on the analysis of the
dependent variable’s truncated nature, the effect of the AFDC guarantee
was allowed to vary for each of the four age groups (interaction terms
for the guarantee with three of the four age dummies were added to the
model). The positive effect of the guarantee is strongest for the oldest
children and virtually zero for the youngest age group.13 This finding
suggests that the full effect of AFDC on educational attainment is not
seen until children reach their mid-20s.
In contrast to the positive and statistically significant effect on children
in single-parent families, the size of the AFDC guarantee has virtually
no effect on children from intact families after controlling for age, family
characteristics, and community characteristics (see Table 2, column 2).
The absence of an effect is expected, since children in two-parent families
are rarely eligible for AFDC, and it strengthens our confidence that the
estimated effect of the AFDC guarantee on children in single-parent
families is not due to uncontrolled factors.
When we control for the size and nature of the family’s resource
network, the sample size is reduced to 372 children because the questions
about resources were only asked in 1980. The children in this subsample
ranged in age from 19 to 24 years in 1985. The effect of the AFDC
guarantee without the resource network controls is .090 (p = .065),
increasing to .157 when the controls are added (p G .Ol). This increase
indicates that AFDC guarantees are higher in areas in which families
have less effective resource networks (either they have fewer people to
count on, they are more likely to have helped other people, or both).
Interpretations of these data must be made cautiously, because we cannot
be sure about the direction of causality. It appears, however, that welfare
may compensate to some extent for the failure of families’ social net-
works to provide relief during hard times.
As shown in Table 3, the more people on whom families can count
in an emergency, the further children go in school. Children in single-
parent families with only one person outside the family who can be
counted on to help complete an additional one-third of a year of school-
ing, on the average, than children whose families have no one upon

I3 The coefficients (and standard errors) are as follows: age 19-20: - .017(.064): age 21-
22: .101(.086); age 23-25: .086(.083); age 26-32: .296(.081).
 WELFARE AND CHILDREN’S EDUCATION 195

TABLE 3
Nonstandardized Regression Coefficients and Their Standard Errors for Children in
Single-Parent Families Who Turned 19 between 1980 and 1985; The Dependent Variable
Is Educational Attainment in 1985

Variable b SE b SE

Constant 9.23 10.52

AFDC guarantee (in $lOO/month) ,090 (.049) .157** (.051)
Age in 1985 (dummies)
22-24 .71** (.22) .g1*** C.22)
21 .89** (25) .90*** (241
20 .55* C.23) .43 (22)
19 - - - -
Family characteristics
Mother’s education .19*** (.04) .17*** (.04)
Family income/needs .08 C.08) .I4 (.09)
Number of siblings - .02 (.04) .02 (.04)
Hours mother worked (in -.04 (.I@ .03 (.I@
1000 hrs/yr)
Age of youngest child .04 C.02) .02 (.@a
Race (dummies)
White - - - -
Black .40* (.19) .34 (.I9)
Other -.31 (.39) -.14 (.39)
Community characteristics
County unemployment rate .Ol C.03) .Ol (.03)
(in 1% units)
Median family income (in - .02 (.02) - .03 C.02)
WMO/yr)
State high-school graduation - .Ol (.03) .03 (.03)
rate (in 1% units)
State college graduation rate .oo (46) .02 (.06)
(in 1% units)
Friends and relatives who can help in emergency
Time (dummies)
No one close by - -
Only one person close by .33 (.25)
Two or more people close by
Time; someone far away .20 (.16)
Money (dummies)
Can’t get money - -
Can borrow money -.lO (.I5)
Can have money as a gift .22 (.24)
Family helped friends and relatives
Spent time - .44** C.16)
Provided money - .35* C.18)
N 372 372
R? .1985 .2654
Adj. R’ .1648 .2191
* p s .05; ** p < .01: *** p s ,001.
196 AMY C. BUTLER

whom they can count (this coefficient is not statistically significant at

p G .05). Children in families with two or more people upon whom they
can count complete an additional 7/lOths of a year of schooling than do
children whose families have no one on whom to count p s .OOl).
However, neither having a friend or relative far away who is willing to
come and help, the availability of a loan, nor access to money that does
not have to be repaid has a significant effect on children’s educational
attainment. These may represent resources that families are more re-
luctant to draw upon because they constitute a greater sacrifice on the
part of the giver. Finally, children in families that lent several hundred
dollars or more or who spent a lot of time helping a friend or relative
do not go as far in school as do other children; they lose 0.35 years (p
s .05) and 0.44 years (p d .Ol), respectively. The increase in explained
variance due the seven family resource network variables is a substantial
6.7 percentage points (p d .OOl), accounted for almost entirely by the
three statistically significant variables. Taken together, the data indicate
that friends and relatives who live nearby and who can provide help to
the family but do not require considerable help in return are an important
resource for children in single-parent families. The availability of re-
sources, whether from relatives and friends or from welfare, appears to
have a positive impact on children’s educational attainment.
Impact of AFDC on the Completion of Specific Grade Levels
We next examine the grade levels on which the effect of the guarantee
is strongest. This is done by estimating the effect of the AFDC guarantee
on a series of dichotomous dependent variables: whether or not children
completed the 9th through the 16th grades by 1985. Table 4 presents the
estimated logits for the effect of the AFDC guarantee on the completion
of each grade level. The analyses are run using age, family characteristics,
and community characteristics as controls. The controls for resource
networks are excluded because their inclusion would limit the sample
size and because we cannot be sure that the size and nature of resource
networks are not affected in any way by the amount of money available
from welfare.
As shown in Table 4, an increase of $100 in the monthly AFDC guar-
antee is associated with an increase in the log odds that children in
single-parent families complete 13 through 16 years of school. These
effects are statistically significant at p s .05 or better. When the analyses
are run for children in intact families, the effect of the AFDC guarantee
on the completion of 13 through 16 years of school is virtually zero, as
we would expect.
The effect of the AFDC guarantee on the completion of lower grade
levels, however, is less clear-cut. The effect of the AFDC guarantee on
children from single-parent families is positive for the completion of the
 WELFARE AND CHILDREN’S EDUCATION 197

TABLE 4
MLE Estimates and Standard Errors for the Effects of a $100 Increase in the AFDC
Guarantee on the Log Odds of Completing the 9th through 16th Grades, for Children in
Single-Parent Families and Children in Intact Families

Single parent Two parents

Grade level
completed Logit SE n Logit SE n

9 .872* (.380) 576 ,198 (.309) 1483

10 ,107 (.161) 576 .458** (.169) 1483
11 - ,012 (.093) 574 ,033 (. 103) 1483
12 - .033 (.075) 574 ,015 (.073) 1483
13” .197* (.089) 489 ,008 (.045) 1391
14h .223* (.105) 418 .012 ( ,049) 1292
15 .581*** (.173) 350 - .054 (.057) 1184
16“ .595** (.216) 286 - .046 (.064) 1082

’ Sample limited to children age 20 and older in 1985.

b Sample limited to children age 21 and older in 1985.
’ Sample limited to children age 22 and older in 1985.
d Sample limited to children age 23 and older in 1985.
* p s .05; ** p s .Ol; *** p s ,001.

9th grade (p s .05), but it has no significant effect on the completion of

the 10th through 12th grades. And whereas the AFDC guarantee should
have no effect on children in intact families, we find that its effect on
the completion of the 10th grade is positive (p s .Ol). The presence of
significant results for children in intact families where none were expected
undermine confidence in the conclusion that AFDC has a positive impact
on the completion of these lowest grade levels for children from single-
parent families. Whatever is accounting for the positive effect on the
completion of the 10th grade for children in intact families may also be
responsible for the effect on the completion of the 9th grade for children
in single-parent families.
In Table 5, statistically significant effects are translated from changes
in log odds into changes in the percent of children completing a given
grade. This serves to illustrate more clearly the magnitude of the esti-
mated effects of the guarantee on children’s educational attainment. In
1985, 97.4% of the children completed the 9th grade; an increase in $100
in the guarantee (in 1988 dollars) is estimated to increase the percent of
children completing the 9th grade by 1.5 percentage points to 98.9%.
The impact of a $100 increase in the guarantee is estimated to increase
the percent of children completing the 13th through 16th grades by 4.0,
3.8, 7.1, and 7.2 percentage points, respectively. Because the standard
errors of the estimates are relatively high, 95% confidence intervals were
calculated and are displayed in Table 5. The bottom limits of the con-
fidence intervals represent the smallest increase in completion rates we
 198 AMY C. BUTLER

TABLE 5
Predicted Increase in Educational Attainment for Children from Single-Parent Families
When the Monthly AFDC Guarantee for a Family of Four Is Raised by $100 (in 1988
Dollars)

Predicted completion 95% confidence

Grade Completion rate with $100 increase Percentage interval for
completed rate in the guarantee difference percentage difference

9th 97.4% 98.9% 1.5 0.3- 2.1

13th 26.3% 30.3% 4.0 0.4- 7.8
14th 19.7% 23.5% 3.8 0.3- 7.7
15th 11.1% 18.2% 7.1 2.6-12.8
16th 10.8% 18.0% 7.2 I .8-14.3

can expect from an $100 per month increase in the AFDC guarantee.
These very conservative estimates range from a 0.3 percentage point
increase for the 9th and 14th grades to a 2.6 percentage increase for the
completion of the 15th grade.
DISCUSSION AND POLICY IMPLICATIONS
This study has examined the effect of the AFDC guarantee on the
educational attainment of children whose families became female-headed
due to the separation of the parents. The results indicate that the effect
of the guarantee on children’s educational attainment is positive: a $100
increase in the AFDC guarantee for a family of four (in 1988 dollars) is
associated with an average increase of approximately l/lOth of a year
of schooling for each child. Welfare has a similar effect on children’s
educational attainment as do other sources of support: the amount of
welfare available to the family, family income relative to their needs,
and the existence of friends and relatives who can be counted on to
spend time helping the family in an emergency all have a positive effect
on children’s educational attainment. Similarly, when the friends and
relatives drain the family’s resources, the children’s educational attain-
ment suffers. Previous research showing that higher family income is
associated with higher children’s educational attainment has not been
able to demonstrate whether the income per se has a positive effect or
whether correlated factors such as motivation, talent, and values are
responsible for the association. The consistency of these findings indi-
cates that regular and dependable resources-whether earned income,
welfare, or the services of friends and relatives who live nearby-increase
the single parent’s ability to provide children with a home environment
which enables the children to complete more years of school.
The overall effect of the AFDC guarantee is mainly due to its impact
on increasing the log odds that children complete one to four years of
postsecondary schooling. It is unlikely that the AFDC guarantee has a
direct effect in increasing the probability that children complete several
 WELFARE AND CHILDREN’S EDUCATlON 199

years of college-i.e., that it helps pay their college expenses. Children

of college age are no longer eligible for welfare as a dependent child,
although higher guarantees may allow young adults more financial free-
dom if their mothers and younger siblings who continue to receive welfare
are supported with higher guarantees. The positive relationship between
the welfare guarantee and the completion of 13 and 16 years of school
is more likely due to the impact of welfare on the children’s lives im-
mediately following the parents’ separation. These are the years for which
the guarantee is measured and during which children are most likely to
receive welfare. The alleviation of financial hardships during this period
and the increase in the choices available to the family because of the
availability of welfare-e.g., whether or not the mother remarries and
how much she works-is likely to have an impact on the child’s life that
can be perceived years later.
These findings are important not so much because they suggest that
we can increase children’s educational attainment by increasing welfare
benefit levels; increases in educational attainment of the magnitude likely
to be brought about by an increase in welfare can probably be produced
more efficiently using other methods of intervention. The importance of
these findings is that they demonstrate that more generous welfare has
helped children rather than hurt them. These findings are consistent with
the theoretical model derived from economics that parents will use their
current resources (of which welfare may be a part) to invest in their
children’s future well-being. These findings are not consistent with what
we would expect if the welfare system were to alter the incentive struc-
ture for the poor, causing parents to make poor choices that hurt the
well-being of their children in the long run. Nor do the findings support
a model that posits that generous welfare traps families, creates a de-
pendency on welfare, and produces an intergenerational cycle of poverty
and failure.
The sample is limited to children in single-parent families due to divorce
or separation, or to the death of the father. Children born to never-
married mothers were not included in the sample and therefore gener-
alizations must not be made from these data to children in those cir-
cumstances. Higher welfare benefit levels may have a different effect on
the educational attainment of children with never-married mothers than
on children whose mothers were once married. Indeed, it is also possible
that some children studied here were hurt by higher benefit levels, even
though, in general, higher AFDC guarantees had a beneficial effect on
children’s educational attainment. Since many different kinds of families
are poor and they are poor for different reasons, it is quite likely that
generous welfare benefits may be more beneficial to some families than
to others. These questions merit further research.
Other areas for further research include investigating the role of in-
tervening variables that will allow us to interpret the relationship between
 AMY C. BUTLER

the AFDC guarantee and children’s educational attainment. The positive

effect of AFDC guarantees on children’s educational attainment may be
due mainly to increased family income. The positive effect of AFDC
guarantees may operate primarily through lowering labor force partici-
pation of mothers and allowing them to spend more time with their
children, or through increasing the probability that unhappy and perhaps
violent marriages are dissolved. Further research is also needed which
explores the effects of the AFDC guarantee on other aspects of children’s
lives, such as their physical and mental health and their subsequent
behavior as adults with respect to marriage, fertility, and labor force
participation.
CONCLUSION
The effectiveness of the Aid to Families with Dependent Children
program in improving the lives of children has been challenged by ar-
guments that welfare rewards failure and promotes dependency. Further
doubt as to the efficacy of welfare has been raised in light of recent
empirical evidence that welfare decreases the amount parents work,
increases the number of single-parent families, and increases the number
of families on welfare and the length of time they stay on welfare. In
the absence of empirical evidence that higher benefit levels will be ben-
eficial for poor children, efforts to increase benefit levels to keep up with
inflation, if not to increase their real value, have been undermined. Thus,
the importance of research on the impact of welfare on various aspects
of children’s well-being cannot be overemphasized.
This study addressed the question of whether we help or harm children
in the long run through the provision of generous welfare benefits. The
analysis focused on the impact of AFDC guarantees on the educational
attainment of children from single-parent families once headed by two
parents. The analyses included controls for family and community factors
as well as controls for resources available to the family from friends and
relatives, all of which are potentially correlated with the AFDC guar-
antee. Comparison analyses were run using children in two-parent fam-
ilies to check for possible remaining bias due to uncontrolled factors.
The findings provide no support for fears that higher benefit levels will
harm children in the long run. On the contrary, these findings suggest
that children reach adulthood with slightly higher levels of education
when AFDC guarantees are more generous.
APPENDIX
The following questions were asked in the 1980 wave of the PSID
survey and were used to create the family resource variables:
Ql. Suppose there were a serious emergency in your household. Is there
a friend or relative living nearby who you could call on to spend a lot
of time helping out?
 WELFARE AND CHILDREN’S EDUCATION 201

Q2. If that person were not available, is there someone else you could
call on?
Q3. Do you have a relative or friend who doesn’t live near you who
could come to help you in an emergency?
Q4. Suppose in an emergency you needed several hundred dollars more
than you had available or could borrow from an institution. Would you
ask either a friend or a relative for it?
Q4a. (if yes) Would this money be a loan or a gift?
QS. People sometimes have emergencies and need help from others-
either time or money. Let’s start by talking about time. In the last five
years have you (or anyone living with you) spent a lot of time helping
either a relative or friend in an emergency?
Q6. In the last five years have you helped out either a friend or relative
in an emergency by giving or loaning them several hundred dollars or
more?
REFERENCES
Alexander, K., Eckland, B., and Griffin, L. (1975). “The Wisconsin model of socio-
economic achievement: A replication,” American Journal of Sociology 81, 324-342.
Alwin, D., and Thornton, A. (1984). “Family origins and the schooling process; Early
versus late influence of parental characteristics,” American Sociological Review 49,
784-802.
Ashenfelter, 0. (1983). “Determining participation in income-tested social programs,”
Journal of American Statistical Association 78, 517-525.
Bane, M., and Ellwood, D. (1983). “The dynamics of dependency: The routes to self-
sufficiency,” Final Report to the US Department of Health and Human Services,
Harvard University Press, Cambridge, MA.
Becker, G. (1981). A Treatise on the Family, Harvard University Press, Cambridge, MA.
Blank, R. (1986). “How Important is Welfare Dependence?“, Institute for Research on
Poverty Discussion Paper No. 821-86.
Burtless, G. (1986). “The work response to a guaranteed income: A survey of experimental
evidence,” m Lessons from the Income Maintenance Experiments (A. Munnell, Ed.),
Federal Reserve Bank of Boston Conference Series.
Cain, G. (1986). “The income maintenance experiments and the issues of marital stability
and family composition,” in Lessons from the Income Maintenance Experiments (A.
Munnell, Ed.), Federal Reserve Bank of Boston Conference Series.
Coleman, J., Campbell, E., Hobson, C., McPartland, J., Mood, A., Weinfeld, F.. and
York, R. (1966). Equality of Educational Opportunity, Office of Education. US De-
partment of HEW, Washington, DC.
D’Amico, R., Haurin, R., and Mott, F. (1983). “The effects of mothers’ employment on
adolescent and early adult outcomes of young men and women,” in Children of
Working Parents: Experiences and Outcomes (C. Hayes and S. Kamerman. Eds.),
National Academy Press, Washington, DC.
Duncan, G. (1974). “Educational attainment,” in Five Thousand American Families-
Patterns of Economic Progress: An Analysis of the First Five Years of the Panel
Study of Income Dynamics, Vol. 1, Institute for Social Research, Ann Arbor, MI.
Duncan, O., Featherman, D., and Duncan, B. (1972). Socioeconomic Background and
Achievement, Seminar, New York.
Economic Behavior Program (1984). User Guide to the Panel Study of Income Dynamics,
202 AMY C. BUTLER

Inter-University Consortium for Political and Social Research. Institute for Social
Research, Ann Arbor, MI.
Ellwood, D., and Bane, M. (1984). “The impact of AFDC on family structure and living
arrangements,” Working Paper prepared for the US Department of Health and Human
Services under Grant No. 92A-82.
Garfinkel, I., and McLanahan, S. (1986). Single Mothers and Their Children; A New
American Dilemma, The Urban Institute Press. Washington, DC.
Gilder, G. (1981). Wealth and Poverty, Basic Books. New York.
Hannan, M., Tuma, N.. and Groeneveld. L. (1977). “Income and marital events: Evidence
from an income maintenance experiment,” American Journal of Sociology 82, 1186-
1210.
Heyns, B. (1982). “The influence of parents’ work on children’s school achievement.” in
Families That Work: Children in a Changing World (S. Kamerman and C. Hayes,
Eds.), National Academy Press, Washington, DC.
Hill, M., and Ponza, M. (1983). “Intergenerational transmission of poverty: Does welfare
dependency beget dependency?,” a paper prepared for the Southern Economic As-
sociation Meetings.
Hill, M., and Duncan, G. (1987). “Parental family income and the socioeconomic attainment
of children,” Social Science Research 16, 39-73.
Hutchens. R. (1979). “Welfare, remarriage, and marital search,” American Economic
Review 69, 369-379.
Hutchens, R. (1981). “Entry and exit transitions in a government transfer program: The
case of AFDC,” Journal of Human Resources 16, 217-237.
Jencks. C., Smith, M., Acland, H., Bane. M.. Cohen, D., Gintis, H., Heyns, B.. and
Michelson, S. (1972). Inequality: A Reassessment of the Effects of Family and School-
ing in America, Basic Books, New York.
Jencks. C.. and Brown, M. (1975). “Effects of high schools on their students,” Harvard
Educational Review 45. 273-324.
Jencks, C.. Crouse, J., and Meuser, P. (1983). “The Wisconsin model of status attainment:
A national replication with improved measures of ability and aspiration,” Sociology
of Education 56, 3-19.
Kane, T. (1987). “Giving back control: Long-term poverty amd motivation,” Social Service
Review 61, 405-419.
Keeley, M.. Robins. P., Spiegelman, R., and West, R. (1978). “The estimation of labor
supply models using experimental data,” American Economic Review 68, 874-887.
Kinard, E.. and Reinherz. H. (1986). “Effects of marital disruption on children’s school
aptitude and achievement,” Journal of Marriage and the Family 48, 285-293.
Krein, S. (1986). “Growing up in a single parent family: The effect on education and
earnings of young men.” Family Relations 35, 161-168.
Krein. S., and Belier. A. (1988). “Educational attainment of children from single-parent
families: Differences by exposure, gender, and race,” Demography 25, 221-234.
Leibowitz, A. (1977). “Parental inputs and children’s achievement,” Journal of Human
Resources 12, 242-251.
Mailer. C. (1977). “The educational and labor supply responses of young adults on the
urban graduated work incentive experiment, ” in The New Jersey Income Maintenance
Experiment, Vol. II: Labor Supply Response (H. Watts and A. Rees, Eds.), Academic
Press. New York.
Mayer, S., and Jencks, C. (1989). “Growing up in poor neighborhoods: How much does
it matter?,” Science 243, 1141-1145.
Maynard, R. (1977). “The effects of the rural income maintenance experiment on the
school performance of children,” American Economic Review 67, 370-375.
Maynard, R.. and Murnane, R. (1979). “The effects of a negative income tax on school
performance: Results of an experiment.” Journal of Human Resources 14, 463-476.
 WELFARE AND CHILDREN’S EDUCATION 203

McLanahan, S. (1985). “Family structure and the reproduction of poverty,” American

Journal of Sociology 90, 873-901.
McLanahan, S. (1988). “Family structure and dependency: Early transitions to female
household headship,” Demography 25, 1-16.
Mercy, J., and Steelman, L. (1982). “Familial influence on the intellectual attainment of
children,” American Sociological Review 47, 532-542.
Milne, A., Myers, D., Rosenthal, A., and Ginsburg, A. (1986). “Single parents, working
mothers, and the educational achievement of school children,” Sociology of Education
59, 125-139.
Moffitt, R. (1979). “The labor supply response in the Gary experiment,” Journal of Human
Resources 14, 477-487.
Mosteller. F., and Moynihan, D. (1972). On Equality of Educational Opportunity, Random
House, New York.
Murray, C. (1984). Losing Ground: American Social Policy, 1950-1980, Basic Books, New
York.
O’Neill, J., Wolf, D., Bassi, L.. and Hannan, M. (1984). “An analysis of time on welfare,”
Report prepared for the US Department of Health and Human Services.
Perlman, H. (1960). “Are we creating dependency?,” Social Service Review 34, 323-333.
Peterson, J., and Zill, N. (1986). “Marital disruption, parent-child relationships, and be-
havior problems in children,” Journal of Marriage and the Family 48, 295-307.
Plant, M. (1984). “An empirical analysis of welfare dependence,” American Economic
Review 74, 673-684.
Plotnick. R. (1983). “Turnover in the AFDC population: An event history analysis,” Journal
of Human Resources 18, 65-81.
Robins, P. (1985). “A comparison of the labor supply findings from the four negative
income tax experiments,” Journal of Human Resources 20, 567-582.
Robins, P., Tuma, N., and Yaeger, K. (1980). “Effects of SIME/DIME on changes in
employment status,” Journal of Human Resources 15, 545-573.
Sewell, W., and Hauser, R. (1975). Education, Occupation, and Earnings: Achievement
in the Early Career, Academic Press, New York.
Sewell, W., Hauser, R., and Featherman, D. (1976). Schooling and Achievement in Amer-
ican Society, Academic Press, New York.
Sewell, W.. Hauser. R., and Wolf, W. (1980). “Sex, schooling, and occupational status,”
American Journal of Sociology 86, 551-583.
Shaw, L. (1982). “High school completion for young women; Effects of low income and
living with a single parent,” Journal of Family Issues 3, 147-163.
Tuma, N., Hannan, M., and Groeneveld, L. (1979). “Dynamic analysis of event histories,”
American Journal of Sociology 84, 820-854.
U.S. Bureau of Labor Statistics. Employment and Unemployment in States and Local
Areas, annual (in microfiche).
U.S. Bureau of the Census. U.S. Census of the Population, 1970, Government Printing
Office, Washington, DC.
U.S. Bureau of the Census. Census of the Population 1980, Characteristics of the Popu-
lation, General Social and Economic Characteristics, Government Printing Ofice,
Washington. DC.
U.S. Bureau of the Census. State and Metropolitan Area Data Book, 1982, Government
Printing Office, Washington, DC.
U.S. Department of Health, Education, and Welfare. Standards for Basic Needs, 1969-
1976. Government Printing Office, Washington, DC.
U.S. Department of Health and Human Services. Characteristics of State Plans for AFDC,
Annual, 1977-1982, Government Printing Office, Washington, DC.