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

Abstract

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.