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Friday, September 01, 2006

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Welfare Reform 10 Years Later

A decade and a half after Midwest states began experimenting with welfare reform, and ten years after President Bill Clinton signed landmark legislation fulfilling his 1992 campaign pledge to “end welfare as we know it,” welfare rolls in most Midwest states are a fraction of their early-1990s peak.

As the law intended, large numbers of people have moved from welfare to work, and countless others who might once have applied for government assistance instead have focused on finding jobs or are relying on family and friends. Large majorities of those who have made the transition to work, though financially better off than before, remain in poverty; they have joined the much larger population of the working poor. Meanwhile, some of those who remain on the rolls face barriers, from mental illness and substance addiction to lack of education, that severely limit their prospects for sustained employment and advancement. Finally, a number of individuals are neither formally employed nor receiving public assistance; little is known about their well-being.

Federal policies guiding welfare and workforce development could do more to help all of these groups. But the recent reauthorization of the welfare reform law largely sidesteps these concerns.

The 1996 legislation, passed by a Republican-led Congress and signed by Clinton, replaced a New Deal-era entitlement with Temporary Assistance to Needy Families (TANF). States were given federal block grants and the authority to design their own programs with only a few federal mandates, including time limits on cash assistance and the obligation to more forcefully move recipients into employment.

Originally set to expire in 2002, the law was extended thirteen times as Congress could not agree on revisions. Finally, in February of this year, Congress folded a reauthorized welfare measure into a budget reconciliation bill. In June the Department of Health and Human Services promulgated new regulations for states to implement the law.

The Joyce Foundation has invested $9.4 million in research following the experiences of Midwest welfare families since 1996. In 2002, at the outset of Congressional deliberation on reauthorization, Joyce summarized the findings to date in Welfare to Work: What Have We Learned? Since then, Joyce has funded continuing research (see list at end of article). Several of the lessons from the 2002 report have continued to hold. Among the findings: Welfare caseloads declined dramatically in most Midwest states.

Perhaps the most spectacular decline has come in Illinois, where the caseload as of 2004 was 35,660, just 17 percent of the 208,646 state residents on the rolls in 1994, shortly after the state began serious efforts to curb welfare receipt. Most Midwest states experienced similar, if less dramatic, declines even through an economic down turn. As University of Michigan researchers Sheldon Danziger and Rucker Johnson wrote in December 2004, “Welfare was so thoroughly reformed that it is no longer a countercyclical program—despite the recent recession, the national welfare caseload changed little between March 2001 and September 2003.” However, they note, in some states, notably Illinois and Indiana, caseloads did increase in response to the recession.

Most people who left welfare went to work. Many took jobs that were part-time or lasted only a few months. Here too, the finding holds—though as wageshave stagnated and employment growth stalled or reversed, jobholding has leveled off or even dropped slightly. Mark Courtney and Amy Dworsky found that, among a sample of TANF applicants from Milwaukee County, the percentage who worked at any time during the year peaked at nearly 79 percent in 1999, but then steadily declined to a low of 59.5 percent in 2003.

Many families who have moved from welfare to work remain poor because they earn low wages. In general, families who have moved from welfare to work are better off than those who remain on the rolls. But in all states, most former recipients still remain poor, and wages have stagnated after generally rising through the first few years of welfare reform. The Illinois Family Study surveyed TANF applicants and found that in 2002, 89 percent of those who were working and no longer on the rolls still lived under the poverty line. Working respondents in one Michigan study earned a median wage of $6.66 (in 2003 dollars) in fall 1997. That median rose 25 percent over the next four years, to $8.35 an hour (a level that leaves a full-time worker with three children below the poverty line), and then stayed level through fall 2003.

Health problems, child care, lack of education, and other problems prevent some welfare recipients from getting jobs, and make it hard for others to stay employed. In the study by Courtney and Dworsky, a large majority of Milwaukee County TANF applicants who were interviewed three times between 1999 and 2002 reported facing at least one of seven barriers to employment each time they were interviewed; lack of education and mental health problems were the most common problems. Research showed that participants with any barriers had a significantly worse chance of being employed than participants without those barriers. Michigan’sDanziger comments, “If a woman has an illness such as asthma or depression, these problems are episodic. She may be holding down a job, then have a relapse which leads to job loss.”

Many families continue to rely on food stamps, Medicaid, and other government assistance to get by. Virtually all Midwest states committed to “make work pay” by providing supports to low-income working families, and in some cases making it easier for them to access child care, health coverage for working adults and their children, and other services. In Cuyahoga County, Ohio, a forthcoming report from MDRC notes that caseloads for Medicaid, food stamps, and (to a lesser extent) child care benefits rose even as TANF receipt shrank.

These findings suggest that in one sense welfare reform was a success, in that the rolls dropped so dramatically and so many of those previously dependent upon public assistance took jobs. But large-scale poverty reduction, never an explicit goal of welfare reform, has not resulted: the overwhelming majorities of those who moved from welfare to work remain poor, and most of them have churned through low-wage jobs and periods of unemployment. The percentage of the TANF applicants in Milwaukee County who were employed in all four quarters of a calendar year peaked in 2000, at 36.5; by 2003, 30.9 percent worked all four quarters. Mark Courtney, lead author of that study, states, “Welfare offices were not up to the task of helping the vast majority of clients walking through the door to become stably employed, let alone economically self-sufficient.”

All the studies, meanwhile, have observed a sharp increase in the numbers of former assistance recipients who are now neither receiving TANF nor working. Danziger and Johnson write, “In most years from 1975 through 2000, about 12 percent of less-educated single mothers had no earnings and no cash welfare; this number increased to 19.5 percent in 2003.” In the Illinois Family Study, the percentage of the sample neither working nor receiving TANF rose from 17 in 1999-2000 to 43 in 2003.

The 2006 reauthorization seems to have taken little heed of these findings about continuing poverty or barriers to work. To the surprise of many who had followed the issue, the debate largely retraced ground covered in the mid-1990s. Margy Waller, project director at the Center for Community Change and a top adviser on welfare issues in the Clinton administration, says that the discussion in Congress “was really about work requirements for people who are still getting checks. There was no debate or public conversation about how the rest of the block grant was being used.”

Waller and others argue that the changes show no appreciation of how TANF had evolved from a program emphasizing cash assistance to one largely dedicated to supporting low-wage working families through various benefits and services. Minnesota journalist Dave Hage bemoans an opportunity missed: “We had 50 experiments in 50 states and a lot of nice research,” Hage says. “We learned a lot about what works. And near as I can tell, the new rules Congress adopted have no grounding whatsoever in the empirical results of the experiment.”

Under the original law, states had little trouble meeting mandated percentages for work participation, because caseloads were falling so rapidly. The reauthorized law tightens loopholes and maintains participation mandates. This will challenge states where caseloads have declined and are holding steady. Courtney points out: “A state like Wisconsin, which has worked so hard to put people to work and where the residual caseload is very low and made up of hard-to-employ people, could fare much worse than a state that hasn’t done as well. The states where the residual caseload is larger will find it easier to meet the rates.”

Federal regulations issued under the new law sharply limit which activities states can count toward the participation rates. Fewer education activities are permitted, and the regulations limit how long substance abuse and mental health treatment can be counted as a work activity.

This frustrates front-line administrators such as Wisconsin Secretary of Workforce Development Roberta Gassman. “We believe in the importance of work, that the best social program is a good-paying job,” Gassman says. “But at the same time, we have to assist those who need help with challenges such as domestic violence, alcohol and drug issues, mental health issues, literacy, or very, very weak education and work history backgrounds.” Many experts worry that states will be forced to choose allowable activities that do little to advance recipients’ long-term prospects, and forego activities that do help but cannot be counted toward the federal requirements.

“Most states now face a more difficult context than they did in 1996,” says Mark Greenberg of the Center for American Progress, on leave from the Center for Law and Social Policy. “They begin without a surplus of resources, with less attention from governors and other political leaders, and with less flexibility under the law.” Moreover, he notes, “the new law creates strong incentives to simply cut assistance, whether or not families get jobs or remain in poverty.”

But Greenberg and others assert that even with these new constraints, states need to strive to resume the progress of the late 1990s. “The pressures to engage more people in activities can represent an opportunity to reexamine program approaches and focus on those activities that can most effectively help families enter sustainable employment,” he says.

Joyce grantees CLASP, the Center on Budget and Policy Priorities, and the National Governors Association’s Center for Best Practices have developed detailed technical assistance materials for helping states implement the new requirements.

Waller laments that the new legislation “doesn’t reflect a deep understanding of the world of low-wage work and people who are facing barriers in getting jobs.” Even so, she argues, states still retain considerable flexibility in running their programs.

“If they want to, they can continue to provide fairly significant work supports to low-wage workers.”

Ways to do this, Waller adds, might include paying small wage stipends to individuals already working but struggling to stay on the job. Another option for most states is to refer many more participants into vocational training, which is allowable for up to 12 months, or to support transitional jobs programs.

Despite the challenges going forward, the welfare reform experience thus far, argues Dave Hage, has been anything but a waste. “In the first six or seven years of the welfare overhaul after 1996,” he says, “we learned a great deal about what works—what encourages families to leave public assistance and get jobs, what helps them find good jobs, what leads to better family outcomes.” Again, it now falls to the states to make the most of their options. Foundations, researchers, and advocates can help by identifying and evaluating strategies that offer the greatest promise of helping working families and poor families with the most serious barriers to employment.

Joyce-Funded Research on Welfare Reform


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