Washington's New Poor Law

The nation's political leaders are declaring welfare "reform" a resounding success. By welfare "reform" they mean the repeal of Aid to Families with Dependent Children [AFDC], the nation's major entitlement program for poor families, and its replacement with a program of time-limited, temporary assistance. Hence the name, Temporary Assistance to Needy Families [TANF]. As evidence of success officials cite dramatically reduced welfare caseloads and increased numbers of welfare recipients taking jobs.

If removing people from the rolls was the primary aim of the legislation, then indeed welfare reform is a success, although the strong economy probably has as much--or more--to do with reduced rolls as welfare repeal. But if real welfare reform means greater self-sufficiency and upward mobility for those who graduate from welfare to work, then its "success" is highly dubious.

Evidence from numerous state follow-up studies paints a far less sanguine picture from those of the policy elites. Most states have been using sanctions for rule infractions much more aggressively than they had in the past and many have been discouraging families from even applying for welfare in the first place. This suggests that a significant proportion of those who left the rolls (or were deterred from them in the first place) may have fallen into deeper poverty. Deterrence was the hallmark of the poor laws that preceded modern social security programs.

Deepening Poverty Despite Economic Growth

Indeed, the first few years of welfare "reform" have been correlated with disturbing rises in several poverty and inequality indices, despite a dip in the overall poverty rate. Here are some of the findings from several different studies and official sources:

Poor families are poorer than they were before welfare repeal. The average amount by which the incomes of poor families fell below the poverty line was $245 greater per family member in 1998 than in 1995.

Poverty rates among children in single-mother families were particularly striking: 55 percent of such children under six lived in poverty in 1998. The figures were even higher for black children--60 percent; and Hispanic children--67 percent.

While the average income of the richest fifth of the population rose substantially between 1989 (the last year before the recession of the 1990s) and 1998, the average income of the poorest fifth of the population registered no increase at all. Their share remained at only 3.6 percent between 1993 and 1998: the share going to the richest fifth increased from 43.8 to 49.2 percent.

A 1999 survey of 26 large cities by the U. S. Conference of Mayors found that the demand for emergency food assistance increased 18 percent over the previous year and the need for emergency shelter rose 12 percent. Most expected the demand for emergency food and shelter to increase in the year ahead. The pattern of increasing need was repeated in numerous studies conducted across the country in earlier years.

Second Harvest, the nation's largest distributor of donated food to emergency food providers projected a shortfall from 1997 to 2002 (due to cuts in the food stamp program and growing needs) of 24.5 billion tons of food or the equivalent of three meals a day for 3.24 million low-income people for an entire year. To make up for this loss, they estimated their collection and distribution activities would have to expand by more than 425 percent over their 1995 capacity and be maintained at this expanded level throughout the six-year period.

The Persisting Jobs Gap

Despite the lowest unemployment rate in 30 years, a significant jobs gap persists.

In January 2000, while the overall unemployment rate was 4.0 percent, 13.3 million workers (9.2 percent of the labor force) were either officially unemployed, working part-time because they couldn't find full-time jobs, or wanting jobs but not looking for a variety of reasons. These include not expecting to find work, or a lack of child care.

Ninety-two percent of 34 cities surveyed in 1997 reported that there were not enough low-skilled jobs to meet the federal work requirements of the welfare reform law. In 1998, when the official unemployment rate was 4.5 percent, 111 cities, including New York, Washington, DC, and Baltimore, and 446 counties, had unemployment rates of 8 percent or higher, and some had double or more. Many had multiples of that figure. According to the U. S. Department of Housing and Urban Development, one in six U. S. cities has chronically high unemployment rates despite the general decline in unemployment.

Workfare--a program in which welfare recipients work off their welfare checks in jobs that have been carved out of those held by retiring workers or those whose hours and wages have been cut--is operating in a number of states. The existence of large workfare programs in cities like New York is an indication of the failure of local labor markets to provide enough entry-level jobs, as are the Welfare-to-Work grants and other federal subsidies given to states for job creation.

Working, but Still Poor

What do we know of those who have left the rolls for work? State follow-up studies, though spotty, indicate that between 61 and 87 percent of those who have been tracked found jobs in 1998 and between 50 and 70 percent in 1999. The National Governors' Association hailed this job placement record as "far exceeded[ing] expectations of proponents and skeptics alike." But again, the glowing rhetoric of policy makers obscures the reality of life after welfare.

Many of the jobs were part-time and temporary.
Few provided paid vacations, sick leave, or health and retirement benefits.
Despite increased efforts by states to "make work pay," by March 1998, only 8 percent of the previous year's recipients had jobs paying weekly wages above the three-person poverty line.
Between 1997 and 1998, the proportion of former welfare recipients with weekly wages below three-quarters of the poverty line surged upward from 6 to 14.5 percent.
The percentage who left the rolls for work in 1999 was only 5 to 10 percent higher than the proportion of recipients who left welfare for jobs under the old AFDC program, when general unemployment was higher than it is today.
Most families who left the rolls had to rely on other forms of public aid like food stamps, Medicaid and transitional childcare subsidies, as well as on family and friends.
Yet, because of the failure of many states to inform welfare leavers of their continuing eligibility for Medicaid and food stamps, fewer families are receiving them, even though they may be eligible.

The Education and Training Gap

Only a little over half of all first-time recipients of AFDC in 1996 had high school diplomas and about 90 percent had no more than that. If entry into the labor market for welfare mothers is to be the road to self-sufficiency, a substantial level of support for education and training will have to be made, and this means not only education at the point of workforce entry, but education from kindergarten on up.

The PRWORA requires mothers under the age of 18 to attend high school or an alternative educational or training program in order to collect welfare, but in its commitment to getting family heads as quickly as possible into the labor market, it includes other counter-productive restrictions on activities needed to prepare people for economically productive work.

TANF funds for job search and job readiness assistance are capped at only six weeks, and no more than four weeks can be consecutive.

The Balanced Budget Act of 1997 stipulates that no more than 30 percent of all families on state welfare rolls may count toward the work participation rate required for TANF funds by participating in vocational education.

TANF funding for vocational education is limited to one year. Yet most good training programs in community and technical colleges require two-years.

The PRWORA excludes postsecondary education as an activity that can count toward the work requirement under TANF even though higher education has been shown to be the most impressive contributor to higher employment and earnings among single mothers on welfare.

While states are not restricted by PRWORA from doing more with their own money, these restrictions in the law send an important signal that discourages many from going further and makes it more difficult for those already in college or hoping to go to get a college degree.

Final regulations issued by the Department of Health and Human Services allow states some flexibility in providing for higher education. Some states have used this flexibility to interpret higher education as an activity that serves as a "work requirement." Other states count it if combined with some work. Still others are dedicating separate state funds to higher education programs that do not have the work requirements and time limits of the TANF funds and are encouraging community colleges and universities to develop work-study programs for welfare recipients so that they can fulfill their work requirements on campus.

While these changes are encouraging, they are still nowhere near the commitment needed to educate and train the hard core of welfare recipients who remain on the rolls and those who have left but are still too poor to afford education and training. Yet if the government is unwilling to invest in the education and training of welfare recipients, who will? In a survey of 43 employers in two low-unemployment Midwestern cities in industries with significant concentrations of entry-level, low-skill jobs, Jobs for the Future found that employers felt they had no responsibility to people who lack basic skills.

Thus, if such a program is to work, states will have to commit more money for this purpose. Most states appear open to doing some of this at the moment, but when a recession comes, schooling and supportive services for welfare recipients may be among the first things to go.

Childcare: A Major Barrier to Employment, Self-Sufficiency and Child Welfare

Almost half of all welfare families need child care (not to mention after-school care) if the parents are to be employed. While funds were too low, the old law at least guaranteed child care assistance for families on welfare and one year for those "transitioning off." The new law provides no such guarantee, consolidating four federal child care programs into a new block grant--the Child Care and Development Fund.

The Child Care block grant includes an increase of $4 billion over six years, but the Congressional Budget Office has estimated that it will fall $1.4 billion short of what is really needed over that time, even if all the states were to put up the matching funds necessary to get the federal money. Although many states have increased their own spending and are using their surpluses, the money may not be adequate to serve all the
families who meet the eligibility criteria, much less to provide quality care.

Only one in ten potentially eligible low-income families actually gets the child care assistance it needs. No state is currently serving all eligible families.

Seventy-one percent of 34 cities surveyed by the U.S. Conference of Mayors in 1997 reported that state reimbursements do not cover average costs for full-day, center-based child care, and 62 percent reported that it did not cover the average current cost for full-day, home-based care.

In 1998, New York City lacked child care for 61 percent of the children whose mothers were supposed to be participating in workfare that year.

Only 4 percent of total child care funds are set aside to improve the quality and expand the supply of child care. Only ten states meet national recommendations for child-staff ratios and only ten states require all family child care providers to meet any regulations. Less than half the states require teachers in child care centers to have any training in early child development.

Before welfare repeal, two-thirds of the 1.5 million children in federally subsidized child care were from working poor families not on welfare. As more welfare recipients are forced to go to work, they will compete with these families for the insufficient day care slots available. With no guarantee of child care for families not on public assistance, welfare recipients who exhaust their time limits will also face a child care crisis.

Welfare Repeal without Work Guarantees: The Future of Welfare Reform

Deepening poverty for a significant portion of the poor, unsteady and poorly compensated work for others, inadequate education and training for upward mobility and inadequate child care in relation to need--if all of these are hallmarks of welfare reform during the longest peacetime recovery in history, what will happen during the inevitable recession?

The federal government has set aside $2 billion in a contingency fund and there is an unused TANF fund balance. Yet even if Congress decides not to use that balance for something else (as Republicans have already tried to do*) it is doubtful that the combined amount--$5 billion--would be enough in another recession. During the last one, welfare costs rose by $6 billion in three years.

Come the next recession states will either have to divide the money up among more people, deny benefits to many needy people or find more money from state resources, which would mean raising taxes--a politically unpalatable prospect, even in good economic times. Yet even without a recession, the Congressional Budget Office has estimated that the amount of money available to the states through TANF would fall $1.2 billion short of what will be necessary to meet the work requirements through 2002. Without a counter-cyclical infusion of federal funds, the end of the welfare entitlement could well deepen any future recession.

From Welfare Repair to Real Welfare Reform

The only long-term solution to poverty is a federal commitment to full employment at living wages and adequate income support for all who cannot work or whose work is family care-giving, and whose incomes fall below a minimal level of decency. To achieve such a policy breakthrough will require a massive, sustained people's movement for fundamental change in our nation's priorities. Short of this we can mount a vigorous campaign to repair our nation's welfare policies in preparation for the expiration of PRWORA in December 2002 and the Congressional debate that is likely to precede it.

The National Jobs for All Coalition recommends the following program of welfare repair.

1. Determine whether jobs are available before imposing work requirements.

Since it is unreasonable to expect welfare recipients to find work when there may not be enough jobs to go around, Congress must determine whether jobs are available before imposing work requirements. To determine job availability, the Labor Department must initiate monthly job vacancy surveys as they are currently doing on a pilot level in seven regions of the country.

If there are too few suitable job openings to provide work for all unemployed persons, including persons on welfare and involuntary part-time workers, then all work requirements and time limits for the receipt of welfare benefits should be suspended.

Suitable jobs should be defined as being reasonably accessible to the unemployed and roughly matching their qualifications.

2. Guarantee that welfare repeal will not be used to create a dual labor force.

Workfare participants should be guaranteed prevailing wages for jobs that are the same or similar to those in which regular workers are employed.

3. Create jobs for the unemployed.

Whenever there are fewer job vacancies than unemployed workers (see #1 above), an employment program should be established with federal or state funds to guarantee jobs for welfare recipients and all other unemployed persons.

Wages paid for such work must be comparable to those paid for similar work.

The mix of full and part-time jobs should attempt to reflect the qualifications of the unemployed and to provide useful services to the community.

The employment program should last until the number of suitable job openings (as defined in #1 above) equals or exceeds the number of unemployed persons.

Job banks should be established by officials at all levels of government or by groups surveying the needs of their communities.

4. Make work pay.

The minimum wage should be raised to at least $7.50 an hour, which would restore it to its peak purchasing power in 1968.

Support "living wage" ordinances that require firms doing business with city governments to pay all their employees at least a prescribed living wage.

5. Guarantee affordable, quality child care to all parents who need it in order to remain employed, accept employment, or participate in education and training.

Increase funding for child care in order to meet the need and provide affordable, quality care.

Prohibit states from requiring welfare recipients to take work assignments in the absence of quality, licensed child care.

6. Increase federal and state commitment to education and training for all workers.

Increase the allowed time that vocational education can count as work experience to two years.

Provide public funding for at least two years of higher education for all workers who want it.

Provide greater funding for education, training and rehabilitation services for those with substance abuse, mental and emotional problems.

7. Increase the amount of the federal contingency fund commensurate with an updated estimate of needs for welfare based on the experience of past recessions and require the states to provide a proportionate share.

8. Stipulate that TANF funds are only to be used for TANF benefits, job creation, and other anti-poverty programs.

*The Washington-based National Campaign for Jobs and Income Support reported that 45 states and the District of Columbia have accumulated $7 billion in unspent federal anti-poverty funds, some diverting that money to tax breaks and general budgets instead of spending it on welfare recipients and other poor people. Findings were based on reports by the states to the U. S. Department of Health and Human Services. See National Campaign for Jobs and Income Support, Poverty amidst Plenty: Amount of Unspent Federal Anti-Poverty Funds Grows despite Persistent Need.

Notes are available on request. For fuller discussions of these issues as well as the history of AFDC and its labor-market context, see Gertrude Schaffner Goldberg and Sheila D. Collins, Washington's New Poor Law: Welfare "Reform" and the Roads Not Taken 1935 to the Present (Apex Press, 2001).

The Coalition thanks Henry A. Freedman, Director of the Welfare Law Center for reviewing this Report.

Editor: June Zaccone, Economics (Emer.), Hofstra University and Helen Ginsburg, Economics (Emer.), Brooklyn College, CUNY

National Jobs for All Coalition
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203-856-3877
Email: njfac [at] njfac.org

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