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Steven Malanga
Welfare Reform, Phase Two
States are putting a new generation of recipients back to work. Will Obama get in the way?
Winter 2009

Selected Responses:

Sent by DH Fabian on 02-03-2009:

It really is wonderful to hear of single parents who are able to work their way out of poverty. There is a tremendous amount of potential among the recent and not-so-recent poor.

Unfortunately, positive outcomes are rare. It is very easy to close "X" number of welfare cases per month. Lifetime limits on aid make this all the easier. But all those doors that once enabled some 80 percent of welfare recipients to work their way out of poverty within five years have been slammed shut.

We might not do very well with foreign wars any more, but we still know how to get tough on the poor and powerless -- and how to keep them that way.

Sent by Nancy on 02-03-2009:

Welfare should only be for the disabled. I know two middle class, 26-year-old, healthy, energetic white women who work in my hair salon. They both have an illegitimate kid and live with their parents in a middle-class suburb. I keep asking them why they don't get money from the kids' fathers instead of taxpayers. This mentality has to stop. People give these girls $20 tips - two haircuts each hour - not counting the bill. And these girls are on welfare.

Sent by Mel C. Thompson on 02-03-2009:

"Sit on the couch all day." This line from your article again displays that most therapists, social workers, and government officials just don't get it. The work system is very specific. It has nothing to do with "being willing to work," as your myths have it. In fact, I was willing to work for decades, the problem is that, at the low end, most jobs, in spite of laws and rules and stated policies, can't honestly accommodate a disabled person.

These accommodations are an illusion. Most low-end jobs are in industries where the profit margin is thin and the competition brutal. The first employer to really start accommodating chronically sickly people immediately loses out to the competition. In industry after industry I tried, it just came out that accommodating weak people, slow people, people in pain, allergic people, mentally ill folks -- was just all but a crazy proposition if one were to remain profitable and prevail against competitors.

Oh yeah, all employers make a grand public effort to show they are hiring the disabled, but those hirings are all for show. The back side is that those employees don't last and end up drifting from employer to employer before finally, exhausted and demoralized, sinking into severe clinical depression. Your article basically presumes a certain level of physical health.

For every miracle story you can produce, I can show you ten who could only hold up a while under the stress of the real world. The average person needing welfare, don't make me laugh . . . they'll do their Walmart job for a year before they're crushed by workplace demands. They'll get sick several times and be labeled "uncooperative" when in fact they're weak and sick, and get tossed to the street. And you won't cover that side of the story.

Welfare Reform is a mirage in virtually all of the forms I've seen it. I know what I'm talking about. I've lived the whole system inside and out. You just don't get it.

In social-services jargon, Debra Autry had “multiple barriers to work” when the state of Ohio told her that she had to start earning her welfare benefits. Autry had been out of work and on public assistance for more than two decades, and she lacked many of the skills necessary for a modern economy. She was a single mother, too, like most welfare recipients, with three kids at home. Autry was skeptical about working in the private sector, so the state placed her in a publicly subsidized program that had her cleaning government offices in exchange for her benefits. Disliking the work, Autry landed a cashier’s job at a local Revco drugstore, arranging her hours around her children’s school day. After the CVS chain bought out Revco, she enrolled in the company’s program to learn how to become a pharmacy technician and eventually began working in that position, which typically pays between $25 and $30 per hour. Autry’s hard work inspired her children. Her daughter just earned a degree as a physical therapist, while one son is in college and another is working full-time. “I was on welfare because there were no jobs that interested me,” she recalls. “But once I had to go back to work, I realized there’s a future if you want to better yourself. It was the best decision I ever made.”

Autry’s story is the kind that reformers dreamed about back in 1996, when President Bill Clinton signed the federal Personal Responsibility and Work Opportunity Reconciliation Act, often referred to as the welfare-reform act. That legislation, drawing on earlier innovations in Wisconsin and New York City, time-limited aid and required some recipients to work, seeking to end the culture of long-term dependency that no-strings-attached public assistance had helped foster. Autry’s success story turned out to be one of many. Since 1996, welfare caseloads have plummeted by 70 percent—8.8 million people off the rolls, which today are down to 3.8 million.

Courtesy of CVS.

In fact, during the first few years of welfare reform, the rolls fell so quickly that many state welfare agencies, which administer welfare for the federal government, stopped feeling pressure to move their remaining welfare clients back into the workforce. But since 2005, states have further reformed their welfare programs to comply with a controversial reauthorization of the 1996 legislation that required states to move even more people to work. This next, crucial phase of welfare reform could put an end to traditional cash welfare assistance in all but the most extreme cases.

That is, unless Democratic policymakers get in the way. Ominously, Democratic foes of welfare reform have gathered power both in Congress and in President Obama’s cabinet.

Graph by Alberto Mena.

The 1996 welfare legislation gave states enormous flexibility in fulfilling its requirements, and many interpreted the law liberally. Some counted as “work” the hours that recipients spent in treatment for alcohol or drug addiction or in traveling to and from job-training sessions. Others let recipients satisfy work obligations by “helping a friend or relative with household tasks or errands,” according to a 2005 Government Accountability Office study. Certain states allowed home exercise, “motivational reading,” and antismoking classes to qualify recipients for aid, reasoning that such practices could at least lead to work.

Despite such laxity, 4 million welfare recipients left the rolls during the first two years after President Clinton signed the reform into law. Since many states previously had required virtually nothing of welfare clients, simply compelling them to meet with caseworkers to discuss work options was enough to propel many out the door to look for jobs. “Everyone underestimated the ability of single mothers to go back to work,” says Grant Collins, former deputy director of the Office of Family Assistance in the Department of Health and Human Services (HHS).

The number of leavers was so big, in fact, that it all but eliminated many states’ federal requirements to keep moving people off welfare. The legislation required states’ work-participation rates—that is, the percentage of people on welfare who were working or searching for work—to be at least 50 percent. But states were allowed to diminish that fraction by whatever percentage their welfare rolls had shrunk since 1995. By 2002, welfare rolls nationwide had fallen so steeply that 33 states could meet their obligations with work-participation rates of less than 10 percent.

That undesirable situation led to a three-year battle to reauthorize and reenergize welfare reform. The result was the 2005 Budget Reconciliation Act, which changed the year from which states could calculate case reductions from 1995 to 2005, thereby ending the generous credit that most states enjoyed from their huge initial drop in welfare cases. Between 40 and 50 percent of states’ adult welfare recipients now had to go back to work, search for a job, or otherwise prepare to work. The federal government also tightened the definition of what counts in fulfilling the work requirement: no longer would spending time in psychological counseling or in traveling to job training do the trick. And the feds urged states to enroll more welfare recipients with physical or mental disabilities in job-training and job-placement programs. “Individuals who happen to have disabilities should be afforded the same opportunities to engage in work—to find work-related training, work experience, and employment—as those who do not have a disability,” the Bush administration’s Department of Health and Human Services wrote in its new regulations.

Advocates and some pols charged that many of those remaining on welfare were too troubled for states to hit the demanding new work-participation targets. Urban League president Marc Morial complained that the bill would “subject families to harsher work requirements with inadequate funding” for social services to help them adjust. He scored the bill in particular for limiting how long someone could remain on welfare while pursuing a college degree. “We don’t have many families left. Those remaining have multiple issues,” objected the head of Welfare Advocates, a Maryland-based coalition of social-services agencies and churches. A 2002 Urban Institute study that found that 44 percent of welfare recipients faced two or more “barriers to work” became a frequent citation.

HHS had basically discounted such complaints in writing its new welfare regulations, in part because the critics were defining “barrier to work” too loosely. The Urban Institute study, for instance, considered the lack of a high school diploma, being out of the workforce for three or more years, and lack of English proficiency as obstacles to work, while other groups argued that being a single parent was a major barrier. A common demand was that welfare programs first provide day-care services for single parents or treatment for addicts before requiring any work. “I was at a White House conference in the mid-1990s in which someone observed that we couldn’t require single mothers on welfare to go back to work until we had day care for all of them,” recalls Peter Cove, cofounder of America Works, an employment service for welfare recipients. “I stood up and said that if we tried to solve every problem before asking people to work, we’d never get any recipient back in the workforce.”

The 2005 bill wholly embraced this “work-first” philosophy. Work-first originally emerged as a welfare-reform model in the 1980s, adopted by Wisconsin governor Tommy Thompson; in the mid-nineties, Mayor Rudy Giuliani enthusiastically signed on in New York City. At its core, work-first maintains that the biggest obstacle that many welfare clients face to employment is their own lack of understanding of the fundamentals of any workplace—showing up for work regularly and on time, for instance. The best way to help such people isn’t to put them in elaborate job-training programs, this approach holds, but simply to get them working—even in entry-level positions—under the careful supervision of a caseworker, who makes sure that they get up in the morning and out the door. Caseworkers will even help out with recipients’ child-care emergencies or get alcoholic clients to continue in treatment—but all with the aim of keeping them on the job. “Many of the best therapeutic programs for people with problems like alcoholism don’t think it’s a good idea for people to stop working and go home and sit on a couch all day after counseling,” says Tom Steinhauser, head of Virginia’s welfare division. “Why should welfare programs treat people any different?”

A work-first approach has helped sustain deep reductions in New York City’s welfare population, long after rolls stopped dropping in some states. By the time Rudy Giuliani left office in 2001, the city’s welfare numbers had fallen from 1.1 million to 475,000, and they’re down another 25 percent, to 339,000, under Mayor Michael Bloomberg, who has continued the reforms. Many of those who wind up on welfare today remain “work-ready,” argues Robert Doar, commissioner of Gotham’s Human Resources Administration (HRA), which is why the city has been able to place some 70,000 to 80,000 of them a year in jobs.

The “work-ready” population is evident at the crowded Manhattan offices of America Works, where I went to observe cofounder Lee Bowes address a new group enrolled in the organization’s counseling and employment program. Every seat is taken, and even the windowsills are occupied. When one attendee asks why the classroom is so crowded, Bowes bluntly responds: It’s because lots of people are looking for jobs. Asked by Bowes how she wound up on welfare, a single mother explains that her apartment building burned and that she and her children found themselves temporarily homeless. She then lost her job and went on public assistance; she says that she’s ready, though, to get back to work. Is this the first agency that she has visited since going on welfare, Bowes wonders? The woman’s answer elicits nods from the group: “I went somewhere where they treated me like I was in kindergarten. They asked me if I was ready to go back to work. I said yes—can you help me find a job? Then I heard that this place does that. So I’m here now.”

Most of these welfare recipients will wind up in entry-level jobs. The average starting wage for someone coming off welfare in New York is just slightly above $9 an hour, according to the HRA. But with other assistance, like the federal and state earned income-tax credits, food stamps, and Medicaid, a recipient’s actual annual income can rise well above $20,000—not enough for an extravagant lifestyle in New York, of course, but enough to allow her to get back on her feet and start down the road to independence. This aid menu is typical across the country, even if assistance levels vary. With the decline in welfare rolls, states now spend more on noncash assistance programs, like food stamps, than on welfare itself.

Many employers have tapped this labor pool because it has been hard for them to fill entry-level positions. New York City–sponsored job fairs for welfare recipients attract dozens of companies. America Works says that it has a reliable list of employers ready to hire welfare recipients for entry-level jobs. Even in an economic downturn, like the current one or the national recession that began in mid-2001, employers keep seeking entry-level workers because of the high turnover rate for these jobs. Welfare rolls didn’t rise in New York City during the last recession, it’s worth noting.

One of those eager entry-level employers is CVS, which has hired about 63,000 people off welfare nationwide over the last decade or so. Some 60 percent still work for the chain, an extraordinary statistic for an industry with high turnover. The typical former welfare recipient at CVS has had at least two promotions. Some, like Autry, have gone through training in CVS’s pharmacy technician program; others have returned to school with the chain’s help and earned pharmacist’s degrees. One key to their success with former welfare recipients, CVS has learned, is to work closely with state agencies and their contractors, who’ll lend a hand with the new hires for several months or longer to ease their transition to employment. “We learned early on that you just don’t throw someone into a full-time job right away without some support,” says Steve Wing, director of workforce initiatives at CVS. “We rely on the agencies to help these people adjust.”

Many state agencies and advocacy groups have derided entry-level jobs in retailing or in service industries—the places where welfare recipients will most likely find work—as pointless, “dead-end” employment. It was this foolish and hoary objection, dating back to the welfare debates of the seventies, that for years thwarted efforts to get welfare recipients working. “We heard the line about dead-end jobs so often from people running welfare agencies that we drew up a poster showing the career opportunities for people at CVS who start by working as cashiers in stores,” says Wing. “The stores are where a lot of our managerial employees start, but there’s just a perception among those who run welfare programs that these entry-level jobs are not good enough.”

Under the revised welfare rules, however, states can no longer ignore such employers and their jobs, and more states are reshaping their programs along work-first lines. Over the last two years, for instance, 17 states have created more stringent contracts for local private agencies working with welfare recipients, requiring them to meet job-placement targets or risk penalties. Arizona has told its contractors that if the federal government penalizes the state for failing to meet work goals, the contractors must share in the punishment. Private groups must even prove when bidding for Arizona contracts that they have sufficient financial reserves to pay any fines. But the state will also give bonuses to agencies that perform job placement well.

Several states have imposed stricter standards even on their own public agencies. In California, new legislation lets the state pass on to county welfare offices any financial penalties that it might incur for failing to meet the new federal regulations. County administrators also must file plans explaining how they intend to meet their new requirements, and county work-participation rates now get shared throughout the system, so everyone can see how each county is performing. Pennsylvania, which had a dismal 7 percent work-participation rate for its approximately 40,000 adult welfare recipients in 2005, not only has started grading each county program but publishes the entire list online.

States are also requiring welfare applicants to begin job searches or undergo employment counseling much more quickly than in the past. Eleven states have altered application procedures to include some kind of employment assessment for people when they first request welfare. New applicants in Delaware, for instance, must spend two weeks working with an employment and training counselor before receiving benefits. Missouri no longer considers a welfare application complete unless the applicant has met with an employment counselor and worked out a job-search plan.

In many states, welfare recipients once could keep getting benefits even when they refused to comply with work or vocational requirements, an enormous impediment to reform. Since the 2005 legislation, however, ten states that previously only partially reduced a welfare recipient’s check for failing to participate in such programs have now moved to “full sanctions,” that is, cutting off benefits completely. Other states, while not going as far, have implemented harsher penalties or are at least considering doing so.

Welfare programs are also launching more joint private-public training ventures, aimed at funneling recipients directly into jobs. Welfare and employment agencies in Atlanta, Baltimore, Cleveland, Detroit, and Washington, D.C. have tapped CVS, because of its previous experience hiring former welfare clients, to establish training centers—essentially, replicas of its stores—where recipients can prepare for full-time jobs at the chain. Hawaii has formed a similar partnership with local banks, resulting in more than 300 welfare recipients’ getting placed in permanent jobs. New York City has joined with cable TV and phone companies to train welfare recipients as customer-service representatives.

Agencies are also taking a harder look at programs that try to get those who claim to have physical or mental barriers to work on the path toward employment. Sometimes this means encouraging them to begin part-time work or to undergo counseling to see what kind of training and work they might qualify for. “States are doing things that sound really simple, like having their own doctors assess those who claim they can’t work,” says Jason Turner, who designed Wisconsin’s welfare-to-work programs and is now a Milwaukee-based consultant. “But you would be surprised how many states were merely accepting notes from a welfare recipient’s doctor, excusing them from work.”

One model is WeCare, which handles New York City’s toughest cases. Welfare recipients who say they can’t work are enrolled in this program, in which a city-employed doctor and a caseworker evaluate them. If the doctor decides that a person can work but has a condition—a bad back or asthma, say—that restricts the types of jobs he can do, the caseworker draws up a job-search plan based on those limitations. Welfare recipients not well enough to work immediately but not permanently disabled are put on a treatment regimen to get them healthier and employable. “If they are exempt from work, they must still participate in treatments and in vocational rehabilitation programs,” says Michael Bosket, who heads WeCare. “Everyone does something.”

Typically, about 6 percent of the recipients referred to WeCare are deemed employable and sent directly back to a caseworker to find a job; another 43 percent are found employable with limitations. “Many people who used to be considered having barriers to work really have barriers to certain kinds of jobs, but they shouldn’t be exempt from work,” says Cove. Of the nearly 24,000 people in the WeCare program last fall, about 3,000 worked or enrolled in approved work-participation programs, about 7,000 were undergoing treatment or vocational therapy, and some 8,500 had been judged permanently disabled by the city’s doctors and directed to apply for federal disability benefits, which are separate from the welfare system. (The rest of the WeCare group was still undergoing evaluation.)

The new law gave states two years to comply, starting from mid-2006, when the feds issued the specific regulations outlining states’ obligations. Many states, including Pennsylvania, Maryland, and Virginia, say that they’ve raised their work-participation rates substantially since then and are close to complying, though the feds have yet to issue a report on the states’ progress.

Yet no one knows how Barack Obama’s White House—which brings with it a whole new set of administrators at the Department of Health and Human Services under the new secretary, former Senate majority leader Tom Daschle*—will carry out the law. As a senator, Daschle opposed the original 1996 welfare reform and then stalled its reauthorization from 2002 through his 2004 electoral defeat. Obama, meanwhile, turned down several opportunities during the presidential campaign to say whether he would have signed the welfare-reform act if he had been president in 1996; he preferred not to look back, he said, but forward. During the campaign, he did run ads crediting the 1997 Illinois law that he helped write—which brought the state’s welfare system in line with federal changes—with Illinois’ decline in welfare caseloads.

Congress’s most powerful Democrats have also opposed welfare reform. Speaker of the House Nancy Pelosi voted against both the 1996 legislation (calling it “punitive and unrealistic”) and the 2005 bill. Harry Reid, the current Senate majority leader, has used language strikingly similar to that of social-services advocates to criticize welfare reform. On its tenth anniversary, he declared that “many welfare recipients face significant barriers to employment” and that states need “flexibility” in aiding them.

At the very least, such statements suggest that a Reid-and-Pelosi-controlled Congress could unwind some key elements of the 2005 law, such as the restrictions on counting certain kinds of job training or substance-abuse counseling as work, when welfare reform again comes up for reauthorization in 2011. Such moves would almost certainly inflate work-participation rates artificially and blunt some of the effectiveness of the 2005 reforms. Whether Congress would attempt to go further, digging into the original 1996 legislation and curtailing some of its mandates, is hard to predict at this stage. But the fact that Obama and his new HHS secretary have hardly been enthusiastic in their support for welfare reform suggests that we may have to fight the battle for it all over again.

*Daschle withdrew his nomination on February 3.

Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute. He is the author of The New New Left, a collection of his City Journal essays.

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