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- Nearly all of the welfare reform
approaches that states have used - mandatory employment
services, earnings supplements, time limits, and various
combinations thereof - increased welfare recipients' employment
and earnings.
A wide range of programs that required
welfare recipients to participate in job search, education,
or training programs as a quid pro quo for receipt of welfare
benefits increased work, as evidenced by increases in the
number of quarters people worked and the amounts they earned.
The first section of Figure
1 shows the average annual impacts (effects) on earnings
of 12 programs that mandated participation in employment services
but did not offer earnings supplements or impose time limits.
All but one of these programs raised earnings significantly.
Despite site and program differences, all three of the earnings
supplement programs listed in Figure
1 also increased welfare recipients' employment and earnings
(by $696 in MFIP, $653 in SSP, and $491 in New Hope). Because
these programs were designed to encourage full-time work -
Canada's Self-Sufficiency Project and Milwaukee's New Hope
program supplemented only full-time work (defined as working
30 hours or more per week), while Minnesota's Family Investment
Program had a mandatory 30-hour-per-week work requirement
- the bulk of the programs' employment gains stemmed from
increases in full-time work. Interestingly, both the Minnesota
and Canadian programs also had large impacts on stable em-ployment
(defined as an employment spell of at least one year), possibly
as an outgrowth of their focus on full-time work. By the middle
of the fifth follow-up year, however, the Self-Sufficiency
Project's effect on employment had largely dissipated. This
erosion of the employment effect is attributable in part to
continued job loss among program participants who took up
the supplement and in part to a continued rise in employment
rates among members of the control group. Also noteworthy,
the New Hope program enabled people who were already working
more than full time (more than 40 hours a week) when that
program began to cut back their work hours to those of a regular
workweek, while increasing employment rates among everyone
else.
When time limits were packaged with employment mandates and
earnings supplements - the course most states have followed
since 1996 - employment and earnings gains were observed both
before and after the time limit was reached. As described
further below, while the pattern of effects resulting from
this package of mandates, earnings supplements, and time limits
changed over time, those changes did not apply to employment
and earnings effects, which were sustained throughout the
three-year follow-period (see the final section of Figure
1). Back
to employment and earnings summary
- Earnings supplement programs produced
their largest employment gains and lowest costs when targeted
at long-term welfare recipients.
Program impacts were generally larger
the more disadvantaged the population served: The largest
increases in employment and earnings were seen among long-term
welfare recipients; the gains to new welfare applicants were
smaller, and those to the working poor were smaller still.
In contrast to the traditional welfare system, which discouraged
work, supplement programs that were aimed at welfare recipients
encouraged work, increasing both employment and earnings.
These findings suggest a trade-off between equity and efficiency.
Highly targeted earnings supplement programs produce the largest
gains in employment and earnings at relatively lower net costs
(program costs minus welfare savings and increased taxes paid)
than a similar program aimed a less disadvantaged population.
But targeted programs create inequities as former welfare
recipients receive more help than similarly situated working-poor
families. Back
to employment and earnings summary
- Mandatory employment-services
programs that tailored services to the needs of individual
recipients - that is, mixed-strategy programs, which required
some participants to start by looking for work and others
to start with education or training - led to larger increases
in employment and earnings than either a job-search-first
approach or an education-first approach.
For more than 30 years, a debate
has raged about what kind of welfare-to-work ap-proach works
best - a job-search-first approach, which emphasizes getting
recipients into jobs as quickly as possible, based on the
idea that the best training for a job is having a job; an
education-first approach, which emphasizes education and training
- typically, remedial reading and math, General Educational
Development (GED) exam preparation, or classes in English
as a Second Language - based on the idea that investing in
recipients' knowledge and skills now will allow them to obtain
better jobs later; or a mixed-strategy approach, which entails
assigning some recipients to job search first and others to
education first.
Although the debate is far from settled, compelling evidence
from the NEWWS studies suggests that a mixed strategy works
best overall. Of the seven NEWWS programs categorized in Table
2 and shown in Figure
1, the Portland mixed-strategy program produced the largest
average earnings gains over three years (exceeding $1,150
a year), followed by the job-search-first programs (a $550
earnings increase) and the education-first programs (a $300
gain). By the fifth year (shown in Table
3), the impacts had dissipated for many of the programs,
although the one in Portland continued to have substantial
impacts on earnings throughout the five-year follow-up period,
averaging more than $1,000 per year.
Not surprisingly, the job-search-first approach led to employment
and earnings gains more quickly than the education-first programs
when the two approaches were compared side by side in three
NEWWS sites - Atlanta, Grand Rapids, and Riverside. It was
assumed by backers of the education-first approach that those
assigned to attend school would leave the classroom and -
equipped with their enhanced "human capital" - get
better jobs than they could have otherwise. Indeed, by the
fifth year, those assigned to the education-first programs
had converged with those in the job-search-first programs,
obtaining comparable employment, earnings, and welfare outcomes
in the fifth year. But there was no evidence that their classroom
experience helped recipients in the education-first programs
get a leg up in the labor market relative to those in the
job-search-first programs - and thus no indication that they
would be able to make up the earnings foregone earlier (Table
3).
What is surprising, however, is that employment-first programs
were also as effective as education-first programs for school
dropouts, that is, for participants who had no high school
diploma or GED. Moreover, when there was a difference, it
always favored the employment-first program. For example,
over the five years, dropouts in the job-search-first programs
had average earnings of about $900 to more than $1,900 more
than did dropouts in the education-first programs. In other
words, even the people who seemed to have the most to gain
from education benefited as much or more from the job-search-first
approach.
Why should education as a first activity boost employment
and earnings more in the context of a mixed-strategy program
that also assigns some people to job search first than it
does in "pure" education-first programs? The answer
lies partly in how the mixed-strategy pro-grams tailor first-activity
assignments. Recipients who - based on the judgment of the
case-worker, the recipient's characteristics (sometimes including
education credentials and literacy test scores), and the recipient's
preferences - are considered not ready to enter the labor
market are first assigned to education, vocational training,
or other activities unrelated to job search. Recipients who
are deemed to be job-ready or who express interest in getting
a job right away, in contrast, are generally required to look
for work first, either on their own or participating in a
group setting focused on job search. By targeting education
and training only at those who need or want it, mixed-strategy
programs may be able to have the best of both worlds.
Running a mixed-strategy program does not guarantee success,
however. Effective mixed-strategy programs typically have
a strong employment focus, make education assignments that
are short term, and use "job developers" to help
people find good jobs. The Portland program, for instance,
urged recipients to hold out for jobs that paid more than
the minimum wage and offered fringe benefits and encouraged
those who obtained a GED also to pursue vocational training,
which led to an increase in the percentage who received both
a GED and a trade license or certificate - a combination that
may be especially effective in boosting earn-ings. In contrast
to Portland's program, a mixed-strategy program operated statewide
in Florida (Project Independence) in the late 1980s yielded
only modest employment and earnings gains at best (not shown),
possibly because it emphasized a relatively ineffective form
of self-directed job search and because it was unable to support
the job search efforts of many parents after it ran out of
child care funding. Finally, the Greater Avenues for Independence
program in Riverside, California - another mixed-strategy
program run in the 1980s - produced even more impressive employment
and earnings results (not shown) than the Portland program.
Back
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