A Safety Net Built Around Work — When There Is No Work
Originally published in The Hill’s Congress Blog on August 22, the 15th anniversary of the signing of the federal welfare reform law
Fifteen years ago this month, President Clinton signed legislation that fundamentally transformed the nation’s welfare system. Implemented in the midst of the roaring 90s, the new program, Temporary Assistance for Needy Families (TANF), was predicated on the conviction that work was preferable to welfare, that welfare should be temporary, and that jobs were available if people would only look for them. Now with unemployment rates at levels unimaginable even five years ago, the context for reform has changed, posing profound questions for Congress as it revisits the law that “changed welfare as we knew it” when it expires next month.
In 1996, work requirements, time limits, and restrictions on welfare recipients’ participation in education and training were all designed to reinforce the message that work was the best route out of poverty. At the same time, the Earned Income Tax Credit was greatly expanded, offering supplements to earnings of up to $5,700 per year for many low-wage workers with children. Rewarding and supporting employment in this way fit with an ethos of reciprocity and responsibility valued by American society.
Building a safety net around work made sense in the midst of a booming economy and its 5 percent unemployment rate. The combination of welfare’s push and the pull of a strong labor market (and the work incentives in the EITC) was effective: low-income women’s employment rates hit all-time highs, welfare caseloads plummeted by nearly half, and child poverty declined.
The Great Recession — and the lingering jobless recovery — has been an unprecedented test of antipoverty programs like welfare. While the rolls of other safety net programs, like the Supplemental Nutrition Assistance Program (food stamps) and unemployment insurance, have risen to meet growing needs, the welfare program has been largely unresponsive to the crisis. In fact, at the depths of the recession in 2008-2009, welfare caseloads rose less than 10 percent in 16 states and actually fell in six others. Restructured as a fixed block grant to states, welfare no longer played the historic countercyclical role it had in past recessions, as cash strapped states proved reluctant to let welfare rolls grow, a failure that likely had both human and economic consequences.
As we slowly recover from the Great Recession, we are entering an extended period in which there is not likely to be enough jobs to go around — suggesting that we need to rethink the nation’s safety net built around work.
A more responsive welfare program would promote work and self-sufficiency in good times while expanding to provide support for the nation’s poorest citizens in difficult economic times. Creating a permanent emergency fund that would only be triggered by high poverty and unemployment indicators would enable states to support families when jobs are scarce. In fact, a little known provision of the Recovery Act created a temporary TANF Emergency Fund, which the states used to create more than 250,000 subsidized jobs, many in private industry, during the recession. Unfortunately, the Fund and the jobs it created expired last September. But if we prefer work over welfare, public job creation may be necessary during severe downturns.
If we are no longer awash in jobs, how do we enforce the work-focused quid pro quo that was at the heart of welfare reform’s historic compromise?
Should we continue placing limits on participation in education and training? Americans believe that economic downturns are exactly the right time to make investments in human capital; the record college enrollment numbers during the last two years attest to that. And research demonstrates that the most effective welfare-to-work programs mix a work-first focus with skill-building for those who aren’t ready for jobs.
Thinking more broadly, do we want to continue to condition welfare receipt on work alone, when the reality of the labor market will likely make a sham of those requirements? Or should we consider other ways to establish a new quid pro quo, possibly by tying benefit receipt to other activities — for example, creating standards that require participants to make adequate progress in education and training?
Further exacerbating the picture, the jobs people do find will likely pay very low wages, making it difficult to support a family at levels well above the poverty line. Men’s earnings have been especially hard hit by low and stagnant wages, a trend that undermines their potential provider role as husbands and fathers. A next generation of labor market policies that help to “make work pay” — by providing earnings supplements like the EITC — will be especially important in this “reset” economy. For single parents, there is strong evidence demonstrating that such supplements lead to increases in employment and earnings, followed by improvements in their younger children’s school performance.
While the creators of TANF can be forgiven for not having anticipated the Great Recession, today’s leaders must confront today’s problems, not revisit yesterday’s battles. To fully realize the promise of our 15-year-old experiment with welfare reform, we need to create a more flexible program that continues to reward work when jobs are plentiful, provides support to poor families when jobs disappear, and begins to address the even more consequential problem of stagnant wages at the low end of the labor market.