The New Anti-Welfare States

While states experiment with real change, Clinton threatens to end welfare reform as we know it.

John Hood from the October 1994 issue

(Page 2 of 3)

In place of the initiative's reforms, Oregon is experimenting with a less-radical program called JOBS Plus, passed last year. Like the Wisconsin and Massachusetts plans, it places work at the center of reform. Jobs Plus establishes a six-month period of employment in either a private or community-service program in six target counties, but participation is optional. The state will collapse AFDC, food stamp, and unemployment insurance payments for recipients into payment for work at no less than the minimum wage ($4.75 in Oregon). The state expects to pay for the extra costs of the program (child-care and transportation expenses) with $2.7 million in start-up money from a state lottery and future savings from getting people employed and off public assistance. That could be tough, Neely says, because no one is sure "where the jobs [for welfare recipients] will come from and what it will cost. We think JOBS Plus can be a method for answering that question."

The current wave of state reforms reflects a new appreciation of the shortcomings and unintended consequences of conventional welfare policy. The new consensus that short- term assistance and work experience are the real keys to getting and staying off the dole is rooted in important scholarship published during the 1980s.

The 1984 publication of Charles Murray's Losing Ground directly challenged the efficacy of anti-poverty programs. The reaction from traditional welfare scholars and politicians alike was generally scathing, but at the same time Murray's straightforward rebuttal of the War on Poverty shifted the welfare debate substantially. Analysts could attack the system while eschewing Murray's more controversial assertions and policy prescriptions. "Until the mid-1980s welfare reform meant more benefits," explains Ron Haskins, a Republican staff member on the Ways and Means Committee of the U.S. House. "After Murray, reform also meant reducing dependency."

About the same time Losing Ground came out, researchers Mary Jo Bane and David Ellwood of Harvard University published several influential studies about the composition of the welfare population. They found that while most families leave welfare within two years, at any given moment more than 65 percent of the families on welfare are in the midst of spells lasting eight years or more. The implications from Bane's and Ellwood's studies, and from research along similar lines by Baruch College economist June O'Neill, are that lots of families move back and forth between welfare and work and that the number of families in long-term dependency builds up in the welfare caseload over time.

O'Neill has gone on to quantify the relationships among welfare, work, and marriage that Murray had originally postulated. She points out that welfare caseloads rose rapidly during the 1960s and early 1970s but then leveled off and even fell as a percentage of the population during that horrible decade, the 1980s. Only recently, since 1989, have caseloads again been going up in most states.

Interestingly, there is a close correspondence between growth in caseloads and growth in total welfare benefits (including food stamps, Medicaid, and other programs). O'Neill speculates that the current increase in caseloads is probably the result both of the recent recession and of the 1988 Family Support Act, which increased the value of welfare benefits.

And she notes that when the new Reagan administration and Congress decided to reform the old Work Incentives program (WIN) in 1981, lowering the amount a person could earn and still remain on AFDC, caseloads fell in many states. The 1981 reform "may be the only federal legislation ever to have been enacted which resulted in a decline in welfare participation," O'Neill observes.

A General Accounting Office analysis of the 1981 legislation found another interesting result: By limiting eligibility for AFDC, it also reduced Medicaid coverage for many low- income workers. But the GAO found that these workers did not have higher rates of unemployment than similar recipients did before the change, calling into question the popular assumption that for welfare reform to succeed you must guarantee Medicaid coverage during the transition from dependency to a job with health insurance.

In a 1993 study funded by the U.S. Department of Health and Human Services, O'Neill and M. Anne Hill discovered that a 50 percent increase in monthly AFDC and food stamp benefits led to a 75 percent increase both in the number of women enrolling in AFDC and in the length of time spent in the program. More important, they found that higher AFDC benefits in a given community suppressed employment of young adult men by reducing the probability of marriage (and the responsibility it creates for providing for a family) and by providing a source of income through girlfriends receiving benefits. The study also found that children raised in families that receive welfare assistance are themselves three times more likely than other children to go on welfare once they become adults, and that a 50 percent increase in benefits led to a 43 percent increase in the number of out-of-wedlock births.

Yet another body of research inspires current reform plans, and it comes from the experience of previous state efforts. When Congress reformed WIN in 1981, it also gave states more flexibility in designing and implementing job-training-and-placement programs. Of the 30 states that responded with demonstration programs, eight contracted with Manpower Demonstration Research Corporation to help design and evaluate their programs. These programs were set up to be true research tests, with random assignment of participants into experimental and control groups, so the results are fairly solid. MDRC found that the states that combined job search and work programs could boost incomes or employment rates somewhat and slightly shorten welfare spells. Programs with extensive amounts of education and job training didn't pan out. Generally speaking, the cost of the successful programs was small ($800 per participant) and was offset by their benefits, albeit modest.

Chuck Hobbs, who headed an important Reagan administration commission that advocated greater flexibility for state experimentation, sums up the research and experience of the past decade or so this way: Put welfare recipients to work massively with few exceptions. Merge the 76 or so welfare programs (costing local, state, and federal taxpayers around $300 billion annually, according to the Heritage Foundation) and use the money to finance job searches and work. Limit the time recipients can receive public assistance, even when it is received in exchange for work. And, stresses Hobbs, "Don't waste time on education and training--work is the best training." Hobbs maintains that work builds self-reliance, which in turns builds self-respect and reduces the need for ongoing social programs.

Given the quality and quantity of the supporting research, work-driven welfare reform is eminently plausible. But it remains to be tested wholesale in the real world--and it may never be. The Heritage Foundation's Rector has carefully read the text of Clinton's own welfare bill and points out two provisions that would trump existing and proposed state reforms alike.

First, the bill appears to limit the conditions on which a state can impose work requirements to that specified in the bill itself--in other words, says Rector, Clinton's real message is that, "If you don't meet these conditions, you don't have to work." Second, the bill stipulates that anyone made to work as a condition for receiving benefits must be paid the prevailing wage for the job they take. This provision could well serve as a sort of "quasi- Davis-Bacon Act," Rector says, protecting unionized workers and pricing low-skill welfare recipients out of the market for available work. In short, the bill, which he calls "tough on the outside, gooey on the inside," will set the welfare-reform debate back about 15 years.

In fact, states seeking to try out radical welfare experiments already face significant barriers. The Ore-gon JOBS Plus proposal, for example, illustrates the need for more flexi-bility in federal welfare oversight. The plan's relatively cautious design--eschewing tough work mandates--is a response to federal intransigence about the state's original, voter-approved initiative.

"The current waiver process is difficult at best and not very satisfactory for anyone," Oregon's Neely says. "It is intended to test new ideas on a very small scale for use as information by the Congress to draft national policy. It doesn't work for states seeking to change their policies on their own."