May 8, 2003 | Backgrounder on Welfare and Welfare Spending
Welfare reforms enacted in 1996 have had a more powerful impact than almost any observer at that time might have predicted: National welfare caseloads have fallen 60 percent, employment among former recipients has risen sharply, and black child poverty is down by a third and at its lowest point in U.S. history.
Central to the change resulting from the reforms passed by the Republican Congress and signed into law by President Bill Clinton in 1996, creating the Temporary Assistance to Needy Families (TANF) program, is the requirement that those who are receiving welfare assistance either work in the private economy or engage in constructive activities leading to employment. To ensure that this expectation is real, the current law specifies a minimum proportion of the overall welfare caseload that must be actively participating in constructive activities.
The importance of getting TANF recipients to engage in welfare-to-work activities is obvious. If a large proportion of recipients are staying at home doing nothing to help themselves become self-sufficient, the TANF reforms can have only a limited impact. Consequently, both Republican and Democrat legislators agreed in debates last year that, in order to be effective, continued reform must require a large percentage of recipients, not just a small portion, to be working toward independence. As then-Senate Finance Committee Chairman Max Baucus (D-MT) said about his own proposal during last year's reauthorization discussion:
We strengthen and refine the work requirements [and] we require states to implement "universal engagement" procedures to ensure that every welfare recipient has a plan for leaving welfare for self-sufficiency and is following through on that plan.1
In short, there is a bipartisan consensus that adult welfare recipients should not be idle on the rolls. Notwithstanding this rhetorical consensus in favor of universal engagement, however, a difference remains as to what percentage of the TANF caseload can actually be expected to engage in constructive activities leading to self-sufficiency.
Former New York City Mayor Rudolph Giuliani set a goal of engaging the largest feasible proportion of welfare recipients in constructive activities leading to employment. In order to maximize the involvement of welfare recipients in these activities, Mayor Giuliani took the following steps:
The results of New York's "high engagement" program are shown in Chart 1.2 In December 2001, fully 67 percent of recipients were engaged in welfare-to-work activities, another 14 percent were scheduled to start activities within six weeks, and only 20 percent were unengaged.
--12.5 percent were in a work experience program (line 4), usually for three days a week and combined with other constructive activities such as job search, education, or training. "Work experience" as used here means working as an assistant in a government agency or nonprofit organization in exchange for welfare benefits.
--19.6 percent were engaged with sanction (line 6). These individuals had an assignment but were not currently attending. Consequently, some had their benefits reduced, while others were under review by the welfare agency.3
The experience from Mayor Giuliani's New York City welfare reform program demonstrates the feasibility of achieving high participation rates among TANF recipients. As Chart 1 shows, in December 2001, fully two-thirds of all welfare cases in which an adult parent was present were engaged in the program. Only 20 percent were inactive.
New York City's "high engagement" policy resulted in a steep decline in the welfare dependency rate. Between August 1996 and February 2003, the caseload declined by 57 percent.4 This downward trend continued even after the 9/11 disaster. The most recent data show that there has been an 11 percent drop in the caseload over the 14-month period ending in February 2003.
Moreover, as New York's "high engagement" efforts reached ever greater numbers of previously idle recipients, employment rates jumped. Near the beginning of the Giuliani reforms in 1996, 42 percent of single mothers in New York City were employed. As the Giuliani work-based reforms took effect, by 2001, the employment rate had soared to 61 percent.
The impact of reform was even more dramatic among the group most likely to be on welfare--single mothers without a high school degree. Employment in this group jumped from 16 percent in 1996 to 42 percent in 2001.5 Overall, compared against all U.S. central city areas, Census Bureau information shows that, between 1995-96 and 2000-01, New York City increased its employment of single mothers at twice the national rate.6
As would be expected, when employment goes up by this much, poverty comes down. New York City's poverty rate was cut by one-fourth during this period, from 27 percent in 1995-96 to 20 percent in 2000-01. The decline in poverty among children was even steeper, dropping from 42 percent in 1995-96 to 30 percent in 2000-01.7
The successful 1996 federal welfare reform law was based on the principle that welfare should not be a one-way handout. Recipients should not remain idle on the rolls but should be required to obtain jobs. If a job is not immediately available, recipients should engage in constructive activities leading toward employment such as supervised job search, work experience, or training.
In the years since enactment of the 1996 reform, states have raised the activity level of welfare recipients. Nonetheless, activity rates in the TANF program remain far lower than they should be. In 2001, 43.2 percent of adults on TANF were engaged in constructive activities such as employment, job search, training, and work experience. The other 57 percent were unengaged and idle.
Moreover, of those recipients participating in activities, more than half were in private employment (mostly part-time) while receiving benefits. Though part-time employment is desirable, it usually does not require the active involvement of the welfare agency with the recipient. In fact, nationwide, welfare agencies were closely involved with only 17 percent of their adult TANF recipients in activities such as supervised job search, work experience, or training.
Participation rates appear even lower when compared to participation standards that incorporate minimum levels of activity in order to be counted for federal purposes. These standards require single mothers with children under age six to engage in work-related activities for 20 hours per week; for mothers with older children, the requirement is 30 hours per week.8 Nationwide, only 27 percent of the adult TANF caseload is intensively engaged at a level sufficient to meet these criteria (including private employment).
By any measure, the participation rate among TANF recipients nationwide is far lower than it should be. Large numbers of adults remain idle on the welfare rolls, receiving a welfare check while doing nothing to prepare for self-sufficiency.
As part of TANF reauthorization, Congress has sought to mandate higher participation rates for the states. The House-passed welfare reform bill (H.R. 4) would require states to reach a nominal participation rate of 70 percent by 2008. However, the bill excludes approximately 25 percent of the adult caseload from the denominator of the participation count.9 Thus, the federal participation requirement would apply to only three-quarters of the adult caseload. This means that the real participation rate in 2008 would be around 50 percent of the full adult caseload (70 percent of 75 percent of the caseload).
H.R. 4 toughens participation standards, most notably by raising the required hours of participation from the current level of 20-30 hours per week to 40 hours per week. In general, however, in comparison to existing participant activity levels (including private employment while on welfare), the effect of H.R. 4 would be to intensify participation rather than greatly expand the portion of the caseload performing activities.
The Senate welfare reauthorization bill (S. 5), introduced by Senator Jim Talent (R-MO), would raise the required TANF participation rate to 56 percent by 2007.10 It also would increase the hours of participation in the same manner as H.R. 4.11
The Democrat welfare reauthorization bill, entitled the Work Opportunity and Responsibility for Kids (WORK) Act, was introduced by Senator Max Baucus (D-MT) in June 2002. Although the bill purportedly sought "universal engagement" by adult TANF recipients, the participation rates required by the formula would not actually exceed 10 percent. Nor would the WORK Act significantly increase required hours of participation.12
The welfare reform of 1996 was founded on the premise that welfare dependence generated poverty and was harmful to families and children. The reform sought to reduce dependence and poverty by converting welfare from a one-way handout that rewarded chronic idleness to a new system of conditioned aid that required recipients to engage in constructive activities aimed at self-sufficiency. Under the reform, TANF recipients should be required to obtain jobs or prepare for work.
Obviously, the reform goal of moving recipients from dependence to employment will not be fulfilled if large numbers of adults remain idle on the welfare rolls. Thus, a core element of the 1996 reform law was the federal requirement mandating states to raise the activity rate of welfare recipients. However, in most states, actual participation rates of adult TANF recipients remain lower than anticipated, and controversy remains concerning what level of participation can realistically be expected.
The example of New York City shows that, at any point in time, roughly two-thirds of all adult TANF recipients can be engaged in constructive activities such as supervised job search, employment, work experience, training, or drug treatment. Regrettably, most states fall far short of that level.
As part of TANF reauthorization, legislators have sought to require states to gradually increase their TANF participation rates. S. 5, as introduced by Senator Talent, requires that participation be raised close to the New York City levels. S. 5 is thus the best option for fulfilling the original welfare reform goals of work and self-sufficiency.
Jason Turner is Weinberg Visiting Fellow in Welfare Policy at The Heritage Foundation. Between 1998 and 2001, he served as Mayor Rudolph Giuliani's welfare commissioner in New York City.
2. Excluded from this tabulation are TANF cases in which there was no adult member (child-only cases), or only an adult member who was receiving SSI, and hence no member who could participate in activities.
3. Due to permissive rules enacted by the New York state legislature, if a recipient flatly refuses to undertake required activities, New York City may reduce TANF welfare checks only modestly (e.g., from $588 per month to $475 per month). This results in the large proportion of individuals "engaged with sanction." If New York City were permitted to impose a "full-check sanction" (temporary elimination of the whole monthly TANF check) for serious noncompliance, experience from other states with such a full-check provision shows that nearly all recipients would comply or would look for alternatives to welfare and close their case. The reauthorization bills H.R. 4 and S. 5 require all states to implement full-check sanctions in the event of severe noncompliance with welfare-to-work obligations.
5. U.S. Bureau of the Census, Current Population Survey data, in Mark Levitan and Robin Gluck, "Mothers' Work: Single Mothers' Employment, Earnings and Poverty in the Age of Welfare Reform," Community Service Society of New York, Special Report, at www.cssn.org/reports/special/motherswork2002_08.pdf.
8. With some exceptions, activities that count for purposes of calculating federal participation include unsubsidized employment, subsidized private employment, subsidized public employment, work experience, on-the-job training, job search and job readiness assistance for a limited period, community service, vocational education for a limited period, and provision of child care to TANF recipients participating in a community service program. Under certain circumstances, other education and job-skills training also count.
9. H.R. 4 excludes all recipients from activity requirements during the first month of receipt of TANF. It also excludes mothers with children under one year of age. These two groups together comprise 25 percent of the adult caseload. Both groups are also excluded from the denominator when calculating a state's participation rate. Thus, H.R. 4's participation rates apply to only 75 percent of the adult caseload. Because it is not reasonable to expect 100 percent of the TANF caseload to be engaged in ongoing activities, all proposed legislation sets future participation rates well below 100 percent. However, excluding certain adult groups from the denominator that theoretically could participate (as in the two examples above) is misleading because it gives the impression that the resulting participation rates are far higher than they actually are.
10. S. 5 sets a 70 percent participation rate for 2008 but excludes mothers with children under one year old from the denominator. These mothers comprise about 19 percent of the adult caseload. Thus, the real participation rate would be 70 percent of 81 percent of the adult caseload, or 56 percent of the entire adult caseload.
12. Robert E. Rector, "The Baucus 'WORK' Act of 2002: Repealing Welfare Reform," Heritage Foundation Backgrounder No. 1580, September 3, 2002.