The States Are Ending Welfare As We Know It But Not Poverty

In 1996, President Clinton and the Republican Congress carried out Clinton's campaign pledge to end welfare as we knew it. But Clinton, in his 1992 campaign manifesto, "Putting People First," made another famous pledge: People who worked hard and played by the rules should not live in poverty.

Thanks to the fortuitous rendezvous of welfare reform and a full-employment economy, redemption of this pledge is possible. Industry is now eager, and in some cases desperate, for more and better workers. The public-policy tools are available, and in some states are actually being used, not just to end welfare as we know it but to end poverty as we know it.

The welfare rolls have declined by 43% since 1996. That has freed billions of dollars in funds under the federal welfare-reform program, Temporary Assistance to Needy Families (TANF). This program mandates time limits on welfare checks but also allows states to reprogram money saved from unspent welfare outlays into expenditures necessary to help former recipients succeed as workers. These include tuition reimbursements, wage supplements, and above all, child care.

`LADDERS.' In the most imaginative states, such as Washington, governors have risen to the occasion and worked with business leaders and educators to convert TANF into a program not just to purge the welfare rolls but also to help all of the working poor rise out of poverty. Governor Gary Locke, the son of Chinese immigrants, devised such a comprehensive program. This year, some $129 million was reprogrammed to job training. Unlike many states, where former welfare recipients are simply pushed into low-wage work and punished if they choose instead to go to school, Washington gives free tuition to people who sign up for a "career ladders" program at community colleges that combines work and learning.

Unhappily, states like Washington remain the exception. In neighboring Idaho, the policy is just to clear the rolls. Idaho leads the nation, so to speak, with an 89% drop in its welfare caseload. But Idaho has spent just $12 million of its $55 million TANF savings on such services as training and child care. Collectively, the states have stashed away fully $7 billion in TANF funds, rather than spending the money to help former welfare recipients succeed as workers. This money is now a tempting target for hard-liners in Congress, who want to reduce outlays on the grounds that they are not needed.

A recent national conference on low-wage workers in the New Economy convened by Jobs for the Future and co-sponsored by the AFL-CIO, the National Association of Manufacturers, and others, made clear that there is a better path. Even hard-line sponsors of the 1996 law recognized that former welfare recipients needed support. This included child care, health insurance, training, and what manpower jargon calls "income disregards." The latter term means that new workers, mostly women with children, should not lose a dollar of welfare benefits for every dollar in their paychecks, because this would kill their incentive to work. Three long-term experiments, recently evaluated by the Manpower Demonstration Research Corp., found that more generous income-disregard formulas make dramatic improvements--in success at work, the well-being of children, and even marriages.

Unfortunately, in their zeal to purge the rolls, most states are taking the opposite path. Welfare offices, rather than serving as bridges to successful employment, are programmed to be obstacle courses. Applicants for welfare benefits, or work-transition benefits, must run a gauntlet of multiple appointments and are "sanctioned"--purged from the rolls--for missing appointments because of innocent mistakes or sick children. As a result, a great many people are diligently working but even worse off economically.

This is a needless tragedy, both for the people themselves and for industry, which desperately needs the workers. Ironically, the Federal Reserve is braking the recovery because labor markets seem too tight. But if every potential worker could be helped to succeed, the labor force would expand by millions.

All of the elements are now present for a national commitment to end poverty as we know it by making work pay. These include a full-employment economy, a generous Earned Income Tax Credit, a flexible post-welfare system that supports work, higher minimum wages, and a resurgence of union organizing in the low-wage service sector. But wages at the bottom have only just begun to rise. Unless creative national policy connects the dots, we will have traded an inadequate welfare system for one that demands that everyone work--but leaves millions in poverty.

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