Commentary: Welfare Reform, Round 2

Keeping poor moms working won't be cheap

By Aaron Bernstein and Alexandra Starr

Annie Perry had been on and off welfare ever since the first of her three children was born 10 years ago. Perry, now 30 and single, held many jobs, including one as a Burger King manager, but could never find stable work that paid enough to keep her family afloat. Then, last fall, she enrolled in a training program for four months that taught her computer and office skills all day while she received a welfare check. After job-hunting for several months, Perry landed a post in March as the office manager of an Allstate insurance agency in her hometown of Raleigh, N.C. She soon got a $2-an-hour raise and now earns enough, she hopes, to stay off welfare for good. "Everything is so great," she gushes. "My boss is sending me to school to get my agent's license."

Perry could easily be the poster mom for the country's six-year-long experiment with welfare reform. As the revamped system comes under scrutiny--the program is set to expire in September unless Congress renews it--Washington has deemed the redesign a smashing success, filled with thousands of stories like Perry's.

It started with the law President Bill Clinton signed in 1996 that adopted a new approach to aiding some of the nation's poorest families. Instead of just handing out checks, states now demand that needy mothers try to find a job. Those who don't comply with the rules can be cut off, and every family faces a five-year lifetime limit on federal aid.

Though critics feared that thousands of families would be left hungry and homeless, it didn't turn out that way. Instead, the make-'em-work strategy slashed the welfare rolls by more than half, to just 5.4 million adults and children today. With employers desperate for workers in the late 1990s, legions of poor mothers were able to find jobs and move toward self-sufficiency. Coupled with new tax policies that reward work, such as the earned income-tax credit, the incomes of the country's poorest single mothers have improved since the early 1990s (chart). "I see no evidence of the disasters predicted by critics," says Rebecca M. Blank, dean of the University of Michigan's public policy school, who criticized the plan before joining Clinton's Council of Economic Advisers in 1997.

Now comes the second phase of the welfare revolution as Congress faces reauthorization of the program. The Bush Administration and House GOP leaders are proposing tougher work requirements to cut the rolls even further. They have been joined by some Democrats eager to prove their centrist credentials, including Senator Hillary Rodham Clinton (D-N.Y.) "A lot of [the success] had to do with the nation making a concerted effort to move people from welfare to work," President Bush told former welfare recipients at a June 4 White House event. Now, he said, "we want to raise the bar."

But ratcheting up the demands on welfare moms at this critical turn could end up backfiring. After the impressive record of the past five years, it's clear that most of those on the dole are willing to take a job if they can manage it. But it's also clear that they need help with the transition from dependency to the world of work.

Most who have left the rolls so far are still struggling and make much less than an official poverty-level income (charts). Even many successes like Perry need a hand along the way: State welfare agencies have been paying for training and education, like she got, all along, as well as for child care and transportation to work. What's more, the 2 million mothers still on welfare often require even more help, since they're more likely to have intractable problems such as mental or physical disabilities or abusive spouses.

If the U.S. is serious about helping more single moms make it on their own, it can't be done on the cheap. This next wave of reform will require a big expenditure--some say as much as $11 billion over five years--for training and education as well as for child care, transportation, and other aid. That should help poor mothers get a reasonable shot at finding and holding a job (table).

So far, though, lawmakers seem fixated on proving how tough they can be. In fact, they seem to want it both ways. Stricter work rules could force already strapped states to set up costly public-jobs programs to get enough moms off the rolls. At the same time, Administration officials have been reassuring panicky governors that there are plenty of loopholes they can use to avoid such workfare programs, says GOP Governor Mike Huckabee of Arkansas. The result could be tougher standards, but only in states willing to bear the cost of enforcing them. "Many in Congress, on both sides, are playing `who can be more pro-work than the other guy,"' says Michigan Governor John Engler, also a Republican.

Such posturing is a misreading of the public mood. Fully two-thirds of Americans say expanded assistance is their top welfare reform priority, vs. just 15% who give top billing to tougher work requirements, according to a March poll by Peter D. Hart Research Associates. Corporate America, which eyes welfare moms as a key pool of labor down the road, also favors a more generous approach. "We need to focus on basic areas like child care and transportation assistance; that's what business thinks is important," says Jonathan M. Tisch, CEO of Loews Corp., which has a program to hire welfare moms in its hotels.

Botching Round Two of the country's historic welfare overhaul would undercut the accomplishments of Round One. There's no question that the insistence on work has transformed America's welfare system. Today, a mother who walks into a local welfare office finds a completely different environment than before. Most states now push recipients to immediately look for a job and report back with the names of the companies they have contacted.

But finding a job doesn't automatically lead to self-sufficiency. Yes, the poverty rate of single moms has declined since the early 1990s. But those in the bottom fifth of the income scales, which includes most of the welfare-eligible population, earned an average of only $7,900 in 2000, according to calculations by Richard Bavier, an economist at the Office of Management & Budget. While that's a 24% gain since 1993 after inflation adjustments, it's still more than 40% below the poverty line. What's more, the recession slashed welfare moms' workforce participation rate by eight percentage points last year, erasing fully half the gains since 1996.

Welfare recipients are so vulnerable because most have low skills and only land jobs at rock-bottom wages. Just 25% remain consistently employed for two years, vs. 57% of all women, according to the Economic Policy Institute, a Washington think tank. In some states, up to 40% of welfare leavers say they're worse off than when they were on the dole.

One unsettling sign: 1.8 million people who had left welfare in the prior two years visited a soup kitchen in 2001, double the number who requested emergency food aid in 1997, according to surveys by America's Second Harvest, a Chicago-based nonprofit that supplies most of the nation's emergency food aid.

Of course, providing more help to moms trying to work their way up raises welfare's cost, which is shared by Washington and the states. At the time of the 1996 reforms, Congress set its annual contribution at $16.5 billion a year. The dramatic fall in the rolls has allowed states to shift money from welfare checks to child care and other aid for moms with a job. Cutting the rolls in half yet again, to 1 million adults, would require even more money. Child care alone would cost up to $8 billion more over five years, says Mark H. Greenberg, an attorney with the Center for Law & Social Policy in Washington.

Problem is, most lawmakers aren't talking about how much it costs to get more mothers to work. They're just focused on shrinking the rolls. In the first round, states had to move 50% of their caseloads into 30 hours a week of employment, although 10 hours could be in training, education, or other job-preparation activities. Now Bush and the House GOP, backed by the centrist Democrats, want 70% of welfare moms to be working within five years. The 30 hours a week would jump to 40, with 16 hours allowed for job preparation.

Democrats are trying to soften the blow somewhat. Senator Clinton signed a letter written by Senator Edward M. Kennedy (D-Mass.) calling for restoring welfare for legal immigrants--who were cut off in 1996--and boosting child-care funds by $11 billion over five years. But so far, the Bush and the Republicans plan to keep out immigrants and freeze federal funds at $16.5 billion a year.

Washington's stinginess is the reason many governors fear they will have to set up public jobs programs like those tried in New York and Wisconsin. But workfare programs don't help participants find private-sector jobs, studies show. New York officials recently testified that only 10% of workfare participants there found jobs lasting more than 90 days.

Rosario Rodriguez didn't even find that. She's a 39-year-old high-school dropout who has been on and off welfare since her first child was born two decades ago. In 1999, she was assigned to clear debris from New York City highways. No permanent job ever came of it. Next year, she will hit her five-year lifetime welfare limit. "If I don't find a job soon, they will cut me off, and I have three kids," says Rodriguez.

Right now, her story wouldn't get much play in Washington. But the dynamic may change when the welfare debate hits the Senate in late June. Bush may agree to trim the 40-hour workweek and to add up to $4 billion for extra aid over five years, White House officials say privately. But they will fight anything close to Kennedy's $11 billion plan.

The work rules may get watered down, too. Already, they contain big loopholes. For example, mothers could count teaching their kids to read at home as part of the 16 hours of "training and education," says Michigan's Engler. No one will be monitoring them, he says, which means states could wink at the new rule.

In today's economy, tackling poverty is a challenge. Just finding a job is difficult, especially for the many troubled mothers left on the rolls. But one thing seems clear throughout the years of social experimentation: The best way to keep up the progress on welfare reform is to offer recipients not a stick but a helping hand.

Bernstein and Starr cover social policy in Washington.

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