Making Welfare Work

Policy Backgrounders | Welfare

No. 143
Thursday, December 04, 1997
by Dr. Merrill Matthews & Kristin A. Becker

States that Have Made Welfare Reform Work

Figure I - AFDC Families%3A Wisconsin vs. The Nation

States that have incorporated most or all of the elements listed above are enjoying success at reforming welfare. A closer look at the most successful states shows why.

"Even during the 1990-93 economic slowdown, Wisconsin's caseload remained level or declined slightly"

Welfare-to-Work Success: Wisconsin. Gov. Tommy Thompson has long promoted aggressive reform of the welfare system. He campaigned on a reform platform and rallied widespread support for his program. While many states have implemented welfare-to-work efforts only recently, Wisconsin committed to reform a decade ago, and the state's subsequent success has strengthened its political commitment.

  • From January 1987 to January 1997, Wisconsin reduced its welfare caseload by 53,147, a net reduction of 54.1 percent - compared to a 9.6 percent increase in the caseload nationally over the same period.9
  • In 1987 the state sent out welfare checks totaling $46 million each month; this year the figure is $21 million a month, a saving of some $300 million in 1997 alone.10
  • Since September 1997, with the implementation of the Wisconsin Works (W-2) program, welfare caseloads have decreased by one-third and state officials estimate that by March 1998 the remaining two-thirds of welfare recipients will be working - every one of them will be doing something in return for a check.

Wisconsin's experience answers one of the most frequent criticisms of current welfare reform: that declining caseloads can occur only in a good economy. As Figure I shows, even during the economic slowdown of 1990 to 1993, when welfare rolls for the nation as a whole rose dramatically, Wisconsin's caseload remained level or declined slightly.

"Welfare reform in Wisconsin began with one simple premise," according to Thompson. "Every person is capable of doing something."11 This philosophy was implemented in several phases, beginning with the Work First program, and expanded in 1995 by adopting the more comprehensive welfare reform legislation known as Wisconsin Works. In this legislation the state adopted a four-part plan for moving welfare recipients to work:

  • Those who are job-ready immediately are placed in an appropriate, unsubsidized job, usually in the private sector.
  • Those without a work history are placed in a subsidized job for a limited time - usually six to nine months.
  • Those with few skills and poor work habits are placed in community service jobs for six to nine months to learn needed skills and work habits before being placed in the private sector.
  • Those incapable of even community service work are placed in the state's W-2 Transitions program and required to participate in activities consistent with their abilities.

To centralize its efforts, Wisconsin established Job Centers that provide one-stop employment and job training.

"Wisconsin complements its welfare-to-work program with several other reforms."

Wisconsin complements its welfare-to-work program with several other reforms. For example, Learn Fare requires families to keep their school-age children in classes in order to receive a welfare check. Children First has increased child support payments significantly by giving fathers a choice: either pay child support or go to jail. Further:

  • In January 1994, the state passed legislation deemphasizing the role of additional education, which is costly and often has little impact on getting people back to work.
  • In December 1995, Wisconsin passed legislation that created incentives for state bureaucrats to help recipients leave the welfare rolls - or stay off them in the first place.
  • In March 1996, Wisconsin began diverting potential welfare recipients into Pay for Performance, a program in which applicants first meet with financial and employment specialists who identify the alternatives to welfare, the services available to help them find employment and child care options.

As a result of Wisconsin's strong commitment to work for anyone receiving a welfare check and its willingness to try new and innovative programs, it has demonstrated that welfare reform can work, even in slower economic times.

Figure II - Oregon Welfare Recipients Given a Choice%3A Unsubsidized Jobs Look More Attractive

Welfare-to-Work Success: Oregon. Welfare reforms being implemented in Oregon, Mississippi and six other states are based on the premise that most welfare recipients can go to work immediately and that most training should take place on the job. The vision underlying the Full Employment Program is that able-bodied welfare recipients should get a paycheck, not a welfare check. While this program varies slightly from state to state, in Oregon it includes:

  • Subsidized jobs at the minimum wage or higher. Federal and state money that was used to fund food stamps and AFDC is used instead to subsidize mainly private-sector jobs. Employers must pay participating workers at least the minimum wage and as much as they pay like-trained employees. The program guarantees that participants receive more spendable income (when the Earned Income Tax Credit is included) than they would get from a welfare check. The average pay is more than $6.45 an hour.
  • Incentives for employers. The program subsidizes employers in an amount equal to the minimum wage plus FICA taxes, unemployment insurance and workers' compensation insurance premiums.
  • Opportunities for advancement. If the employer has not offered the participant an unsubsidized job after four months, the participant is paid for eight hours of job-search time every week for the next two months. If the participant does not find an unsubsidized job, at the end of the period he or she may switch to another subsidized job with another employer.
  • Temporary continuation of noncash benefits. Those who would normally qualify for Medicaid retain their eligibility and receive child care if they need it.
  • Educational opportunities. Participants in a subsidized job may receive guidance and counseling, including life skills classes. They may also enroll in classes to earn a General Education Development (GED) diploma. However, they learn job skills primarily on the job, not in a classroom.

"Four out of five people who took subsidized jobs moved on to unsubsidized jobs during the first 14 months of the pilot project."

Oregon was the first state to adopt a Full Employment Program (JOBS Plus) in a three-year, six-county pilot project. At the same time, the state implemented a jobs-oriented philosophy in other counties. Many welfare recipients quickly found unsubsidized jobs when faced with the reality of losing their benefits. Others left the system, presumably because they had better alternatives.12

  • Of the approximately 2,200 people taking jobs in the six pilot counties, about 80 percent did not need the government subsidy, saving the system millions of dollars in welfare spending. [See Figure II.]
  • Of those who did take subsidized jobs, four out of five moved on to unsubsidized jobs during the first 14 months.
Figure III - Compliance Rate for Teen Mothers on Welfare (1996)

A more detailed examination of results in one of the pilot counties demonstrates one reason why welfare-to-work saves money: faced with having to take a job, about a third of the people simply leave the system. In Beaverton, 549 people applied for welfare between February and July of 1996.13 Of that number:

"Many Welfare recipients quickly found unsubsidized jobs when faced with the reality of losing their benefits."

  • About 35 percent signed up for JOBS Plus but found an unsubsidized job within the first 30 days.
  • About 33 percent left the program voluntarily or refused to cooperate and are in the process of losing their welfare benefits.
  • Eight people out of 549 actually required a subsidized job.

Because of the work requirements, more welfare recipients are leaving the system, fewer are signing up for benefits and the state is saving money.14

  • Within three months of the JOBS Plus program's limited 1994 introduction, the number of families on welfare began falling. The numbers are down about 53.2 percent since the beginning of 1994, from 42,000 to 20,606, including a caseload drop of 8,000 in just the last 12 months.
  • 95 percent of two-parent families and 75 percent of single-parent families are taking part in work activities.

Welfare-to-Work Success: Virginia. Taking a more comprehensive approach under Gov. George Allen, Virginia passed legislation that went into effect in July 1995, intended to move welfare recipients to work while addressing some of the social problems that trap people in the welfare system. The work-related provision of the legislation, known as the Virginia Initiative for Employment Not Welfare (VIEW), requires able-bodied AFDC recipients to begin some type of work activity within 90 days of entering the welfare system. If recipients fail to find work, then caseworkers can place them in community work to gain experience.

At the same time, the state adopted the Virginia Independence Program (VIP) to counter social problems that make it difficult for some families to leave the welfare system. For example:

  • Mothers must name the father(s) of their children. As of July 1996 - when an assessment was made of the first year's progress - the state had experienced a 99.6 percent compliance rate with this provision. [See Figure III.]
  • Most children, including minor mothers, must attend school to receive their benefits. By the end of the first year, 99.5 percent of the AFDC children had complied with the mandatory school provision.
  • Unlike traditional welfare, which penalized welfare families frugal enough to save some money, the state permits low-income families to save up to $5,000 for purposes of education, home ownership or to start a business.
  • The state imposes a "family cap," providing no additional cash benefits when a family already receiving benefits has another child.

What has been the state's year-long overall experience with these reforms?

  • More than 30 percent of Virginia's total welfare caseload went to work in order to avoid a loss of benefits.
  • The welfare caseload declined 14 percent after only the first year, saving Virginia taxpayers $13.8 million.

"Success in neighboring Fairfax County presents a contrast with Washington D.C."

However, Virginia's experience provides additional insight into those districts that have not made a strong commitment to a welfare-to-work initiative, such as neighboring Washington, D.C., whose welfare caseload has dropped only 2 percent.

Fairfax County in Virginia borders on Washington, D.C., yet according to data from the county:15

  • 1,880 individuals enrolled in the VIEW program between April 1996 and April 1997.
  • 1,226 of these participants found employment, with 1,051 finding full-time jobs.
  • The average rate of employment retention was 71 percent.
Figure IV - Children Having Children

"In Virginia, 99.6 percent of mothers named the father(s) of their children, and 99.5 percent of children attended school."

Because Virginia's welfare reform legislation provided some local flexibility, not all of the state's counties responded with a strong work program. Neighboring Arlington County did not put as much initial emphasis on work as Fairfax did and quickly discovered it would not meet the state's goals. Arlington officials had to quickly revise their county's plan.16

Welfare-to-Work Success: Michigan. In October 1992, Michigan's Gov. John Engler obtained a federal waiver for the implementation of the To Strengthen Michigan Families (TSMF) program. The program encourages parents to stay together by eliminating "marriage penalties." Welfare mothers are permitted to keep the first $200 a month of their earnings without losing anything from their welfare checks. Transitional child care and medical coverage are provided when recipients reach the earnings limit and lose cash assistance.

Under Michigan's Work First program, welfare recipients must work at least 20 hours a week or actively seek a job within 60 days or lose benefits. Work First is a collaborative effort between Michigan's social services office and its job commission. It uses local boards, generally with a private-sector majority, to coordinate employment opportunities.

Most recently, Michigan implemented Project Zero in six areas of the state. A small research effort, Project Zero is identifying personal characteristics, demographic information, client strengths and barriers to employment of welfare recipients. Private-sector companies work with the project to help place recipients in jobs.

"Since Michigan launched its program, 129,016 welfare recipients have left the rolls because they were earning too much money to qualify."

Like other aggressive welfare reform states, Michigan has seen its caseload drop significantly. In 1991, Michigan's Family Independence Agency (formerly the Department of Social Services) had a welfare caseload of 245,000. Since the launch of the program in October 1992:

  • 129,016 welfare recipients have left the rolls in Michigan because they were earning too much money to qualify.
  • Cases without earned income decreased from 178,751 in September 1992 to 88,156 in September 1997.

Although Michigan has experienced only a 38 percent decline in welfare cases since January 1993 - much less than the decline in some other states - it demonstrates that even states with large urban centers and chronically underemployed inner-city populations can reduce their welfare rolls.

Other Welfare-to-Work Successes. Among the other states successful in reducing their welfare rolls is Mississippi, which adopted a version of the Full Employment Program pioneered by Oregon. Though the program was not implemented statewide, in less than five years:17

  • The welfare caseload was down from more than 61,000 to 32,288 as of August 1997 - a decline of 47.1 percent.
  • In the past year alone, the number of people receiving Temporary Assistance for Needy Families (TANF) is down 29.8 percent.
  • In August 1997, 143,617 households received food stamps, a 29 percent drop from 200,000 in 1993.

"Wyoming, with the least population, has the largest reduction in welfare cases - 73 percent."

Even though it began welfare reform only in December 1996, Wyoming (with the nation's smallest population) can boast a 73 percent reduction in welfare cases - the largest percentage decline in the country. Under Gov. Jim Geringer, Wyoming's Personal Options with Employment Opportunities (POWER) program encourages self-sufficiency through work. In contrast to Wisconsin's Pay for Performance, Wyoming's work program is called Pay after Performance to stress that a recipient must work for benefits.

As does Michigan, Wyoming requires that each client sign an Individual Responsibility Certificate of Understanding that defines performance requirements. The purpose is "to promote and support individual and family responsibility through the belief that parents, not government, should be responsible for themselves and their children."

Although Vermont can only claim a moderate reduction in welfare recipients, its 1994 welfare reform legislation is significantly reducing teen pregnancy. Prior to reform, Vermont provided cash assistance and helped young girls who had become pregnant get their own apartments. Now teens with children must live under supervision and cannot collect welfare if they set up an independent household.18

As a result of this and other restrictions, the number of teenage mothers in Vermont is down 25 percent, compared to a 12 percent decline nationally, with no detectable increase in abortions. [See Figure IV.]

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