Welfare Reform

Welfare policy at the start of the twenty-first century is the result of many changes in the nature of assistance to the economically disadvantaged throughout the history of this nation. Before 1900 the federal government played a minimal role in the alleviation of poverty. During this period, assistance to the poor was given through religious organizations and private philanthropic societies in the form of in-kind benefits such as clothes, shelter, and food. This assistance was often predicated on some type of work done in return on the part of the recipient, thus allowing for the recipient to retain a sense of pride and responsibility in "working" for the assistance given. Around the turn of the century, the plight of America's poor was just beginning to catch the attention of commentators such as Jacob Riis (1890) and Jane Addams (1902), who chronicled the conditions of urban housing tenements in New York and Chicago. Still, the government was a relatively small part of the American welfare structure at this time. As indicated by Carl Chelf (1992), in the years prior to the Great Depression, only about 12 percent of the assistance provided in the nation's fifteen largest cities came from public sources. Nevertheless, the idea that the federal government had a role in ameliorating the conditions of poverty was beginning to creep into the American consciousness.

In 1909 the first significant recognition of the problem of poverty by the federal government occurred when President Theodore Roosevelt invited 200 experts to the White House Conference on the Care of Dependent Children, which was essentially a brainstorming session on how best to devise programmatic solutions to assist widows and impoverished children. Two primary movements arose out of this conference–one to provide mothers' pensions and one to establish a federal children's bureau. The mothers' pension movement was primarily manifested at the state level, and by 1919 such pensions were available in thirty-nine states. The movement to establish a federal children's bureau culminated in the passage of federal legislation in 1912 that created the U.S. Children's Bureau, which provided federal grants to states that funded maternal and child health services. Federal involvement on this front was further institutionalized with the passage of the Sheppard-Towner Act of 1921, which supported the implementation of the first direct federal expenditures for child welfare.

The national economic collapse experienced during the Great Depression created the impetus for a much greater federal involvement in social welfare. In the face of unemployment rates of more than 20 percent that negatively affected the ranks of the middle and even the upper class, President Franklin D. Roosevelt created the Committee on Economic Security. This committee provided the momentum for the passage of the Social Security Act of 1935, which had two primary components: The first was an employment-based social insurance system based upon the contributions of employees and employers and the second provided assistance to economically disadvantaged mothers that was noncontributory in nature. This latter program, known as Aid to Families with Dependent Children (AFDC), would form the foundation of the welfare state well into the 1990s.

In the years after World War II America's urban centers began to deindustralize, as advances in mass-produced housing construction and the development of the national highway system facilitated the movement of industry and population to peripheral suburban areas. This movement was skewed by income and race. Those that moved outward tended to be largely more affluent and Caucasian, while those that remained within the urban core were largely economically disadvantaged minorities that faced declining opportunities for employment near their residences. These changes in the "structure of opportunity" resulted in highly concentrated populations of disadvantaged people within the nation's inner cities. As a result, the number of AFDC recipients increased 17 percent between 1950 and 1960. According to the U.S. Bureau of the Census, by 1960, more than 22 percent of the nation's population continued to live at incomes below the poverty line.

The persistence of poverty in America was addressed through federal initiatives in the 1960s, including John F. Kennedy's "War on Poverty" and Lyndon B. Johnson's "Great Society." Perhaps the most significant result of these efforts was the passage of the Economic Opportunity Act of 1964, which created the Office of Economic Opportunity (OEO). The OEO operated through a huge network of "neighborhood service centers" that facilitated the allocation of benefits to the community. The effect of the Economic Opportunity Act was profound. Between 1960 and 1970 the number of AFDC recipients increased by 107 percent and the national poverty rate declined to just under 13 percent.

From Welfare to Work: Federal and State Programs

The first federal effort to connect employment to welfare receipt was embodied in the Workforce Incentives Program, which was part of the AFDC law between 1967 and 1989. Under this program, states were required to register through their employment services any AFDC recipients with no preschool children. Of 1.2 million AFDC recipients in 1986, only 130,000 "worked" their way out of welfare, most without the assistance of the program. An attempt at addressing these shortcomings was represented in the Family Support Act of 1988 (FSA), which created the Job Opportunities and Basic Skill (JOBS) Program. The JOBS program required any woman whose youngest child was three or over to participate in activities intended to promote self-sufficiency. Although FSA was a significant improvement over past efforts in that it provided for job training, childcare, and transitional assistance, states had difficulty meeting the 40 percent match requirement for the JOBS program. As a result, states were exempting more than half of the adult caseload in 1992, with some states reaching a 70 to 80 percent exemption rate. Overall, only about 7 percent of the adult caseload participated in the JOBS program in 1992.

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 effectively ended the federal direct cash benefit to disadvantaged parents by reverting to funding awarded in the form of block grants to states. This policy gave states wide latitude in expending this funding, although several parameters were established. First, PRWORA placed a sixty-month lifetime limit on the receipt of benefits. States were allowed, however, to allow for a time limit exemption for up to twenty percent of the caseload. Second, PRWORA limited consecutive receipt of benefits to twenty-four months, after which recipients would have to reapply to continue participation in the program. Third, recipients were required to work as soon as they were determined to be "job-ready." Thus, PWORA re-established welfare policy as a means of providing short-term assistance as recipients worked towards employment.

The implementation of this latest permutation of welfare policy was a response to a wave of efforts at welfare reform at the state level, as more than forty states had been granted waivers to impose major changes in their welfare systems between 1993 and 1996. The passage of PRWORA only accelerated this tendency. Within the framework of PRWORA, the imposition of time limits at the state level was an important component of these changes. As of 2000, the enforcement of time limits had resulted in the loss of benefits for approximately 60,000 families nationwide.

The Impact of Welfare Reform

According to statistics published by the U.S. Department of Health and Human Services and Economic Policy Institute in 2001, all of these sweeping changes in federal and state welfare policy resulted in a 56 percent reduction in caseload between 1993 and 2000–from more than five million families (5.5 percent of the population) to just over two million families (2.1 percent of the population). In fiscal year 1994, only 8 percent of TANF adults were employed while receiving assistance compared to 28 percent in fiscal year 1999.

However, it is important to note that the PRWORA was implemented during the one of the strongest economic cycles in history. Researchers have found that at least 40 percent of the fall in caseloads may be attributable to the growth in the economy, rather than to changes in welfare policies. As unemployment ticked upwards in 2000 and 2001, caseloads again began to rise. Food stamp caseloads jumped by nearly 600,000 from September to October 2001–a 3 percent increase–and the majority of states saw increases in welfare caseloads during the latter part of 2001. Welfare caseloads became increasingly concentrated in America's cities. As of 1999, nearly 60 percent of all welfare cases were in 89 large urban counties, and ten urban counties accounted for almost one-third of all U.S. welfare cases.

Analysis of the poverty data regarding those moving from welfare to work indicates that although the poverty rate has declined overall, it has increased among working families, particularly those headed by single mothers. For those families that were already poor, poverty deepened between 1995 and 1999. The poverty rate among people in these families, after government benefits and taxes are taken into account, was 19.4 percent in 1999, nearly the same level as in 1995, when it stood at 19.2 percent. The census data also show that in 1999, the incomes of working single-mother families that were poor fell below the poverty line by an average of $1,505 for each person in these families. The number of working single-mother families that were poor climbed considerably between 1995 and 1999 and was larger in 1999 than at any other time in the 1993 to 1999 period. These data indicate that while welfare reform policies resulted in the employment of more single mothers, an unintended consequence of this public policy has been that working-poor families headed by single mothers have grown poorer.

Work supports were also implemented in the welfare to work reform efforts. The major areas of support focused on childcare, health care, the EITC, food stamps, and housing. The total federal dollars available for childcare nearly doubled from the early 1990s to the start of the twenty-first century and new regulations allowed states to use TANF monies for childcare expenditures. However, in 1999 only 12 percent of eligible families received assistance through the Child Care and Development Fund and Head Start served less than half of eligible children. Furthermore, despite increased federal funding on childcare over the 1990s, wages for childcare workers stagnated, resulting in recruitment and retention problems among child care workers.

As families transition to work, the costs of health care and housing costs become major concerns. Some employers do not offer affordable health benefits to the dependents of the employee. A parent in a family of three earning more than $7,992 (59 percent of the poverty guideline) is not eligible for Medicaid coverage. Former welfare recipients experience levels of health hardships similar to those of welfare families, and higher than those of poor families overall. In addition, the welfare reform legislation did not recognize the large role of housing in the budgets of poor families. A recent report concluded that "families are experiencing high rates of housing hardships: among parents who recently left welfare, 28 percent report being unable to pay housing or utility bills" (Wright, Gould, and Schill, p. 46).