The Key to Welfare Reform

Today the relief rolls stand at near record levels despite six years of the Reagan presidency. Some 11 million Americans currently receive payments from Aid to Families with Dependent Children, the main cash-assistance program available to the non-elderly. Roughly 3.7 million families were on the rolls in 1986, near the 1981 all-time high of 3.9 million. Nor was the high number of welfare families last year unusual during the Reagan Administration. More families have been on AFDC in each of the past four years than at any previous time, with the exception of 1981. Correspondingly, federal expenditures on AFDC have edged upward, from $7.8 billion in fiscal year 1982 to $9 billion in fiscal year 1985. After adjustments for inflation, that amounts to a rise of three percent.

Those numbers don't square with the conventional wisdom about Reagan's cold-blooded budget cuts. In fact most of the President's domestic-program curtailments took place during his first year in office; since then few people have bothered to study their impact. Reagan's OBRA cutbacks are a case in point. Democrats widely denounced them at the outset--yet recent, little-noticed assessments of the regulations' effects indicate that the gloomy prognostications have not come true.

At first the toughened eligibility guidelines appeared to make a real dent in welfare dependency. Generally, they reduced the amount of earned income that could be disregarded in determining AFDC benefits, thereby removing several hundred thousand "working poor" families from the welfare rolls. The General Accounting Office estimated that 442,000 families were cut off AFDC by mid-1984 because of the new rules.

Yet the welfare rolls started rising in 1983, and no one was quite sure why. Unemployment was high, but increases in unemployment have not been closely linked to AFDC caseload growth during the past two decades. The persistence, moreover, of bloated welfare rolls in 1984 and 1985--years when the economy was booming and an unprecedented number of jobs were created--subsequently cast further doubt on the unemployment hypothesis. Divorce, which often pushes women and their children onto relief, remained level, and illegitimacy did not climb more rapidly than it had in previous years.

One possible explanation for the recent increase in dependency is that the Administration's rule changes, which made it harder to mix welfare and work, ultimately enticed mothers with low-paying jobs to go back on welfare. A recent analysis by Robert Moffitt, of Brown University concludes that women who were combining work and welfare stayed on the job after losing their benefits because of inertia--until a crisis hit. Then, once, say, a child became ill--an emergency that Medicaid typically covers if the mother is on AFDC--the mother reduced her working hours to restore her AFDC eligibility. Since crises of this sort occur only every now and then, Moffitt suggests, the dependency-inducing effect of the OBRA restrictions was delayed.

An equally critical and perhaps more disturbing shortcoming of the 1981 reforms is that they have failed even in the short term to curb the dependency of the hard-core welfare mothers--the women who stay on AFDC for a decade or more at a time. These chronic recipients have become the real source of public concern about welfare in recent years, and rightly so. "There is a difference," as Senator Moynihan puts it, "between people who have some trouble come into their lives and those whose whole lives are in trouble." Few taxpayers are outraged by a mother who goes on welfare for eight months because she's been deserted by her husband or laid off. Many do object, however, to women whose kids grow up seeing that it isn't necessary to work for a living (or that it's necessary only rarely). Two million children, most of whom are black, now live in families that have survived on welfare checks for a decade or more.

It is extremely difficult, it turns out, to reduce the welfare budget without getting these chronic users off the rolls. "Any program which fails to help the long-term recipients cannot possibly save much welfare money," says David Ellwood, of Harvard University's Kennedy School of Government. Whereas chronic recipients currently make up only a quarter of those who use AFDC, they consume at least 60 percent of its budget. That's because as the short-termers go on and off the rolls over a period of years, the chronic recipients remain. Thus, at any one time long-term dependents actually constitute the majority of welfare recipients. Getting someone off the dole, in short, is not the crux of the problem--whom you get off is.

Unfortunately, OBRA cut off the wrong families. According to a 1984 study by The Urban Institute, it removed from the welfare rolls "those at and near the margin--those most likely to leave anyway...Leaving behind a relatively 'hard core' group of recipients." A 1986 study by Vicky Albert and Michael Wiseman, of the University of California at Berkeley, found a marked lengthening of stays on AFDC in California. "OBRA effects appear to have been perverse," the authors conclude. "Because of OBRA, the state has been left with a more expensive and, in the long run, more dependent caseload." Ironically, President Reagan defended the cutbacks by saying that they were restricted to better-off recipients, leaving the "truly needy" unharmed in the social safety net. In fact the cutbacks primarily punished a small number of the most industrious welfare mothers. Left unaffected were those whom critics of welfare have always derided as "welfare deadbeats"--the able-bodied women who bear illegitimate children, drop out of high school, and live off relief checks for years at a time.

Just as the Administration's rewrite of the public-assistance rule book has failed to curb dependency, its efforts to reform work and training programs for welfare mothers have done little to get welfare mothers working. Work programs have never reached more than a small percentage of welfare recipients--and they appear today to be reaching even fewer families than they did when Reagan entered office. And though some small programs seem spectacularly successful--for example, the Reagan Administration's Job Training Partnership Act--much of that record turns out to be little more than statistical sleight-of-hand.

To date, Administration officials have essentially pursued two approaches to reforming job programs. They sought first to correct the abuses of previous job-training programs; then they created their own program to try to show how it should be done. Correcting perceived abuses led to eliminating funding for the Comprehensive Employment and Training Act (CETA)--which had a reputation for sloppy administration and placed participants in temporary public-service jobs, instead of moving them into permanent private positions. Overall, funding for work and training programs was cut 50 percent in real dollars from 1981 to 1986. The main program of job training and placement for welfare recipients--the Work Incentive Program, known as WIN--was reduced even more sharply, from $365 million in 1981 to $110 million in 1987. Nationwide the number of welfare recipients trained for jobs is minuscule: it is estimated that WIN moved 130,000 people off welfare in 1985, or about one percent of those on AFDC. Similarly, the much-touted, proliferating "workfare" programs, which require recipients to work off their welfare benefits in community jobs, are believed to cover about one percent of AFDC recipients.

Besides cutting back, the President sought to make job programs more efficient--WIN recipients should be hustled into jobs, instead of taking college courses that taxpayers' money pays for; welfare mothers should be induced to read want ads and look for a job, instead of simply sending in an application to city hall and calling it quits.

The no-frills solution developed by the Administration was the Job Training Partnership Act (JTPA), which established a program emphasizing quick placement in the private sector by teaching enrollees job-search techniques and offering them short-term training. Although the program is open to the members of various disadvantaged groups, it is clearly meant to reach AFDC mothers, since "reductions in welfare dependency" are a statutory goal of the program. Since the program began, in 1983, it has placed 61 percent of its participants in jobs, and the President has proudly boasted that it has "the highest job-placement record of any of the employment programs the government has ever tried." He's right--even though, paradoxically, the program is probably a waste of resources.

The hitch is that the Reagan Administration has never evaluated how similarly situated welfare recipients who did not go through the JTPA program fared in finding work, so no one really knows what difference the program makes. For example, JTPA may place 60 percent of its participants--but if 60 percent of similarly situated welfare recipients who do not go through JTPA also find jobs, the program is a waste of money. As conservatives have been quick to point out, the absence of a control group has proved a critical stumbling block to evaluating other job programs, such as Massachusetts's much-heralded ET initiative. Of course, not knowing whether JTPA made a difference is not the same as knowing that it didn't--but there's good reason to believe that it doesn't do much to reduce dependency. Study after study of the program shows that it achieves its high placement race by "creaming"--skimming the most talented few off the top. In 1985 only 72,500 AFDC recipients "entered employment" through JTPA (meaning they showed up for at least one day of work). According to the best estimates of the Labor Department, JTPA participants were significantly better educated than the rest of the AFDC population.

Creaming, it should be noted, is not limited to the JTPA program. It is endemic in job programs, because most administrators prefer to help job-ready applicants. Such applicants are often more eager to work, and it's easier to get them hired--enabling the administrator, naturally, to show a high job-placement rate. What the Reagan Administration did, though, was encourage more creaming, by tilting federal incentives further away from working with hard-core welfare mothers. For example, the Administration's performance standards offer financial incentives to program managers who can quickly place applicants in private-sector jobs at a low per-slot cost. Women who have been on welfare for a decade or more, however, need more than the shallow but "efficient" support offered through JTPA--a few weeks of training and a lecture about how to shape a resume aren't enough. Several recent studies of other programs (studies that do use control groups) show that the most disadvantaged welfare recipients--mothers who dropped out of high school, have little or no work experience, and stay on welfare for long periods--benefit the most from employment and training programs. The same studies show that AFDC recipients who are better prepared for the job market--like those who go through the JTPA program--ultimately derive little benefit from work programs. The job-ready candidates would have climbed off welfare without government help.

In view of JTPA's shortcomings, diagnosing the ills of current job programs seems easy enough: they've failed to reach enough welfare mothers, and those they have reached have least needed the help. The prescription, consequently, seems equally clear: expand job programs and give priority to serving chronic welfare recipients. But neither the Administration's nor the Democrats' work program under debate in Congress this year would affect the welfare rolls more than marginally. The divide in this year's debate is between those who favor a targeted approach to work programs (generally Democrats) and those who favor a blanket approach (generally Republicans). The problem, it turns out, is that the targeted approach is not so carefully aimed and the blanket method is not so all-inclusive.

Targeting, whose champions are Ted Kennedy and Augustus Hawkins (the respective chairmen of the Senate and House labor committees), would give chronic welfare mothers priority over job-ready recipients. For example, Kennedy's Jobs for Employable Dependent Individuals (JEDI) program provides financial bonuses to states that train and place AFDC recipients who have been on welfare for at least two years or are young high school dropouts. JEDI passed the Senate last April, 99 to 0, and Kennedy says that it "could be the catalyst for real change in long-term dependency." Yet no one actually knows how to reach hard-core welfare mothers on a broad scale. The National Governors' Association favors the preemptive strike--that is, immediately going after welfare mothers who are candidates for long-term dependency. Suggested reforms include requiring teen mothers to stay in school, mandating immediate work for young unwed mothers, and requiring mothers to seek work as soon as their youngest child turns three.

Reagan's advisers dismiss targeting as the latest academic fad. Robert Carleson, a former Reagan aide now in the private sector, says, "Social scientists always try to categorize people, but you can't sit in your ivory tower in Washington and apply these kinds of demographic distinctions to millions of people around the country. It would be a disaster." Even David Ellwood--who with his colleague Mary Jo Bane has done most of the work analyzing how short-term and chronic recipients differ--is skeptical. "Targeting which is handled badly can make people feel isolated and stigmatized," he says. "You don't, moreover, want to offer help only to those with the greatest impediments, since that can create the wrong impressions about what is rewarded." As Ellwood points out, setting aside resources for chronic welfare recipients could seem to penalize job-ready welfare recipients who finished high school or have recent work experience.

The only real way to get welfare mothers working, Administration officials assert, is to have a broad, mandatory program. For the past seven years Reagan has proposed, with little success, a national version of a "workfare" program, but Congress is now taking the work-requirement approach more seriously. The Administration's current proposal--the Greater Opportunities Through Work (GROW) program--is easily its most ambitious to date. Previous Administration workfare plans allowed most mothers to beg off if their youngest child was less than six years old. GROW would require mothers with children of six months or more to participate, roughly doubling the number of welfare recipients who would be reached by the program. When the program was fully operational, 60 percent of those eligible would be looking or training for work, finishing high school, or in a workfare slot.

GROW would cast a wider net than Kennedy's JEDI proposal, but it still would reduce dependency only modestly. That's because of the two stumbling blocks that politicians love to ignore when talking about work programs--the price tag and the "dribble-out" phenomenon.

Cost estimates for GROW have left some welfare analysts incredulous. During the first year of the program, when 20 percent of those eligible for GROW would be expected to participate, roughly $40 million of the money would be for child care. California alone expects to spend twice as much next year on child care for a much smaller group of welfare mothers in its work program. Underestimating the cost of a job program is far more than just a bean-counter's nightmare; as the experience with WIN shows, inadequate funding can hinder efforts to reduce dependency. AFDC family heads, for examples have been "required" to participate in WIN since 1967, but the requirement has largely been meaningless. Underfunded from the start, WIN typically registers hundreds of thousands of welfare mothers who end up doing nothing, since there is no work or training available through the program. Participation requirements make the paper-shuffling routine worse, since lots of recipients can be served only if the most job-ready mothers are helped. GROW provides similarly perverse incentives for creaming by withholding matching funds for the direct costs of education or training--both of which chronic welfare recipients need to become employable.

Assume, though, for the sake of argument, that GROW's cost estimates are plausible and its incentives flawless. There remains the stumbling block of the dribble-out phenomenon: once job programs get rolling, some people drop out, and simultaneously the number that get exempted seems inevitably to grow. Historically, the most successful job programs have a placement rate of about 65 percent. That means one out of three participants doesn't get a job out of the "best" programs; the person gets sick, finds a job before the program is completed, gets married, or recycles through the program. Meanwhile, those who do see the program through typically fail to make enough money in their training slot or low-wage job to get off welfare. As David Ellwood reports, the most successful programs for poor mothers "boost earnings by perhaps a thousand dollars per year on average, surely not enough to insure self-support." Unlike many mothers of preschoolers, those on welfare typically cannot secure a decent-paying part-time job that will enable them also to care for their children.

These humble results might be dismissed as unrepresentative, part and parcel of the small, inefficient job programs of yesteryear, were it not for the loophole problem. GROW actually would grant far fewer exemptions than other work proposals, including the current proposal from the National Governors' Association. The NGA, for example, would not require mothers with children under three to participate in its work-education initiative--which lets almost 40 percent of all AFDC recipients off the hook before the program begins. By lowering the age of the youngest child to six months for exemption, GROW closes that loophole and purportedly covers 90 percent of the AFDC caseload.

Yet even in GROW the numbers would still add up: 10 percent of AFDC mothers with infants would be exempt; 40 percent of the people eligible for GROW would not be required to participate when the program was fully implemented. Some people would recycle back into the program after losing a job. Others would participate by getting their high school degree instead of working. The cumulative effect of the loopholes can be seen in the Administration's own projections. By 1992, when the program was fully implemented, 440,000 fewer families would be on welfare because of GROW, either because they had found jobs through the program or because they were deterred by GROW from ever going on AFDC. That's a 12 percent reduction--worthwhile, certainly, but far short of a "simple solution" to the welfare problem.

The modest record of employment initiatives has stirred renewed interest in more-radical solutions. Job-related reforms advocated in recent months have included abolishing AFDC and replacing it with a guaranteed government jobs program; and expanding the use of tax credits, to make it easier for mothers to work part-time without having to rely on AFDC. Recommendations for reforming cash benefits have included shutting off payments to a family after two years, and expanding child-support laws to provide single parents a guaranteed income. A far-reaching overhaul isn't likely in 1987, however, because the political consensus between Republicans and Democrats breaks down when more than philosophical support for job programs is at stake.

What's likely to emerge from the Republican-Democratic tug-of-war in Congress is some tinkering with the cash side of the welfare system, plus a compromise job program that includes more funding for jobs and training, with stiffer obligations for recipients. Should President Reagan win authorization for a series of demonstration projects at the local level, they undoubtedly would produce some useful ideas for curbing welfare dependency. Still, most of the experiments are expected to run for at least five years, so final results wouldn't be available until at least 1992, long after Reagan leaves office. In the meantime, the prospects for mothers to climb off the relief rolls the old-fashioned way--through earnings--remain dim, far dimmer than either Ronald Reagan or Ted Kennedy cares to admit.