WELFARE REFORM AND BEYOND · ences resulting from the 1996 federal welfare reform legislation. Welfare Reform and Beyond is the most recent in CED’s ongoing series of policy studies

WELFARE REFORM AND BEYOND

MAKING WORK WORK

A Policy Statement by the Research and Policy Committee of the Committee for Economic Development

WELFARE REFORM AND BEYOND

MAKING WORK WORK

A Policy Statement by the Research and Policy Committee of the Committee for Economic Development

Library of Congress Cataloging-in-Publication Data

Welfare reform and beyond : making workwork : a statement on national policy by the Research andPolicy Committee of the Committee for Economic Development.

p. cm.Includes bibliographical references.ISBN 0-87186-137-2I. Committee for Economic Development.

Research and Policy Committee.

First printing in bound-book form: 2000Paperback: $18.00Printed in the United States of AmericaDesign: Rowe Design Group

COMMITTEE FOR ECONOMIC DEVELOPMENT477 Madison Avenue, New York, N.Y. 10022(212) 688-2063

2000 L Street, N.W., Suite 700, Washington, D.C. 20036(202) 296-5860

www.ced.org

iii

CONTENTS

RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY iv

PURPOSE OF THIS STATEMENT vii

CHAPTER 1: INTRODUCTION AND SUMMARY OF RECOMMENDATIONS 1Welfare Reform Goals: Responsibility, Work, and Reducing Poverty 2Recommendations: Completing Work-Centered Welfare Reform 4Recommendations: Expanding Opportunities to Acquire Skills 8

CHAPTER 2: WELFARE REFORM AND THE LABOR MARKET 12Changing the Rules: Work First 12From Welfare to Work: Experience to Date 19The Demand for Low-Skill Labor 26The Low-Skill Labor Force 28Implications of These Findings 28

CHAPTER 3: COMPLETING WORK-BASED WELFARE REFORM 29Encouraging Business to Hire Welfare Recipients 29Providing Services to Support Work 30Strengthening Financial Incentives to Work 37Planning for Economic Downturns 38Welfare Recipients and the Working Poor 42

CHAPTER 4: EXPANDING OPPORTUNITIES TO ACQUIRE SKILLS 44Improving Basic Education for Children and Adults 44Strengthening Publicly-Funded Employment and Training Programs 47Expanding Opportunities to Advance in the Workplace 49

CONCLUSION 53

APPENDIX A: INDICES OF POLICIES REQUIRING WORK AND SUPPORTING WORK, BY STATE 54

APPENDIX B: EMPLOYERS IN THE WELFARE TO WORK PARTNERSHIP 55

APPENDIX C: SOURCES OF FURTHER INFORMATION 57

ENDNOTES 59

MEMORANDA OF COMMENT, RESERVATION, OR DISSENT 65

OBJECTIVES OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT 68

The Committee for Economic Developmentis an independent research and policy organi-zation of some 250 business leaders and educa-tors. CED is nonprofit, nonpartisan, and non-political. Its purpose is to propose policies thatbring about steady economic growth at highemployment and reasonably stable prices, in-creased productivity and living standards,greater and more equal opportunity for everycitizen, and an improved quality of life for all.

All CED policy recommendations must havethe approval of trustees on the Research andPolicy Committee. This committee is directedunder the bylaws, which emphasize that “allresearch is to be thoroughly objective in char-acter, and the approach in each instance is tobe from the standpoint of the general welfareand not from that of any special political oreconomic group.” The committee is aided by aResearch Advisory Board of leading social sci-entists and by a small permanent professionalstaff.

The Research and Policy Committee doesnot attempt to pass judgment on any pending

specific legislative proposals; its purpose is tourge careful consideration of the objectives setforth in this statement and of the best means ofaccomplishing those objectives.

Each statement is preceded by extensive dis-cussions, meetings, and exchange of memo-randa. The research is undertaken by a sub-committee, assisted by advisors chosen for theircompetence in the field under study.

The full Research and Policy Committeeparticipates in the drafting of recommenda-tions. Likewise, the trustees on the draftingsubcommittee vote to approve or disapprove apolicy statement, and they share with theResearch and Policy Committee the privilegeof submitting individual comments for publica-tion.

Except for the members of the Research andPolicy Committee and the responsible subcommit-tee, the recommendations presented herein are notnecessarily endorsed by other trustees or by theadvisors, contributors, staff members, or othersassociated with CED.

RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY

iv

RESEARCH AND POLICY COMMITTEE

v

ChairmanJOSH S. WESTON, Honorary ChairmanAutomatic Data Processing, Inc.

Vice ChairmenIAN ARNOF, ChairmanBank One, Louisiana, N.A.ROY J. BOSTOCK, Chairman and Chief

Executive OfficerThe MacManus Group, Inc.BRUCE K. MACLAURY, President

EmeritusThe Brookings InstitutionCLIFTON R. WHARTON, JR., Former

Chairman and Chief Executive OfficerTIAA-CREF

REX D. ADAMS, DeanThe Fuqua School of BusinessDuke UniversityALAN BELZER, Retired President and

Chief Operating OfficerAlliedSignal Inc.PETER A. BENOLIEL, Chairman, Executive

CommitteeQuaker Chemical CorporationGORDON F. BRUNNER, Chief Technology

Officer and DirectorThe Procter & Gamble CompanyFLETCHER L. BYROM, President and

Chief Executive OfficerMICASU CorporationDONALD R. CALDWELL, Chief Executive

OfficerCross Atlantic Capital PartnersROBERT B. CATELL, Chairman and Chief

Executive OfficerKeySpan Energy CorporationJOHN B. CAVE, PrincipalAvenir Group, Inc.CAROLYN CHIN, Executive Vice

PresidentMarketXTA. W. CLAUSEN, Retired Chairman

and Chief Executive OfficerBankAmerica CorporationJOHN L. CLENDENIN, Retired ChairmanBellSouth CorporationGEORGE H. CONRADES, Chairman and

Chief Executive OfficerAkamai Technologies, Inc.KATHLEEN B. COOPER, Chief EconomistExxonMobil CorporationRONALD R. DAVENPORT, Chairman of

the BoardSheridan Broadcasting Corporation

JOHN DIEBOLD, ChairmanJohn Diebold IncorporatedFRANK P. DOYLE, Retired Executive

Vice PresidentGET.J. DERMOT DUNPHY, Chairman and

Chief Executive OfficerSealed Air CorporationCHRISTOPHER D. EARL, Managing

DirectorPerseus Capital LLCW. D. EBERLE, ChairmanManchester Associates, Ltd.WILLIAM S. EDGERLY, ChairmanFoundation for PartnershipsWALTER Y. ELISHA, Retired Chairman

and Chief Executive OfficerSprings Industries, Inc.EDMUND B. FITZGERALD, Managing

DirectorWoodmont AssociatesHARRY L. FREEMAN, PresidentThe Freeman CompanyRAYMOND V. GILMARTIN, Chairman,

President and Chief Executive OfficerMerck & Co., Inc.BARBARA B. GROGAN, PresidentWestern Industrial ContractorsPATRICK W. GROSS, Founder and

Chairman, Executive CommitteeAmerican Management Systems, Inc.RICHARD W. HANSELMAN, Retired

Chairman and Chief Executive OfficerGenesco Inc.RODERICK M. HILLS, ChairmanHills Enterprises, Ltd.MATINA S. HORNER, Executive

Vice PresidentTIAA-CREFGEORGE B. JAMES, Retired Senior Vice

President and Chief Financial OfficerLevi Strauss & Co.H.V. JONES, Office Managing DirectorKorn/Ferry International, Inc.EDWARD A. KANGAS, Chairman,

Global Board of DirectorsDeloitte Touche TohmatsuJOSEPH E. KASPUTYS, Chairman,

President and Chief Executive OfficerPrimark CorporationCHARLES E.M. KOLB, PresidentCommittee for Economic DevelopmentALLEN J. KROWE, Retired

Vice ChairmanTexaco Inc.CHARLES R. LEE, Chairman and

Chief Executive OfficerGTE Corporation

ALONZO L. MCDONALD, Chairmanand Chief Executive Officer

Avenir Group, Inc.NICHOLAS G. MOORE, ChairmanPricewaterhouseCoopersJOHN D. ONG, Chairman EmeritusThe BFGoodrich CompanyJAMES F. ORR III, Retired Chairman and

Chief Executive OfficerUnumProvident CorporationSTEFFEN E. PALKO, Vice Chairman

and PresidentCross Timbers Oil CompanyCAROL J. PARRY, Retired Executive

Vice PresidentThe Chase Manhattan CorporationVICTOR A. PELSON, Senior AdvisorWarburg Dillon Read LLCPETER G. PETERSON, ChairmanThe Blackstone GroupS. LAWRENCE PRENDERGASTDirector and Retired Chairman and

Chief Executive OfficerAT&T Investment Management

CorporationNED REGANThe Jerome Levy Economics InstituteJAMES Q. RIORDANQuentin Partners Co.MICHAEL I. ROTH, Chairman and

Chief Executive OfficerThe MONY Group Inc.LANDON H. ROWLAND, Chairman and

Chief Executive OfficerKansas City Southern Industries, Inc.GEORGE RUPP, PresidentColumbia UniversityHENRY B. SCHACHT, Director and

Senior AdvisorE.M. Warburg, Pincus & Co., Inc. LLCROCCO C. SICILIANOBeverly Hills, CaliforniaMATTHEW J. STOVER, Group President,

Bell Atlantic Directory GroupBell Atlantic CorporationALAIR A. TOWNSEND, PublisherCrain's New York BusinessARNOLD R. WEBER, President EmeritusNorthwestern UniversityDOLORES D. WHARTON, Chairman and

Chief Executive OfficerThe Fund for Corporate Initiatives, Inc.MARTIN B. ZIMMERMAN, Vice

President, Governmental AffairsFord Motor Company

*Voted to approve the policy statement but submitted memoranda of comment, reservation, or dissent. See page 65.

*

✝Abstain

✝

*

vi

SUBCOMMITTEE ON BUSINESS, WELFARE REFORM, ANDTHE LOW-WAGE LABOR MARKET

*Voted to approve the policy statement but submitted memoranda of comment, reservation, or dissent. See page 65.

Co-ChairsREX D. ADAMSDeanThe Fuqua School of BusinessDuke UniversityMATINA S. HORNERExecutive Vice PresidentTIAA-CREF

WILLIAM E. BROCKChairmanIntellectual Development Systems, Inc.ROBERT B. CATELLChairman, President and Chief

Executive OfficerKeySpan Energy CorporationMARY ANN CHAMPLINRetired Senior Vice PresidentAetnaKATHLEEN COOPERChief EconomistExxonMobil CorporationMITCHELL S. FROMSTEINRetired Chairman and PresidentManpower Inc.CAROL R. GOLDBERGPresidentThe Avcar Group, Ltd.LEON C. HOLT, JR.Retired Vice ChairmanAir Products and Chemicals, Inc.PRES KABACOFFPresident and Co-ChairmanHistoric Restoration, Inc.JOSEPH J. KAMINSKICorporate Executive Vice PresidentAir Products and Chemicals, Inc.

JOSEPH T. LYNAUGHRetired President and Chief

Executive OfficerNYLCare Health Plans, Inc.COLETTE MAHONEY, RSHMPresident EmeritusMarymount Manhattan CollegeDIANA NATALICIOPresidentUniversity of Texas at El PasoSTEFFEN E. PALKOVice Chairman and PresidentCross Timbers Oil CompanyROBERT M. PRICERetired Chairman and Chief

Executive OfficerControl Data CorporationJAMES Q. RIORDANQuentin Partners Co.ALAIR A. TOWNSENDPublisherCrain's New York Business

Ex-Officio MembersFRANK P. DOYLERetired Executive Vice PresidentGECHARLES E.M. KOLBPresidentCommittee for Economic DevelopmentJOSH S. WESTONHonorary ChairmanAutomatic Data Processing, Inc.

Non-Trustee MemberHILARY PENNINGTONPresidentJobs for the Future

PROJECTDIRECTORMARC BENDICK, JR.Bendick and Egan Economic

Consultants, Inc.

ADVISORSDANIEL E. BERRYVice President for Workforce PreparationGreater Cleveland Growth AssociationMARK A. HUGHESVice PresidentPublic/Private VenturesLAWRENCE MEADProfessor of Political ScienceNew York UniversityMICHAEL WISEMANSenior FellowThe Urban Institute

PROJECTASSOCIATEALASTAIR SMITHResearch AssociateCommittee for Economic Development

*

*

*

*

vii

CED Trustees have long appreciated theintricate connections between economicgrowth, education, the work force, and publicassistance. In this policy statement, CED Trust-ees examine the policies dealing with theseissues in light of the state and national experi-ences resulting from the 1996 federal welfarereform legislation.

Welfare Reform and Beyond is the most recentin CED’s ongoing series of policy studies aimedat helping the U.S. work force adapt to chang-ing economic conditions and improving theliving standard of all Americans, especiallythose on the lower rungs of the economicladder. We came to this study mindful that theold welfare system had become dysfunctional.It had developed corrosive disincentives andobstacles not only to work, but to participationin mainstream American society. There had tobe a better way.

Poverty is a national issue and a sharednational and state responsibility. Now, afterfour years of experience in shifting the em-phasis of policy from welfare checks to jobs, iswelfare reform working? We believe that, over-all, it is. To be sure, it is a work in progress—indeed, a work just beginning—whose finalresults will not be seen for years or decades.And, certainly, progress has been unevenamong states and communities. But we con-clude that the central premises of welfare re-form are sound: as a matter of simple equity,able-bodied recipients should work; and as amatter of simple economics, only employment,with public support and encouragement wherenecessary, offers a permanent path out of pov-erty.

Communities, states, businesses, and indi-viduals now face a major challenge: how do wemake welfare reform work better to achieve

what we believe should be its three fundamen-tal goals: enhanced personal responsibility,stronger employment, and the reduction ofpoverty?

Welfare Reform and Beyond provides both near-term and longer-term suggestions in answer tothis question. For the near term, we offer a setof specific recommendations for moving to-wards these goals by completing welfare re-form. We urge Congress to examine theserecommendations when it considers reautho-rization of the program. For the longer term,we offer directional guidance to individuals,employers, and public officials for buildinginstitutions that will extend to all Americansopportunities to acquire productive skills. It isour firm conviction that only this developmentof individuals’ capacities can eventually raisetheir living standards.

In offering these recommendations, we rec-ognize that no system that is equitable, politi-cally viable, and affordable can improve thecircumstances of every family and individualin economic distress. Our more realistic goalhere is to present a balanced and achievableagenda for moving our society more effectivelyfrom welfare to work, and eventually to thehighly productive and rewarding work to whichall Americans aspire.

Since its founding in 1942, CED Trusteeshave addressed these and related issues throughour ongoing programs on education reform,the labor force, and the changing nature ofwork. Most recently, we have explored them insuch statements as The Employer’s Role in Link-ing School and Work, Connecting Inner-City Youthto the World of Work, Rebuilding Inner-City Com-munities, Putting Learning First: Governing andManaging the Schools for High Achievement, WhyChild Care Matters, The Unfinished Agenda: A New

Purpose of This Statement

Vision for Child Development and Education, andAn America That Works: The Life-Cycle Approach toa Competitive Work Force. A list of these andother CED policy statements appears in theback section.

ACKNOWLEDGMENTSI would like to thank the dedicated group

of CED trustees and advisors who comprisedthe subcommittee that prepared this report(see page vi). Very special thanks go to thesubcommittee’s co-chairs, Rex Adams, Deanof the Fuqua School of Business at Duke Uni-versity, and Matina Horner, Executive VicePresident of TIAA-CREF. We are also gratefulto CED’s staff for the research, analysis, andwriting they have contributed to this policystatement: project director Marc Bendick, Jr.,of Bendick and Egan Economic Consultants,Inc.; CED research associate Alastair Smith;and project counselor Van Doorn Ooms, CEDSenior Vice President and Director of Research.

Finally, we gratefully acknowledge gener-ous financial support provided by The ChaseManhattan Foundation, The John D. andCatherine T. MacArthur Foundation, Feder-ated Department Stores, Northwestern MutualLife Foundation, and The CommonwealthFund. Contributions such as these enable CEDto produce thoughtful, well-researched policystatements and disseminate them widely to con-tribute to the national dialogue on these im-portant issues.

Josh S. Weston, ChairmanCED Research and Policy CommitteeHonorary ChairmanAutomatic Data Processing, Inc.

viii

1

Chapter 1.Introduction and Summaryof Recommendations

In the White House Rose Garden on Au-gust 22, 1996, President Clinton signed thePersonal Responsibility and Work Opportu-nity Reconciliation Act of 1996 (PRWORA).This law replaced the nation’s principal cashwelfare program, Aid to Families with Depen-dent Children (AFDC), with a boldly differentapproach called Temporary Assistance toNeedy Families (TANF). PRWORA providedthe capstone to policy initiatives undertakenin many states to modify AFDC under federalwaivers. Reversing policies that had prevailedfor decades, TANF caps federal public assis-tance spending and ends its entitlement sta-tus, subjects recipients to stringent workrequirements and eligibility time limits, in-creases financial incentives to work, and grantsstates flexibility to design their own programs.When PRWORA is fully implemented in 2002,welfare will no longer mean government support-ing low-income people who do not work but insteadgovernment helping low-income people to work tosupport themselves.

CED strongly endorses PRWORA’s boldmandate to replace a public assistance systemthat often discouraged personal responsibilityand employment with one whose centralpremise is that most assistance recipients canand should work.

Between 1994 and 1999,✝ welfare caseloadsnationwide shrank 50 percent. (See Figure 1.)

Figure 1

Families Receiving AFDC/TANF

SOURCE: Data from U.S. Deptartment of Health and HumanServices, adapted from Douglas Besharov, Testimony beforethe U.S. House of Representatives, Subcommittee on HumanResources of the Committee on Ways and Means,May 27, 1999.

Number of Families (millions)

6

5

4

3

2

1

0

+38%

+229%

+5%

+34% -50%

Year

✝ Enrollment in AFDC peaked in 1994 and started to fall prior toPRWORA’s passage in 1996 because 40 states were then operat-ing under federal waivers that allowed them to modify AFDC indirections that subsequently evolved into their TANF programs.

As welfare families left the rolls, the adultsheading these families (principally women)entered the workforce and employment inlarge numbers. (See Figure 2, page 2.) As manyas 80 percent of those persons leaving the

1960 1970 1980 1990 June 1999

2

Welfare Reform and Beyond

welfare rolls held jobs during some period,and 60-70 percent were employed when sur-veyed. These results have been hailed as evi-dence that the new approach has already takenhold, and in many states it clearly has. How-ever, an unusually strong job market has alsocontributed, disguising the fact that some stateshave made more progress than others in imple-menting a pro-work system. Not all states cur-rently provide even basic work support servicesand incentives, and only a minority compre-hensively undergird families’ transitions toemployment. Only about half have made sub-stantial preparations for a weakening of thestrong labor market.

Four circumstances currently create an un-usual opportunity for states to develop welfaresystems that are thoroughly work-centered: (1)strong public support for a work-oriented ap-proach; (2) legislation providing a clear frame-

work; (3) substantial financial resources forwork-supportive services and incentives; and(4) a strong job market. This unusual coinci-dence of circumstances will not last indefinitely.We urge state and local governments, the fed-eral government, providers of employment andtraining services, and the business communityto complete welfare reform now.

WELFARE REFORM GOALS:RESPONSIBILITY, WORK, ANDREDUCING POVERTY

The welfare program that preceded TANF,Aid to Families with Dependent Children(AFDC), was established in the 1930s to assistlow-income widows and orphans. When wel-fare reform was debated in 1996, AFDC stillprincipally assisted single mothers and theiryoung children, but by then most were divor-cees or mothers with children born out of wed-lock. While many AFDC participants receivedbenefits only for short periods, about 48 per-cent of the caseload was expected to remainwelfare-dependent for 10 years or more — insome cases, for multiple generations. Most im-portant, the number of recipients had beengrowing explosively in the 1990s.1 Critics at-tacked welfare as spreading a dysfunctional “cul-ture of poverty,” undermining important socialvalues of family stability, personal responsibil-ity, investment in education, and commitmentto work. By 1994, AFDC was supporting 14.8percent of all American families with children.

Eligibility for AFDC was limited to house-holds with very low incomes, so that recipientstypically lost benefits or became ineligible ifthey became employed. Beneficiaries couldparticipate indefinitely (as long as they haddependent children) and received only spo-radic training or counseling to improve theirprospects for employment. Government-pro-vided health insurance, food assistance, andother social services followed similar rules. Theincentives, therefore, were pernicious: to be eli-gible for support, a family had to remain jobless andpoor.

SOURCE: Data from U.S. Bureau of the Census

Employment of Single Female Headsof Household with Children

Figure 2

90%

80%

70%

60%

50%

40%

30%

Percent

Year

All Household Heads

Poor Household Heads

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

3

Chapter 1: Introduction and Summary of Recommendations

TANF reverses these incentives. It sets timelimits on individuals’ eligibility for benefits,and funds and encourages states to provideservices supporting work. It permits recipientsto receive earnings without immediate, drasticreductions in benefits, so that work brings largerrewards than before. These changes are rein-forced by the federal Earned Income Tax Creditand recently expanded programs for child careand health insurance. These developments cre-ate a new set of incentives: to be eligible for sup-port, a low-income family head must work.

We believe that the great flaw in publicassistance prior to welfare reform was not itsprovision of public support per se but its failureto require and encourage responsible individualbehavior, including work by the able bodied.The system was not only costly to society. It wasfundamentally unfair. The public could notjustify subsidizing welfare recipients to sit athome while many others in similar impover-ished circumstances took responsibility andworked hard. Nor can we. We see a world ofdifference between public support that accommo-dates or encourages idleness and public support thatencourages work.

We also see a world of difference between awelfare system that focuses exclusively on theproblems and limitations of the poor and onethat recognizes their potential to contribute totheir families, employers, communities, andthe economy at large. It is woefully shortsightedto view the poor, who often exhibit remarkablecoping skills and stress management capabili-ties, as “deficient” individuals who are an un-avoidable burden on society. With appropriateopportunities, incentives, and support, they canbe active and productive members of society.2

In this spirit, welfare recipients have beenamong the most vociferous proponents of en-hanced opportunities to support themselves.Most welfare recipients share the values of theAmerican public in preferring self-reliance todependence and have been frustrated by wel-fare rules and disincentives that encouragethem to remain jobless.3 It is not surprisingthat they have generally shown strong supportfor the new work-oriented system.4

Individual responsibility and work, impor-tant in their own right, also provide a route outof poverty. While the old welfare system hadthe incentives wrong, we believe that its ulti-mate goal of relieving poverty was correct. Asan affluent society with an historical commit-ment to social justice and an important stakein the well being of all its children, the UnitedStates should not tolerate chronic povertyamong those who act responsibly.

We therefore believe that the public,policymakers, practitioners, and employersshould recognize and adopt three equally im-portant goals for welfare reform:

1. Responsibility by individuals for their livesand the well being of their children;✝

2. Employment as an individual’s obligation tosociety, a primary source of income, and arequirement for public aid; and

3. Reduction of poverty✝✝ through higher in-comes, derived primarily from work butpublicly supplemented if necessary in waysthat encourage and support work.*

In implementing welfare reform, somestates have embraced this full range of goals.Others, however, have focused narrowly onthe responsibility goal — reducing welfare de-pendency and caseloads — without adequatelyassisting welfare families to replace dependencywith work. For many welfare recipients, find-ing and keeping a job is not easy. Many havepersonal circumstances, such as child-careneeds, unstable home situations, and healthand transportation problems, that create seri-ous obstacles to steady employment. Many arehindered by deficiencies in education, func-tional literacy, and marketable skills that pre-vent them from commanding above-poverty

✝In addressing the issue of responsibility, PRWORA included asgoals not only a reduction in welfare dependency through jobreadiness and work, but also the formation and maintenance oftwo-parent families and reduction of non-marital childbearing.This statement focuses primarily on the employment and in-come issues addressed in the legislation.

✝✝ For a brief discussion of the official poverty measure and itsdeficiencies, see box: Measuring Poverty, p. 23.

*See memorandum by COLETTE MAHONEY (page 65).

4

wages. For decades, the nation sidestepped thecomplexities and expense of employment forthese individuals, allowing them to languish independency.

CED strongly endorses PRWORA’s intentthat limited job readiness should no longerexempt welfare recipients from working, insome capacity, to support themselves and theirfamilies. But we also recognize the difficultiesand new societal obligations that this policyentails. The rapid, fundamental shifts triggeredby PRWORA overturn expectations built upover decades. Life plans constructed around aculture of dependency must now be rebuiltaround a culture of work. Because of the ob-stacles to stable employment that many publicassistance recipients face, our society, by re-quiring work, assumes greater responsibility tomake it feasible. We believe that successfulwelfare reform must not simply make welfarerecipients work. It must make work itself work forthese individuals, their families, and their em-ployers.

By providing program flexibility and sub-stantial financial resources, PRWORA and re-lated federal legislation establish a frameworkwithin which states can create the work-cen-tered welfare system that the nation requires.Taking advantage of this framework, manystates have implemented innovative require-ments, incentives, and services to encourageand support work. But much remains to bedone. We believe that our recommendationspresented below would improve and completethe reform that has begun well in many, butnot all, states.

RECOMMENDATIONS:*

COMPLETING WORK-CENTEREDWELFARE REFORM

Providing Services to Support WorkWelfare reform is expected to increase the

number of low-skill workers nationwide bysomewhat more than one million workers by

2002. The largest additions, about 300,000 peryear, probably occurred during 1997-1998, thefirst two years PRWORA was in force. Strongeconomic growth has recently been addingabout two million jobs to the economy eachyear, and the absorption of these new low-skilljob seekers has been further aided by slowergrowth in the entry-level workforce. Thus, thischange in labor supply should not prove diffi-cult for the nation’s large and flexible economyto handle — and to date it has not, althoughareas of structural unemployment remain, es-pecially in older urban centers. The limitedsurvey data available suggest that half to two-thirds of former recipients left welfare for ajob, and 70-80 percent have been employed atsome point after leaving the rolls. And, althoughan increase in job seekers in itself exerts down-ward pressure on wages, the labor market hasbeen so strong that entry-level wage rates havebeen rising. In short, concern about whetherthere are “enough jobs to go around” for per-sons moving from welfare to work has beensomewhat misplaced, at least in most localesand in the buoyant economy of 1994-2000.

CED believes that the primary challenge towelfare reform is not the number of jobs thatmust be found for welfare recipients but thework readiness of the job seekers. Workers with-out advanced education or specialized skillshold millions of jobs in the American economy.However, even entry-level jobs typically requireminimum literacy, communication skills, andappropriate workplace behavior. They alsodemand worker dependability that, in turn,requires proper work attitudes, reliable arrange-ments for transportation and child care, andreasonably stable personal lives. A substantialproportion of public assistance recipients whohave sought jobs to date, and a higher share ofthose who will be doing so over the next severalyears, cannot meet these basic standards un-aided.

Moreover, the jobs that former welfare re-cipients typically acquire do not offer a perma-nent escape from poverty and dependency.Hourly wages average $6.61 ($13,750 per year


*See memorandum by JOSH S. WESTON (page 66).

5

if employed full time, full year). But only abouttwo-thirds are full-time, and as many as 75 per-cent of these jobs last less than a year. Further-more, only about 23 percent carryemployer-based health insurance, and few of-fer significant opportunities for training or ad-vancement. Some 30 percent of persons leavingwelfare subsequently return.

While many states and localities activelyaddress these problems with appropriate pre-and post-hiring support services and financialincentives, others require welfare recipients toseek jobs with little or no aid and induce themto leave welfare even if they have few job pros-pects (for example, by imposing difficult ad-ministrative requirements). Even in states wherethe provision of work-support services has beenimpressive, there are dangers that these effortswill not be sustained politically.

CED believes that public assistance rollsshould be reduced principally by encouragingand assisting recipients to succeed in the jobmarket. Many states are developing substan-tial, well-designed work-supportive services todo this, and we urge states that currently pro-vide little assistance to join these “best prac-tice” states. Welfare reform cannot be judged asuccess nationwide until all states adequatelyassist welfare recipients’ work efforts.

States can provide such support without newfederal legislation or additional federal or statefunds. Rapidly-declining welfare rolls have al-ready built up $7.3 billion in unspent TANFfunds, and additional resources are availablefrom other federal and state programs. Statesgiving high priority to employment are devot-ing these resources to child care, transporta-tion assistance, career counseling, jobplacement, education and training, temporarywage subsidies, short-term job creation, sub-stance abuse treatment, health insurance, andsimilar services. Other states, however, havesubstituted TANF funds for services that werepreviously state-financed, in effect divertingthese resources to activities unrelated to workand welfare or to tax reductions.

CED believes that, in general, public funds

for welfare-to-work services should not be re-duced in the near term. We urge states toinvest federally provided resources, supple-mented by state funds where appropriate, inactivities that assist welfare recipients to findand hold jobs. Furthermore, we urge Congressnot to rescind federal funds simply becausethey have not been obligated to date. If re-sources remain after current welfare recipi-ents are served, they can be used productivelyto prevent non-welfare, low-skill workers frombecoming welfare-dependent.

We wish also to express our concern aboutthe adequacy of information to properly ad-minister, monitor, and evaluate welfare reform.The states must be accountable to the publicfor their management of public assistance un-der welfare reform. However, when Congresstransferred primary decision-making author-ity from the federal government to the states,it also weakened or eliminated many require-ments that states document the policies theyhave implemented and their effects. We be-lieve the federal government must remain con-cerned about poor families across the nationand should therefore ensure that there is in-formation adequate to monitor their condi-tion and evaluate federal and state policiesthat vitally affect them. The federal govern-ment also must exercise oversight over thebillions of federal dollars transferred to statesunder the TANF block grant. In preparing thispolicy statement, we were often frustrated bythe lack of data that would allow us to comparestates in a consistent manner and assess theimpact of their policies. We urge the Congress,in consultation with the states, to develop anationally uniform system for reporting on wel-fare policies and their consequences and toassist the states with the resources and techni-cal assistance required to implement such asystem.

Preparing for Economic DownturnsWelfare reform’s first three years have coin-

cided with the longest economic expansionin postwar history. Between March 1991 and


6

November 1999, payroll employment grew by21.2 million, or 20 percent, and the nationalunemployment rate fell from 6.8 percent to4.1 percent, its lowest level in 29 years. Thisstrong labor market has greatly facilitated thetransition of many assistance recipients to em-ployment.

There is a danger that this extraordinaryeconomic expansion will mislead us into be-lieving that strong labor markets are inevitable.They are not. Should the economy weaken, asis surely likely, unemployment and welfare ap-plications will expand while federal TANFgrants to states will remain fixed and state taxrevenues will contract. Since most state consti-tutions require budgets to balance annually,severe pressure will develop to reduce spend-ing on employment services and income assis-tance, just when they are needed most. Ournew work-centered welfare system will experi-ence new problems when work becomes harderto find. Prudent future planning is thereforeincumbent on both the federal and state gov-ernments.

Under PRWORA, states are allowed to re-serve TANF funds from current surpluses in“rainy day” funds for such contingencies, andabout half the states are doing so. Although werecognize that states face different fiscal situa-tions, CED recommends that states without suchformal “rainy day” reserves consider develop-ing them. States should do so, however, onlyafter allocating adequate resources to currentlyneeded work support services, as noted above.

When the economy slows or declines, wel-fare recipients will experience increased diffi-culty in finding jobs. Under TANF, innovativestates such as Wisconsin have developed port-folios of employment alternatives, withunsubsidized private employment as the pre-ferred option and publicly funded jobs (at sub-sidized private firms, nonprofit organizations,or public agencies) as back-ups. In strong la-bor markets, these latter positions primarilyserve welfare recipients with disabilities, whocan function only in “sheltered” jobs, and wel-fare recipients without recent work experience,

as a transition to regular employment. Duringeconomic downturns, these positions canreadily be expanded for TANF recipients whowould have found regular jobs in a strongerlabor market.

CED urges states currently without a com-prehensive range of job alternatives for TANFrecipients to develop options that include pub-licly funded jobs for limited use during pros-perity and expansion during recessions. Thisapproach can reconcile the program’s workrequirements with the nation’s commitmentto support low-income families with children.Government should not, however, become an“employer of last resort,” creating public jobsfor the general population of the unemployed.

Unemployment Insurance (UI) providestemporary income for the involuntarily unem-ployed. UI coverage has eroded sharply overseveral decades; it now covers only one-third ofworkers who lose their jobs, principally thoseemployed more steadily than most low-skillworkers. Under current rules, no more than 20percent of those leaving welfare for work arelikely to become eligible for UI through theirnew jobs. This is in large part because somestate eligibility rules categorically exclude low-wage, part-time, short-term, and seasonal work-ers from coverage even if they meet other UIrequirements, such as attachment to the laborforce. Two-thirds of the states do not categori-cally exclude low-wage workers, and a numberof states have removed the exclusions of tem-porary, seasonal, and part-time workers. Weurge the remaining states to expand their UIcoverage in a similar manner, as recommendedby the federal Advisory Commission on Unem-ployment Compensation.

If such an expansion were financed byhigher UI payroll taxes, it would tend to re-duce the hiring of low-wage workers and thusdefeat its purpose. Therefore, we recommendthat the federal and state government considerways to finance such broader UI coverage withgeneral revenues. For example, the UI trustfund could be credited with individual incometaxes paid on UI benefits, as is done in the


7

Social Security and Railroad Retirement trustfunds.

Making Work PayMany of the previous recommendations

sharply distinguish between TANF recipientsand other “working poor” — families who re-main under or near the federal poverty thresh-old even though one or more adults in thehousehold is employed. This is the conven-tional way welfare reform has been debatedand legislation framed. The distinction is ad-ministratively convenient because the targetpopulation is clearly defined. It has budgetaryappeal because putting welfare recipients towork reduces government expenditures morethan expanding employment among the work-ing poor. However, the distinction does notserve social and economic policy well. It con-centrates public resources on welfare recipi-ents, who constitute less than half of America’spoor families. It ignores the fact that, evenprior to welfare reform, many recipients rou-tinely moved between public assistance andwork. Most important, it treats workers whoface similar economic difficulties very differ-ently, offering more generous public supportto those who receive welfare than those who donot. This creates serious inequities and disin-centives to seek independence from public as-sistance.

Recognizing these circumstances, somestates support the work efforts of welfare re-cipients through programs that also serve otherlow-skill, low-wage workers. For instance, Wash-ington state provides health insurance to allworking families with incomes less than twicethe federal poverty threshold, and Illinois of-fers child care subsidies for all working familiesearning less than half the state’s median in-come.

Such broadly-targeted programs often re-quire substantial public outlays as well as apolitical consensus that government should as-sist low-income workers in these ways. There-fore, they may not be feasible in all states.However, these programs benefit low-income

people who work — the guiding principle ofwelfare reform. We urge states, in providingservices to TANF recipients, to consider ap-proaches that assist other low-skill, low-wageworkers as well.

In this context, we are concerned that asignificant number of those who have foundjobs and no longer receive TANF cash benefitsdo not receive other assistance for which theyremain eligible, including Medicaid and FoodStamps. Poor information and confusion abouteligibility appear to be major sources of thisproblem, especially in an administrative envi-ronment where many states have aggressivelysought to “divert” potential beneficiaries fromthe welfare rolls to work. The complexity andrestrictive rules of these programs also pose amajor problem, carrying over into the present,work-oriented environment rules that were de-veloped in a different environment, in whichthey were administered in tandem with a wel-fare program centered on dependency, notwork.

Quite apart from the entailed hardship, suchactions create disincentives and barriers toemployment. We urge federal and state offi-cials to administer Medicaid, Food Stamps, andrelated programs to make their benefits as avail-able as possible to beneficiaries eligible undercurrent law, taking vigorous actions to informthem of their eligibility and facilitate their en-rollment.

The Earned Income Tax Credit (EITC) is aprincipal instrument by which the nation makeswork pay for low-wage workers. This refund-able credit against the federal income taxsupplements the earnings of low-income work-ing families by as much as $3,756 annually,enabling both unskilled workers and their em-ployers to benefit from jobs that commandmeager wages in the marketplace. The EITChas been a powerful force in dramatically rais-ing the employment of low-income women inrecent years. With the EITC, full-time workersearning only the minimum wage can raise theirfamilies above the federally-defined povertythreshold. CED urges the federal and state


8

governments, community-based organizations,and employers to cooperate in outreach to en-roll eligible households not currently claimingthe EITC. We also recommend that the federalgovernment and employers encourage EITCrecipients to exercise their option to incorpo-rate the credit in their monthly earnings ratherthan waiting for a delayed annual payment.

The federal income tax’s current exemp-tions and rate schedules, in combination withthe EITC, eliminate tax liability for most fami-lies below the federal poverty threshold. Whilemany states have followed the federal example,15 still require families in poverty to pay stateincome taxes. As states consider tax reduc-tions, we recommend that they reduce or elimi-nate state income tax burdens for familiesbelow the federal poverty threshold. We alsorecommend that states use relatively high “earn-ings disregards” in designing the eligibility forbenefits in their TANF programs. Both poli-cies allow TANF recipients to keep more oftheir earnings from work and thereby simulta-neously encourage work and reduce poverty.

In the longer term, a more comprehensivereexamination of the nation’s safety net pro-grams is required, although detailed recom-mendations lie beyond the scope of this policystatement. Food Stamps and Medicaid tradi-tionally have been linked to AFDC cash assis-tance and have complex and often burdensomeeligibility mechanisms; their use by eligibleworkers is declining as those links are broken,as noted above. In a world of required work,child care has become more critical both as aprerequisite for employment and a job-relatedexpense. Child support enforcement hasemerged as a potentially important tool forboth encouraging responsibility and support-ing working mothers. And the role of DisabilityInsurance and Supplemental Security Incomewill necessarily change as disabled individualsleave welfare. We therefore urge Congress, asit considers modifications to TANF, to reex-amine the design of Food Stamps, Medicaid,and other support programs. It should modifythem as required to encourage the shift from a

dependency-oriented public assistance systemto one centered on work. We also recommendthat Congress reexamine the EITC to deter-mine whether increasing its value, especiallyfor workers who accumulate longer experience,would further strengthen work incentives andreduce poverty.*

RECOMMENDATIONS:EXPANDING OPPORTUNITIESTO ACQUIRE SKILLS

In its first several years, welfare reform hasmade substantial progress in terms of the firsttwo goals outlined above – enhancing indi-vidual responsibility and increasing employ-ment. Progress toward the third goal, thereduction of poverty, has been less evident. Forthe majority of families affected by welfarereform, the primary effect to date has been totransform them from dependent poor to workingpoor. For those able to work, this is an impor-tant first step, because work provides a po-tential to escape poverty that continueddependency does not. But until the possibilityof upward mobility is turned into actual oppor-tunities and increases in income, welfare re-form will not have achieved its anti-povertygoal.

In the ranks of the working poor, newly-employed public assistance recipients join manyother low-wage workers, including recent im-migrants, low-income youth, and experiencedworkers who face job displacement from newtechnology, globalization, and structuralchange. Together, these groups encompassapproximately 20 million workers, 15 percentof the nation’s work force. We believe thatwelfare reform’s greatest long-term challengeis to put significant numbers of the workingpoor, not just former welfare recipients, on apath of upward mobility.

The only sustainable basis for such upwardmobility ultimately is the development of skills.Throughout the American economy, competi-tive pressures require employers to base hiring


*See memorandum by PRES KABACOFF and STEFFENE. PALKO (page 65).

9

and compensation decisions primarily on work-ers’ productivity. In our market-oriented soci-ety, stable jobs and good incomes are builtprimarily on a foundation of human capital —the ability, knowledge, and effort on which aworker’s productivity is based.5 Workers withpoor job skills will generally continue to strugglein the labor market. Equity and efficiency bothdemand that our society expand opportunitiesto acquire marketable qualifications.

Skill acquisition occurs within a broad rangeof education, training, community, and work-place institutions, both public and private. Ex-panding opportunities to acquire skills willrequire cooperative efforts by federal and stategovernments, schools and colleges, other pro-viders of employment and training services,employers, unions, and workers. This policystatement cannot make comprehensive recom-mendations for increasing opportunitiesthroughout these large and complex systems.However, we identify three major directionsfor needed change.

Education for Children and AdultsPublic elementary and secondary schools

are the nation’s most fundamental institutionsfor developing informed citizens and produc-tive workers. In previous policy statements, CEDhas argued that our schools generally are notmeeting the needs of the new, skill-demandingeconomy.

Their failures are particularly evident amongthe high school dropouts, functionally illiter-ate graduates, and under-skilled workers promi-nently represented among welfare recipientsand the working poor. The best long-run strat-egy for reducing welfare rolls is to cut off theflow of poorly schooled young persons enter-ing adulthood each year. We urge federal, state,and local governments to give urgent attentionto improving education in preschool throughthe twelfth grade, particularly in schools serv-ing low-income, disadvantaged students.

Adult education is an often-overlooked ad-junct to the nation’s schools that directly serveswelfare recipients and the working poor. For

many adults, remedial education, high schoolcompletion, English as a second language, andoccupational skills courses are essential if theyare to earn above-poverty wages. The providersof these courses include high school adult pro-grams, community college remedial programs,community-based vocational training centers,and in-prison schools.

These institutions often share the manage-rial and pedagogical weaknesses of secondaryschools and have additional problems as well.They typically receive little public attention,are inadequately funded, and often depend onuncredentialed, part-time, and voluntary staff.Expenditures per full-time-equivalent adult stu-dent average about one-third that in elemen-tary and secondary schools. CED urges thefederal and state governments to recognize theimportance of adult education and improve itsquality and availability.

Publicly-Funded Employment andTraining Programs

Change is also badly needed in publicly-funded programs that provide employmentcounseling, job placement, and training to low-skill, low-wage workers. While some programsare well designed and executed, many producediscouraged trainees and disenchanted employ-ers, as evidenced by negative evaluations. Inmany localities, public funds support a hodge-podge of uncoordinated initiatives that sup-port neither effective nor ineffective efforts.Undersubscribed and duplicative programscoexist with waiting lists, program gaps, andunpublicized services. Community-based ini-tiatives are often well-intentioned but resourcepoor, and employer involvement is intermit-tent at best. This performance is not accept-able.

The 1998 federal Workforce Investment Acthas created important opportunities to improvethese activities. Under this legislation, innova-tive state and local governments in locales suchas Boston and Cleveland have been developingcoherent, effective employment and trainingsystems. We urge other states and localities to


10

consider the best practices developed by thesepioneering efforts. The Act’s mechanisms forimproving performance through accountabil-ity, evaluation, and consumer choice should beaggressively implemented. Government, em-ployers, service providers, and community-based organizations should cooperate intransforming the Act’s Workforce InvestmentBoards into influential organizations that stra-tegically allocate employment and training re-sources. Service delivery should be reorganizedaround “one-stop” labor market intermediar-ies that offer a range of services and a conve-nient single point of contact. These newarrangements can more effectively serve bothemployers and low-skill workers, includingformer welfare recipients.

Hiring and Advancement in thePrivate Workplace

Successful work-centered welfare reform willrequire the active participation of large andsmall private employers. In our marketeconomy, the role of business is to innovate,produce goods and services efficiently, serveclients and customers, and provide a financialreturn on invested capital. Job creation is ahealthy byproduct of these activities, but not abusiness goal in itself. Indeed, economicprogress ultimately depends on increasing pro-ductivity, often producing more output withfewer workers.

Employers therefore cannot be expected tohire welfare recipients because they need jobs. Norcan employers be expected to hire applicantswho are unqualified, to offer wages higher thanworker productivity justifies, or to provide un-usually expensive training or employee sup-port. Although these constraints apply to allemployers, they particularly affect the smalland medium-sized firms that employ dispro-portionate numbers of low-skill, entry-levelworkers.

In this spirit, we consider welfare reformand related education, employment, training,and social service initiatives primarily publicresponsibilities. Private firms will cooperate and

make substantial investments of their own inworkforce development — if public institutionshelp individuals become qualified job candi-dates.

The tightest job market in recent memorycurrently provides strong incentives for em-ployers to hire former welfare recipients. Byseeking them out, firms have filled positionsthat might otherwise have remained vacant.Many firms have found that, with the screen-ing, training, and post-hiring support providedby welfare-to-work programs, public assistancerecipients have adapted better and shown lowerturnover than other entry-level workers. Suchexperiences reinforce our optimism that stateand local governments, in partnership withbusiness, can devise and operate welfare-to-work programs that simultaneously serve theinterests of taxpayers, employers, and welfarerecipients.

American business spends about $55 billionannually on employee training, and this for-mal training is dwarfed by informal skill acqui-sition on the job. For many employees,opportunities to learn new techniques, diver-sify their experience, demonstrate their capa-bilities, and develop networks of personalcontacts are an expected aspect of daily worklife. However, these arrangements are far morecommon for employees with post-secondaryeducation and several years of steady work ex-perience than for low-skill, entry-level workers.Even the lowest rungs of career ladders remainbeyond the reach of many former welfare re-cipients and other low-skill workers. These op-portunities for training and advancement oftencan be extended to workers with lower initialqualifications to the benefit of both employeesand employers. The workers will benefit fromenhanced skills, greater earning power, andstronger attachment to the work force, whileemployers also benefit through expanded re-cruitment, lower turnover, and higher produc-tivity.

The American workforce is becoming in-creasingly diverse in race and ethnicity, gen-der, age, citizenship, personal background, and


11

family status. In response, many employers havemade explicit efforts to “manage diversity”through employment policies and workplacepractices. These initiatives often include “fam-ily friendly” workplaces. Because of their typi-cal characteristics, low-skill workers, includingformer welfare recipients, especially benefitfrom these efforts. Businesses stand to gainthrough increased productivity, an expandedcustomer base (both domestic and interna-tional), and greater retention of effective em-ployees.

The box “Key Recommendations for Em-ployers” summarizes the actions that we askour business colleagues to consider.

* * *

If the watchword in public assistance priorto welfare reform was entitlement, the new watch-word is responsibility. CED strongly supports thisrenewed emphasis on individual self-sufficiency,but we also believe that it creates mutual obli-gations. If able-bodied adults are expected towork, they must have reasonable prospects ofemployment. Society must assist motivatedworkers with services that make steady job per-formance feasible, income supplements thatenhance limited initial earnings, and longer-term opportunities to advance to full self-sup-port. We see this new social contract as the coreof welfare reform. Now is the moment for thefederal government, states and localities, pro-viders of employment and training services,the business community, and welfare recipi-ents themselves, to fulfill that contract.


KEY RECOMMENDATIONSFOR EMPLOYERS

• Consider welfare recipients as possibleemployees in a broad range of occupa-tions. Judge applicants on their indi-vidual qualifications and potential, nottheir public assistance history.

• Cooperate with public agencies, non-profit organizations, and public-pri-vate partnerships running welfare-to-work programs. Take advantage ofthe screening, training, mentoring,and other work-supportive servicesthese programs offer.

• Consider expanding internal supportservices for employees, especiallychild care, transportation, flex-time,training, career counseling, andmentoring.

• Reconsider formal and informalarrangements for employee advance-ment in the workplace. Where fea-sible, extend them to encompassworkers with more limited initialqualifications.

• Consider innovative business initiativesto manage workforce diversity and pro-vide family friendly workplaces.

12

Chapter 2.Welfare Reform and theLabor Market

The social, legislative and administrativechanges that center around the 1996 PersonalResponsibility and Work Opportunity Recon-ciliation Act (PRWORA) represent one of themost dramatic developments in social policysince the New Deal. This chapter describes thislaw, the environment in which it is operating,and the changes it represents, providing thecontext for our recommendations for complet-ing welfare reform in Chapter 3.

CHANGING THE RULES:WORK FIRST 6

PRWORA replaced a 60-year-old federalprogram, Aid to Families with Dependent Chil-dren (AFDC), with Temporary Assistance toNeedy Families (TANF). Many states had be-gun to make significant changes in their wel-fare policies under federal waivers of the lawprior to 1996. Change accelerated sharply withthe enactment of PRWORA, as states have beentranslating it into practice through a variety ofnew work requirements, financial incentives,and work support services. Because TANF is ablock grant, providing federal resources thatstates can flexibly apply within broad guide-lines, considerable variation has emergedamong the states with regard to these policies.(See Table 1.)

Work RequirementsAFDC was an entitlement to cash benefits

that a family could receive as long as the familyhead was a low-income, single parent with de-

pendent children.7 In contrast, TANF imposestime limits on cash benefits. Except for 20 per-cent of their caseloads that states may exempt,PRWORA requires states to terminate assistanceto an individual after no more than five years;forty states have adopted this five year limit,and eleven have set shorter limits, such as twoyears. Thirteen states have added time limitsfor each continuous period of welfare use, mostcommonly two years.

PRWORA also strengthens requirementsthat recipients work or prepare for work whilethey receive benefits. Under AFDC, few recipi-ents faced such requirements. TANF requiresstates to place at least 40 percent of theircaseloads in work (or work-related activitiessuch as job search or training) in 2000, and atleast 50 percent by 2002. All adults receivingbenefits for more than two years must partici-pate in these activities. In addition, 29 statesrequire welfare applicants to search for work(for example, for a month) before their appli-cation is considered, and 11 states require someor all recipients to “work off their grant” inunpaid positions in public or nonprofit agen-cies. Recipients under age 18 who are not highschool graduates must participate in educationor training; however, training in lieu of workfor recipients other than teenagers is limitedto 30 percent of those in work activities and 12months per trainee.

Financial Incentives to WorkPrior to welfare reform, work and welfare

were predominantly mutually exclusive, with

13

Chapter 2: Welfare Reform and the Labor Market

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most low-income households depending on ei-ther public assistance or earnings and only aminority receiving both. In 1995, for example,only 23.7 percent of AFDC families worked.9

Such a pattern was not surprising because ofthe program’s high “benefit reduction rate” —if an AFDC recipient increased her earnings,her benefits were sharply reduced, often bymore than the additional earnings, and hereligibility for Food Stamps and Medicaid mightalso be lost. Work was often a losing proposi-tion.

TANF allows welfare and work to be morereadily combined because many states allowrecipients to keep a majority of their earnings.One study of 13 states found that TANF recipi-ents on average now face benefit reductions ofonly 12 percent of additional earnings.10 Thesenew financial incentives within TANF now com-bine with a substantial expansion of assistancefor the working poor that has occurred duringthe last decade to produce large rewards forwork.

The most important of these assistance pro-grams is the Earned Income Tax Credit (EITC),which was significantly increased in 1993. TheEITC is a refundable credit against the federalincome tax currently received by 20 millionlow-income households at an annual cost of$30 billion. In 1999, for households with twoor more children and annual earnings of$10,000, for example, the EITC provided $3,816per year. In 1997, this supplement raised 4.3million low-income families across the federalpoverty threshold.11 In addition to the expan-sion of the EITC, health care has been ex-tended to children in working poor familiesthrough expansions in Medicaid and ChildHealth Insurance programs, and assistance forchild care has increased.

The difference such new policies have madein the rewards for work is profound. Consider,for example, a typical welfare family in Penn-sylvania with one worker who earns $10,000per year. In 1986, the family would have nettedabout $3,600 from these earnings after taxes(including a small earned income credit) and

the reductions in AFDC benefits and FoodStamps they entailed. Under the new rules, thefamily would keep about $9,400 — about 160percent more — and have Medicaid coveragefor the children.12

Figure 3 shows the main elements in thisreward structure in more detail, using a typicalTANF household (one adult and two children)in Colorado, a state with fairly typical benefitpolicies. If this household’s only income wereTANF and Food Stamps, its annual incomewould be $8,088, about 62 percent of the fed-eral poverty threshold in 1998 for this family(Bar A in Figure 3). But Colorado’s TANFprogram allows households to receive public


Figure 3

Yearly Family Income at DifferentLevels of Work for a Single Parentwith Two Children in Colorado, 1998

Yearly Family Income (thousands of dollars)

SOURCE: Coe, et al., Does Work Pay? A Summary of the WorkIncentives Under TANF, p. 10.

200% of Poverty for a Family of 3, 1998: $26,266

150% of Poverty for a Family of 3,1998: $19,700

Poverty Levelfor a Familyof 3, 1998:$13,133

(A)

(B)(C)

(D)

(E)

Earned Income Tax Credit

Earnings After Taxes

NoEarnings

20 hrs/wk,52 wk/yr,$5.15/hr.

35 hrs/wk,52 wk/yr,$5.15/hr.

35 hrs/wk,52 wk/yr,$9.75/hr.

35 hrs/wk,52 wk/yr,$16.10/hr.

TANF Grant

Food Stamps

$30

$25

$20

$15

$10

$5

$0

15

approach been embraced by all states in wel-fare reform’s first three years?

To be sure, complicated administrative prac-tices and entrenched organizational culturesare difficult to change quickly in complexbureaucracies.15 The dramatic shift in publicassistance goals and expectations regardingwelfare recipients requires a corresponding pro-found change in missions, attitudes, and be-havior for public officials. The focus must shiftfrom process to outcomes, from error-avoid-ance to experimentation, from check cuttingto career planning. The difficult transforma-tion from welfare offices to job centers is likelyto involve many painful decisions and falsestarts, and a great deal of “learning by doing.”In many cases, different personnel will beneeded to serve new functions and play newroles. Some states and localities have even goneso far as to completely reorganize the deliveryof their social services. (See box, page 16:“LINC: Coordinating Comprehensive Ser-vices.”) The years 1996–1999 have been yearsof transition, with many agencies just begin-ning to settle into their new operations. Pre-liminary evidence suggests impressive progressin many states, while important challenges re-main in others.16

Since 1996, virtually all states have com-plied with PRWORA’s mandates to changecertain program rules, such as imposing timelimits and requiring a proportion of recipientsto engage in work or work activities. Virtually


assistance while working. If the family receivesTANF and the adult is also employed part time,full year at the minimum wage, the family’sannual income increases to 95 percent of thepoverty threshold; earnings account for 39 per-cent of this total, while TANF, Food Stamps,and the Earned Income Tax Credit contribute61 percent (Bar B). If the adult works addi-tional hours or earns a higher wage rate, thehousehold’s support from public programs isgradually reduced, but its total income contin-ues to rise (Bars C and D). Public support fallsto zero only when the adult is employed fulltime at $16.10 per hour, when earnings alonebring the household to 189 percent of thepoverty threshold (Bar E). Of course, theseoutcomes depend upon sustained, full-yearemployment, which is difficult (and unusual)for many people leaving welfare to find orretain. Nevertheless, the policies provide a sub-stantial incentive for welfare leavers to seeksuch employment and to raise their incomes.

Services Supporting Work In 1996, AFDC’s final year, 86.2 percent of

program expenditures went for cash paymentsto families; only $1.4 billion was spent on train-ing and other efforts to make employment fea-sible or financially rewarding. Under TANF,the average state now devotes only two-thirdsof program outlays to cash payments, andannual expenditures for services supportingwork have expanded to nearly $9 billion.13

Table 2 shows the distribution of state spend-ing on these services in Fiscal Year 1998. Somestates provided extensive services; 11 states spentat least $2,000 per household per year, andsome spent more than $3,000. In contrast, 17states spent less than $1,000, some of themclose to zero.

The Direction and Extent of ChangeTaken together, the new requirements, in-

centives, and services just described reflect aprofound change in strategy — from discourag-ing work by providing entitlement benefits to requir-ing work and providing incentives and support tomake it viable. To what extent has this new

Spending per NumberTANF Family of States

$0-999 17

$1,000-1,999 23

$2,000-2,999 7

$3,000 or more 4

TABLE 2

State Spending Per TANF Family onWork-Supportive Services, FiscalYear, 1998 14

16


all states have also made changes to signal anew approach to assistance, such as renaming“income maintenance centers” as “job centers.”These developments alone mark a significantbreak from AFDC.

Beyond that, however, states vary consider-ably in the direction and degree of change.Researchers observing the interaction betweenpublic assistance administrators and recipientshave concluded that roughly one-third of localwelfare offices focus on employment as theirprimary goal, while an equal proportion areprimarily concerned with caseload reduction,whether or not it is achieved through employ-ment.17 Welfare reform means very differentthings in different places.

Kansas City, Missouri’s Local InvestmentCommission (LINC) is an innovative model forgoverning programs assisting families ineconomic distress. Founded in 1992 as apublic-private partnership managing school-linked services and comprehensive develop-ment in inner-city communities, theCommission began to apply its collaborativeapproach to welfare-to-work in 1995. Duringthe next four years, more than 4,000 welfarerecipients were placed in employment throughits efforts.

LINC is a semi-state agency with a governingboard of business executives, civic leaders,community representatives and involvedcitizens. It funds and coordinates activitiesthroughout Kansas City and Jackson County ofMissouri’s departments of Social Services,Mental Health, Housing, Health, Labor,Corrections, Employment Security, Education,and Economic Development, as well as localnonprofits and faith-based institutions.

LINC’s efforts to make comprehensiveservices accessible to families in need is mostevident in the development of five “one-stop”centers that contain agencies providing TANFsupport, Food Stamps, job placement, training,child support enforcement, and help with

Table 1 illustrated this diversity by report-ing the extent to which states have adopted 24policies regarding work. In choosing amongthese policies, each state decides how it wishesto balance work requirements with work incen-tives and support. The variety of policy choicesmade by different states is shown in Figure 4,which shows indexes of policies requiring workand policies supporting work for each state, basedon the information in Table 1. (For the state-by-state indexes, see Appendix A.) Figure 4reveals that almost equal numbers of stateshave elected each of four different combina-tions of policies:

• Weaker Requirements, Weaker Supports –In Mississippi, for example, work require-

health care, child care, transportation, andhousing. Applicants for assistance are assessedby a joint intake process and then directed toappropriate sources of assistance from themultiple public and private agencies within thebuilding. The success of this integratedapproach has been enhanced by redefining theresponsibilities of staff that assist TANF recipi-ents. Rather than focusing upon confirmingeligibility and providing a check, TANF staff(now known as “employment specialists”) aretrained to help welfare recipients transitioninto lasting jobs.

The LINC partnership generates substantialbenefits for all its partners. For welfare recipi-ents and others in difficult circumstances, co-location and coordination of services simplifiesthe process of receiving assistance and makes itmore likely that they will use services for whichthey qualify. Having a single governing bodysupervising service delivery by multiple organi-zations eliminates duplicative and ineffectiveprograms and makes more efficient use ofpublic funds. Membership of 17 prominentbusiness leaders on the commission’s govern-ing board provides organizational credibilitythat has proved particularly useful in placingwelfare recipients in private sector jobs.

LINC: COORDINATING COMPREHENSIVE SERVICES ✝

✝Information is from LINC’s web site (www.kclinc.org).

17


ments are relatively weak, applying only thefederally-mandated five-year lifetime limitand two-year work requirement. Financialincentives and support services are also lim-ited — for example, offering Medicaid towelfare leavers only for the one year re-quired by federal law and allowing recipi-ents to own automobiles worth only $1,500or less.

• Weaker Requirements, Stronger Supports –Vermont imposes work requirements that,like those in Mississippi, consist primarily ofthose mandated by federal law. However,unlike Mississippi, Vermont complementsthese requirements with work supports andfinancial incentives that range from guar-anteed child care subsidies to a state earnedincome tax credit.

• Stronger Requirements, Weaker Supports –In Idaho, work requirements are far more

stringent than the federally-mandatedminima, limiting lifetime TANF eligibilityto two years and imposing substantial finan-cial penalties for not complying with workrequirements. Concurrently, the stateoffers few incentives or support services —for example, only very limited state-fundedchild care and health insurance.

• Stronger Requirements, Stronger Supports– In Wisconsin, work requirements, like thosein Idaho, go well beyond federally-mandatedminima; as discussed later in this chapter,they essentially require all TANF recipientsin the state to work. However, unlike Idahoor Mississippi, work is generously supported.For example, guarantees of child care andsubsidized employment help to make workfeasible, while incentives such as a stateearned income tax credit make it finan-cially rewarding.

Figure 4

Comparison of State TANF Policies for Work Requirements and Supports

Details on indices by state provided in Appendix A.

Index of Policies Supporting Work

100

50

0

0 50 100

Index of Policies Requiring Work

Weaker Work Requirements,Stronger Support Services

Stronger Work Requirements,Stronger Support Services

Stronger Work Requirements,Weaker Support Services

Weaker Work Requirements,Weaker Support Services

VermontWisconsin

Mississippi

Idaho

➤

➤

➤

➤

18


CED favors strong work requirements andstrong work supports. We believe that a combi-nation of substantial “carrots” and strong“sticks” is the most effective way to promoteall three welfare reform goals — responsibil-ity, employment, and poverty reduction —simultaneously.

We also believe that these goals will beattained only if welfare reform represents adramatic break from past policies. To date,states vary in the degree to which welfare re-form has been treated as an opportunity forcomprehensive, creative change. Some stateshave merely modified their former AFDC sys-tems in incremental ways, while others have

Wisconsin’s approach to welfare reform became the most-publicized state effort to “end welfare aswe know it” when dramatic policy changes combined with a strong economy to produce an 89percent reduction in its welfare caseload between 1993 and 1999.

In a bold second phase dubbed “Wisconsin Works” (W-2), implemented in 1997, Wisconsineliminated traditional cash welfare benefits in favor of four employment alternatives:

1. Unsubsidized Employment: Recipients deemed “job ready” are assisted to work in the regular jobmarket. During the state’s current economic expansion, this alternative has proved feasible forthe majority of TANF clients. Although this status carries no subsidies for employers, the state andfederal governments together provide extensive earnings supplements to recipients. The statesubsidizes child care (on a sliding fee scale up to 165 percent of the federal poverty threshold),health insurance for one year, and an earned income credit against the state income tax of up to$498. Recipients also are eligible for Food Stamps and the federal EITC. This option is currentlyutilized by about 35 percent of TANF recipients.

2. Trial Jobs: For recipients who do not find unsubsidized employment, an alternative is employ-ment for up to six months with the state paying the employer a subsidy of $300 per month.Recipients receive wages from their employer and the same earnings supplements as forunsubsidized employment. Only a small number of TANF recipients currently utilize this option.

3. Community Service Jobs: Community service jobs, which the state pays public or nonprofitagencies to create, are the third alternative, adopted by about 43 percent of Wisconsin’s currentTANF caseload. Recipients may remain in these positions for nine months, working 30 hours aweek and spending 10 hours in education or training. They receive a TANF stipend of $673 permonth ($3.91 per hour), child care subsidies, health insurance, and Food Stamps.

4. Transitions: For recipients with very limited employability — currently about 22 percent of thestate’s TANF caseload — “work” is defined to include such activities as drug rehabilitation andphysical therapy. They participate in these assignments for 28 hours a week and spend 12 hoursin education or training. They receive a TANF stipend of $628 per month ($3.65 per hour), childcare subsidies, health insurance, and Food Stamps.

WISCONSIN: TESTING TANF’S OUTER LIMITS 18

essentially built new systems.No state better exemplifies the vision of

such a “dramatic break” than Wisconsin, whichis frequently cited as a yardstick against whichto measure other states. (See box: “Wisconsin:Testing TANF’s Outer Limits.”) Wisconsin’s“Wisconsin Works” (W-2) plan undertakes toreplace traditional cash assistance with fourwork alternatives — a regular job, a subsidizedjob, a community service job, or a “transitions”program of work-preparatory activities such asdrug rehabilitation. Each option is designedto carry substantial work-supportive services,including counseling, training, transportation,and child care. If political support can be sus-

19


tained to provide the resources this compre-hensive approach requires, the vision of W-2will be realized in an action model of dramaticand creative change.

Bold experiments such as that in Wisconsindo not achieve universal or immediate success,of course. Particularly in Wisconsin’s first yearsof transition to the new approach, administra-tive confusion about eligibility for benefits wasproblematic, and movement directly from wel-fare to employment was less common thandepartures from welfare without a clear workalternative.19 Both imposed initial hardship onmany welfare recipients. In later years, politi-cal pressure has built within the state to reducethe generosity of work-supportive services.These circumstances should remind us no stateoffers a model that is applicable nationwide;each state must adapt policies to its individualcircumstances. Nevertheless, certain states —including Wisconsin — deserve special atten-tion for designing bold initiatives that appearto be producing results, and specific policiesthey have pioneered often represent best prac-tices that other states should consider.

The Federal Government’s RoleWhile the principal responsibility for sup-

porting TANF recipients in their transition towork has devolved to the states, the Federalgovernment continues to play an importantrole. As described in Chapter 3, it appropri-ately provides incentives for businesses to hirewelfare recipients, who often require higherinitial recruitment, supervisory, and trainingcosts. Apart from the basic TANF block grant,the federal government provides other sup-port for transitions to work. The Welfare toWork block grant offered states $1.5 billionannually to promote employment among hard-to-serve or long-term welfare recipients in 1998and 1999. The Child Care Development Fund,which consolidates several pre-existing pro-grams as stipulated by PRWORA, offers $14billion to states over 1997–2002 to subsidizechild care for poor families. Under the re-cently enacted State Child Health Insurance

Program (CHIP), the federal government pro-vides $20.3 billion over five years to states forhealth insurance coverage of low-income chil-dren. An Access to Jobs program allocates $500million over five years to facilitate travel towork for low-income workers, and $300 millionper year in housing rental subsidies is ear-marked for persons transitioning from welfare.Additional resources can be drawn from theSocial Services Block Grant, the CommunityDevelopment Block Grant, and the WorkforceInvestment Act, which provided $1 billion fortraining disadvantaged adults in 1999.

FROM WELFARE TO WORK:EXPERIENCE TO DATE

What have been the effects of the changesjust described? It is useful to organize the an-swer around the three goals of responsibility,work, and the reduction of poverty.

Moving from Dependency toResponsibility

The most visible change in welfare sincePRWORA’s passage has been dramatic reduc-tions in the number of TANF recipients. Be-tween 1994 and 1999 the number of householdsenrolled in TANF fell 50 percent, from morethan five million to about 2.5 million. By 1999,the rolls had shrunk to levels not seen since1970. Substantial caseload reductions have oc-curred in every state, from 89 percent in Wis-consin to 20 percent in Rhode Island. (SeeFigure 5, page 20.)

Of course, not all families that leave welfareremain off the rolls indefinitely; of 2.1 millionfamilies who left between 1995 and 1997,600,000 (29 percent) subsequently returned.20

Nevertheless, the overall rate at which new wel-fare cases join the rolls has fallen sharply, andthe rates of departure have sharply acceler-ated.

Sustained national economic growth dur-ing this period underlies these dramatic case-load declines; employment rose by 21 millionduring the 1991–1999 expansion, and unem-

20

Welfare Reform and BeyondFi

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21


ployment fell to its lowest rate in 30 years. Tostaff their enterprises in a tight labor market,employers increase wages, broaden recruitmentefforts, modify hiring standards, and augmenttraining. While such actions improve the jobprospects of all workers, they have an espe-cially strong impact on entry-level workers withlimited qualifications.

The Council of Economic Advisers estimatesthat only about 8-10 percent of the 1996–1998decline in the welfare rolls would have beengenerated by this strong labor market alone,with no change in welfare policies. However,this does not mean that the strong economyhas been of minor importance. The tight labormarket certainly facilitated and reinforced themovement to work activated by welfare reform.21

A fortuitous coincidence of welfare reform witha period of sustained economic growth hasproduced increases in employment that nei-ther prosperity alone nor changes in publicassistance policy alone could have achieved.

An important corollary to this conclusion,of course, is that this reduction in welfare rollscould quickly reverse itself if the economy weak-ens. With low seniority and limited skills, manyformer recipients remain vulnerable to layoffsfrom their new jobs. In a slack labor market,many would experience considerable difficultyfinding new positions, as would current wel-fare recipients seeking to leave the rolls. Aweaker economy would sharply reduce thenumber of jobs available for former welfarerecipients, and many might attempt to returnto public assistance. It is therefore importantthat prudent planning for economic downturnsbe undertaken, as noted in Chapter 3.

Increasing EmploymentThe second major goal for welfare reform is

to encourage work. Are the people leaving wel-fare moving into jobs?22

One dramatic indication that they are isprovided by rapid increases in the employmentof low-income single mothers nationwide. Be-tween 1994 and 1998, the proportion of poorfemale household heads with dependent chil-

dren who work rose dramatically, from 48 to 62percent.23 While this recent rise in work effortreflects in part TANF work requirements, it is acontinuation of an increase over the last 15years resulting from the expansion of the fed-eral Earned Income Tax Credit and extensionof Medicaid to non-welfare families — alsoelements of welfare reform, broadly defined.24

The rise in the employment rate of adults with-out high school diplomas, from 35.5 percentin January 1993 to 40.1 percent in July 1999,tells a similar story.

Data specific to welfare recipients show simi-lar increases in employment. Between 1993and 1998, the proportion of adults currentlyreceiving welfare who were also employed rosefrom 21.5 to 33.8 percent.25 The results forthose who leave welfare entirely are more im-pressive; 69 percent of the respondents in anational survey of persons leaving public assis-tance cited increased earnings or a new job astheir reason for leaving.26 Of those who hadleft welfare, 61 percent were employed, two-thirds of them full time. Their reported wagerate averaged $6.61 per hour. In many cases,former welfare recipients show higher employ-ment rates and higher wage rates than otherlow-income women. For example, the employ-ment and wage rates for all mothers with in-comes under 150 percent of poverty were 50percent and $5.83 per hour.27

While finding a job when leaving welfare isan important accomplishment, remaining em-ployed can pose an even larger challenge. Stud-ies conducted by various states typically foundthat although about 70-80 percent had workedfor some period after leaving welfare, only about60 percent of adults who had left TANF wereemployed when surveyed. (See Table 3, page22.) Nationally up to 75 percent of the jobsobtained by former welfare recipients lastedless than one year.28

While it is encouraging that a majority offormer recipients find jobs, why are the restnot working? The reasons former recipientsgive are varied: In one multi-state study, 27percent report that they are unable to work

22


because of an illness or disability, 26 percentare taking care of their family, 12 percent can-not arrange child care or transportation, and 9percent are in school. Only 15 percent reportedthat they could not find work, and only onepercent indicated that they did not want towork. While such self-reported results must beregarded with caution, specific medical, fam-ily, or personal circumstances seem to provideserious barriers to work in many cases. Suchbarriers can be daunting and explain why nearlyhalf of non-working former recipients had notworked for two years or longer.30

Can the current levels of employment besustained as welfare reform continues? Theproportion of TANF recipients affected by newprogram rules will increase gradually over thenext several years as states implement addi-tional policy changes, TANF work requirementsapply to a larger proportion of the caseload,and more recipients reach their time limits. Itappears that the recipients who have left wel-fare to date are generally better prepared forthe job market than those who remain on wel-fare and will become subject to work require-ments over the next several years. A national

study comparing the characteristics of thosewho have left public assistance under welfarereform with those who remain illustrates thispoint: Table 4 shows that individuals who haveleft welfare have more education, more recentwork experience, fewer very young children,and fewer work limitations than those still onwelfare. When the cumulative number of ob-stacles to work faced by an individual is tabu-lated, the results are even more striking; 24percent of former welfare recipients report twoor more of these obstacles, compared to 44percent of current recipients.31

TABLE 3

Employment Outcomes for PersonsLeaving Welfare, 1998 29

EverEmployed Average Average

Employed Since Hourly Hoursat Time Leaving Wage Worked

State of Survey Welfare Rate Per Week

Indiana 64.3% 84.3% $6.34 32

Maryland N/A 63.0 N/A N/A

Oklahoma 64.5 N/A 6.51 34

South Carolina 61.8 85.6 6.45 36

Tennessee 61.0 N/A 5.67 37

Washington 71.0 87.0 8.09 36

Wisconsin 62.0 83.0 7.42 36

National 61.0 N/A 6.61 N/A

TABLE 4

Characteristics of Former and CurrentWelfare Recipients, 1997 32

Former CurrentCharacteristic Recipients Recipients

EducationLess than highschool education 29% 41%No post-secondaryeducation 66 76

Never worked or lastworked three ormore years ago 13 43

Child under age one 12 15

Language barrier 4 7

Poor health limits work 13 18

Poor mental health 18 22

Because many of the recipients who wererelatively work-ready have already left welfare,states are likely to find the proportion of re-cipients with more severe skill deficiencies andwork limitations rising substantially over thenext several years. Some states are already re-porting that caseload reductions have slowedas they have dealt with increasingly hard-to-place individuals.33 This suggests that job place-ment and work support activities by the stateswill become increasingly important in the nextseveral years.

23


Reducing PovertyOur third goal for welfare reform is to in-

crease the incomes of low-income familiesthrough work. Here, the results have to datebeen less impressive than for the goals of en-hanced responsibility and employment. (Themeasurement of poverty raises many issues thatlie beyond the scope of this paper; for a briefsummary, see box: “Measuring Poverty.”)

Total incomes (including earnings, theEarned Income Tax Credit, and public assis-tance) of the poorest income quintile of allsingle mother families — which includes manywelfare recipients — fell by 6.7 percent from1995 to 1998, reversing a trend of rising in-comes from 1993 to 1995.34 However, incomesfor families in the second quintile (which islikely to include many newly-working formerwelfare recipients) rose slightly, by 0.7 percentbetween 1995 and 1998. Concurrently, the pov-erty rate for female-headed families with chil-dren declined from 46 percent in 1993 to 42percent in 1995 and 39 percent in 1998. (SeeFigure 6, page 24.) Such poverty rates are dis-tressingly high and indicate an enormous prob-lem to be addressed, but there is little indicationthat welfare reform has made the problemworse.35

Information specific to families leavingwelfare is more sparse. However, the 1997national survey referred to above found thatthe family earnings of employed welfare leaverswere similar to or higher than those of otherlow-income families. Median monthly earningswere $1,149, which would translate into $13,788annually for a worker who could maintain theseearnings for the full year. This is at about the1997 poverty level for a family of three, beforeincluding the EITC or other cash income suchas child support. Among welfare leavers whowere not working, about half (47 percent)werereceiving cash assistance from child support,Social Security, or Supplementary SecurityIncome.36

The available information on former wel-fare recipients suggest that some families in-

MEASURING POVERTY 37

Each year, the Census Bureau calculatespoverty thresholds for families of differentsize by using a relatively crude inflation-adjusted measure of subsistence expendi-tures for food and other household items. In1998, the threshold was $13,133 for a familyof one adult and two children (a typicalTANF household).

The poverty measure has serious short-comings, however, quite apart from the factthat poverty is a complex phenomenoninvolving noneconomic factors. A panel ofthe National Research Council, whichrecommended a revised measure in 1995,found that the current measure greatlyunderstated the poverty rate for people inworking families relative to those on publicassistance. This was principally because themeasure (a) includes only cash income(including assistance), excluding in-kindbenefits such as food stamps; (b) uses grossearnings before taxes; and (c) does notdistinguish between the needs of workersand non-workers, such as the need for childcare. The measure also takes no account ofdifferences in health status and insurancecoverage, nor does it vary by location, so thatpoverty tends to be understated in areas withhigh costs of living (such as New York City)and overstated in lower cost rural areas.Finally, the poverty measure takes no ac-count of societal changes in real livingstandards, and its inflation adjustment hasreflected the much-discussed problems withthe Consumer Price Index.

The National Research Council panelfound that the overall poverty rate would be3.6-4.5 percentage points higher under itsrecommended measure than under thecurrent measure, with rates 7-8 points higherfor working families and about one pointlower for those on welfare.

crease their incomes after leaving welfare, whileothers do not. The critical factors, of course,are whether adults in the family become em-ployed, find full-time work, and remain em-

24


ployed. In addition, families with few children,those in states with low welfare benefits, andthose that were not working while on welfareoften have improved their economic positionsby leaving welfare for work, while larger fami-lies, those in higher-benefit states, and thosethat had already combined welfare with work,often have not.

Table 5 displays the six occupations in whichthe largest number of low-skill single mothers— typical former TANF recipients — find jobs.Consistent with most recipients’ limited em-ployment qualifications, all six are entry-levelpositions with few educational, experience, orskill prerequisites.

Wages for these occupations average $6.95per hour, about one-third above the federalminimum wage of $5.15 per hour. This figure

is consistent with the average wages in Table 3,page 22 for former welfare recipients, rangingfrom $6.34 in Indiana to $8.09 in Washingtonstate. Many of these jobs are part time andshort term, with the average person holding1.7 jobs during a two-year period (sequentialshort-term jobs, simultaneous part-time jobs,or both) and working 78 percent of full time.Annual earnings from such employment aver-age $11,231 per year. This level of earningscorresponds to 87 percent of the federal pov-erty threshold for a typical TANF household(one adult and two children) in 1997.38

As Figure 3, page 14 illustrated, these earn-ings potentially can be substantially supple-mented by the federal Earned Income TaxCredit, Food Stamps, and TANF cash assistance.On top of earnings, this supplementation would

Figure 6

Number (millions)

Female Headed Families in Poverty

SOURCE: Economic Report of the President 1999, Table B-33.

5

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0

Proportion of All Female Headed Families (percent)

40%

35%

30%

25%

20%

Year

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Number

Proportion

25


TABLE 5

Typical Occupations and Earnings forLow-Income Single Mothers, Nationwide1990–1991 (in 1997 dollars)39

% of FederalHourly Yearly PovertyOccupation Wage Earnings Threshold

Cashier $5.95 $9,615 74%Nursing aid/

orderly 8.03 12,976 100Server/

waitperson 5.48 8,856 68Janitor/

cleaner 6.64 10,730 83Secretary 8.85 14,302 111

Sales clerk 6.67 10,779 84

Average $6.95 $11,231 87%

multi-state study, 39 percent of former recipi-ents have either a spouse or unmarried part-ner from whom they are likely to receiveeconomic assistance, and 17 percent receivedhelp from a family member in their first threemonths after welfare.42 Among very poor fe-male family heads with children, contributionsfrom non-family household members accountfor nearly half of their incomes.43 When thesecontributions are added to the incomes of thepoorest quintile of single mother families,nearly all the decline in income from 1995 to1998 is erased, and their spending may evenhave slightly increased.44

Families who leave the welfare rolls and donot find steady employment — as many as 40percent of welfare leavers — are of particularconcern. As noted above, many appear to ob-tain support for themselves and their childrenby relying on parents, relatives, or friends. How-ever, others apparently “fall between thecracks,” with neither substantial earnings norfamily support to replace public assistance.Some indications of their number may begleaned from those reappearing in other partsof the social services system. Nationally, ninepercent of former recipients receive help fromchurches and seven percent from communitycenters. A ten-state study by Catholic charitiesfound that one client in eight at food pantriesand soup kitchens had been discontinued from

TABLE 6

Families’ Receipt of Public AssistanceAfter Leaving TANF 41

Adult ChildMedicaid Medicaid Food

Group Coverage Coverage Stamps

Former recipientswho left welfarewithin the past6 months 52% 55% 47%

Former recipientswho left welfaremore than 6months previously 21 29 19

move many TANF families out of poverty. A$3,816 federal EITC alone would increase theaverage total income to $15,047, or 117 per-cent of the poverty threshold.

Unfortunately, many of these families donot actually receive these supports when theyleave welfare. Well over 90 percent of TANFrecipients receive Medicaid and Foods Stampswhile enrolled in TANF. However, Table 6shows that only about half receive assistancefrom these programs during their first sixmonths after leaving TANF, and the propor-tion falls dramatically after that. Similarly, inthe first three months after leaving welfare,only 19 percent of former welfare families na-tionwide receive child care assistance, 15 per-cent receive help finding a job or training, and11 percent receive help with work-related ex-penses.40 In some cases lack of information,complex rules, or burdensome administrativeprocedures prevent families from claiming ben-efits despite their eligibility, while in other casesnarrowly defined state eligibility rules restricttheir access.

Support from family and friends furthercomplicates this picture. According to one

26


welfare in the previous two years, while a surveyof families in Atlanta homeless shelters identi-fied nearly half as having left TANF in theprevious year. In one national study, 11.8 per-cent of former welfare recipients reported thatthey often did not have enough money to buyfood, and 38.7 percent reported that, at somepoint since leaving welfare, they were not ableto pay housing or utility bills.45

We recognize that every vulnerable familythat ends up in such circumstances is cause forconcern. However, no affordable public assis-tance system can eliminate all cases of distress,and certainly the previous welfare system didnot do so. These numbers suggest that, in mostlocations at least, welfare reform has beenimplemented without plunging large numbersof low-income families into dire distress, assome had feared prior to reform. Indeed, thereduction in poverty among female-headedfamilies, noted above, suggests quite the oppo-site.

In balancing the positive and negative ef-fects of welfare reform on public assistancerecipients, it is particularly instructive to exam-ine the experience in Wisconsin. As previouslydiscussed, that state’s restructuring of publicassistance is the most far-reaching, and thedramatic 89 percent caseload reduction thatfollowed is the highest in the nation. It is there-fore encouraging to observe that no conse-quent widespread increase in destitution wasobserved. In fact, a recent study of 13 statesfound Wisconsin with the lowest poverty rateamong the states, both overall and for chil-dren.46 On the other hand, many former wel-fare recipients do appear to be subsisting atvery low levels of income. Only between one-third and one-half of former welfare families inWisconsin had earnings above the povertylevel.47 Families with larger numbers of chil-dren appear to remain particularly vulnerable;in Wisconsin, 49 percent of one-child familieshad greater cash incomes (including earningsand cash benefits) after leaving welfare, com-pared with only 38 percent of families with 3 ormore children.

THE DEMAND FORLOW-SKILL LABOR

Some critics of welfare reform have arguedthat work is not readily available for the mil-lions of working poor already in the low-skilllabor market, let alone welfare recipients be-ing added to their ranks.48 These critics citecontinuing joblessness among low-skill work-ers even in periods of low general unemploy-ment. For example, in February 1999, whenthe unemployment rate for all workers overthe age of 25 was 3.3 percent, that for workerswithout a high school diploma was 7.5 percent,more than twice as high. Concurrently, 3.6million workers were involuntarily working parttime.49

These critics often emphasize the particu-larly bleak job prospects in inner-city neigh-borhoods, which contain many welfarerecipients. Among applicants for fast-food jobsin New York City’s Harlem, for example, onestudy counted 14 applicants for every job va-cancy; among applicants not hired, 73 percentwere still unemployed a year later. In high-poverty neighborhoods in Chicago in 1990,only 33 percent of working-age persons wereemployed, compared with 57 percent city-wide.50

While such statistics document the un-doubted problems that workers with low skillsalways face in securing employment, especiallyin depressed economic areas, they do not di-rectly address the effects of welfare reform.What are the likely labor market effects of thereduction in welfare caseloads already experi-enced and continuing?

A recent, careful analysis estimates thatroughly one million workers have been addedto the low-skill labor force during 1993–2000as a result of welfare reform, and that thisnumber may increase to about 1.4 million by2005. The largest increases appear to have takenplace during 1997–1998, in the immediate wakeof the new legislation. During those years, theannual increase was about 300,000.51

27


The capacity of the economy to employ theseadditional job seekers has been surprisinglystrong. In spite of the problems that many ofthese new workers individually encounter insecuring and maintaining employment, jobopportunities for low-skill workers are, in fact,substantial in an economy that produces about1.8 million net new jobs each year. The Bureauof Labor Statistics estimates that jobs in itslowest education and training category —occupations requiring on-the-job training ofone month or less — comprise 39 percent oftotal U.S. employment. Total job openings inthese occupations are projected to increase by21.4 million during 1996–2006, allowing for 42percent of the growth in job openings. Theoccupations projected to provide the largestadditions to employment include cashiers, truckdrivers, home health aides, child care workers,food counter workers, food preparation work-ers, packers, and security guards — all occupa-tions open to persons with limited skills.52

Furthermore, simple projections such asthese take no account of the labor market’sreaction to changes in labor supply. In theshort run, individual businesses hire employ-ees to fill a fixed number of job vacancies. Butin the long run and across the entire employercommunity, the number of vacancies itself con-stantly adjusts in response to many factors, in-cluding the number and qualifications of jobseekers. Over recent decades, the labor markethas accommodated several demographic move-ments of much larger scale than this. Thelabor force participation of women increasedfrom 33 percent in 1950 to 60 percent today,adding nearly 27 million women to the currentworkforce; the proportion of foreign-born work-ers doubled from 6.4 percent in 1980 to 12percent in 1997, adding 7 million workers, with750,000 entering the labor force each year;and the baby boom generation contributed 18million more entrants to the labor force thanthe generation that preceded it.53

Over time, employers react to such large-scale changes by relocating and redesigningjobs, as well as by expanding production and

employment. The new workers’ own earningsexpand demand for goods and services that, inturn, opens new requirements for workers. Simi-lar adjustments are occurring in reaction tothe much smaller influx of welfare job-seekers.

Wage rates provide an important indicatorof whether the number of job seekers and jobvacancies are out of balance. Because welfarerecipients seeking work expand the number ofcompetitors for entry-level jobs, they would beexpected, in themselves, to depress wages forthese positions.54 However, between 1993 and1998, real hourly wages for men at the lowest20th percentile of the wage distribution in-creased by 6 percent, and that for counterpartwomen by 4.7 percent, reversing a decline inreal wages that had extended for more thantwo decades.55 This development may be re-lated to the fact that, as skill-upgrading in thelabor force continues, the supply of low-skillworkers appears to be growing more slowlythan demand, evidenced by the fact that thenumber of workers with no post-secondary edu-cation did not grow during 1992–1998.56 Dur-ing the present period of economic growth atleast, the labor market seems to be providingsufficient job opportunities to more than stayeven with the increase in job seekers.

The long-term capacity of the economy as awhole to employ additional low-skill workers,however, should not obscure the serious prob-lems in some local labor markets, especially inthe short term. In particular, unemploymentof low-skill workers will continue to be high,and may rise, in certain large urban labor mar-kets, including Baltimore, New York, St. Louis,and the District of Columbia.57 In addition,despite the favorable long-term outlook, thenext recession, like those in the past, will havea severe employment impact on the less skilled,and especially on those (like welfare leavers)with the least experience and seniority. Finally,even under favorable general conditions of low-skill labor demand, particular workers will faceproblems of employability and access to jobsthat will make employment — especially regu-lar, full-time employment — difficult.

28


Characteristics of Adult WelfareRecipients and the Working Poor, 1995 58

† In 1996, AFDC was renamed TANF.

Employed AdultsAdult with Household

Recipients IncomesCharacteristic of AFDC† below Poverty

SexFemale 88% 49%Male 12 51

100% 100%

RaceWhite 36% 54%Black 37 23Hispanic 21 23Others 6 –

100% 100%

AgeUnder 20 years 6% 7%20–24 years 22 1825–34 years 41 3135–44 years 24 2545 or older 7 19

100% 100%

EducationLess than H.S. diploma 39% 37%H.S. graduate, no college 45 34Some postsecondary, no degree 15 18College graduate 1 11

100% 100%

Family StructureSingle parent with children 91% 46%Two adults with children 9 39No children 0 15

100% 100%

ResidenceCentral city of a metropolitan area 55% 40%Suburb of a metropolitan area 24 31Outside of a metropolitan area 21 29

100% 100%

TABLE 7THE LOW-SKILL LABOR FORCEThe employment prospects of welfare re-

cipients cannot be analyzed as though they arealone in the labor market. When they becomejob seekers, they join millions of other workerswith characteristics like theirs. Some are formerrecipients who left the assistance rolls prior towelfare reform. Others have never receivedwelfare but have employment qualifications andpersonal circumstances similar to the welfarepopulation. Like most persons moving fromwelfare to work, the earnings they commandleave them and their families near or below thefederal poverty threshold. For that reason, thislarger group is commonly referred to as theworking poor. Table 7, compares the characteris-tics of adult welfare recipients with those of theworking poor.

IMPLICATIONS OF THESEFINDINGS

Together, the facts reviewed in this chaptersuggest three important conclusions:

1. Welfare reform is off to an impressive start. Itsobjectives are economically and sociallysound. Its legal and fiscal provisions areconsistent with these objectives. It does notask welfare recipients, government agen-cies, or employers to undertake tasks be-yond their capacity. As a consequence,welfare reform has already had substantialpositive effects.

2. Welfare reform’s success is directly attributable toits employment-centered approach. To the ex-tent that this approach is not yet universallyimplemented, continuing and expandingits application should receive top priority.

3. No circumstance more threatens welfare reform’slong-term success than the limited work readinessof the majority of welfare recipients. Unless theyare addressed, these limitations will con-tinue to make responsibility, employment,and poverty reduction difficult to attain.

29

Chapter 3.Completing Work-BasedWelfare Reform

This chapter presents recommendations forcompleting the transformation of work-basedwelfare reform from a concept in federal law toan operational reality in all states.

ENCOURAGING BUSINESS TOHIRE WELFARE RECIPIENTS

In a market economy, employers’ principalresponsibilities are to innovate, produce goodsand services efficiently, serve clients and cus-tomers, and (for businesses) provide a finan-cial return on invested capital. The creation ofjobs is principally a byproduct of these activi-ties rather than an objective in itself. Thus,employers cannot be expected to hire welfarerecipients because they need jobs, nor toweaken hiring requirements substantially toaccommodate workers who are not ready orable to work productively.

How then can states persuade businesses tohire from the welfare rolls? The only approachthat will be effective on a large scale is to offerjob candidates who are good potential employees.Millions of entry-level jobs in the Americaneconomy do not require advanced educationor specialized skills, but they almost universallydemand basic literacy, appropriate work atti-tudes, and employee dependability. Most wel-fare recipients who can meet these minimumstandards are likely to find and retain somesort of employment, at least in reasonably stronglabor markets.

In a tight labor market in which many em-ployers are struggling to fill entry-level posi-

tions — advertising more extensively, offeringhiring bonuses, or working with placementagencies — an increasing number of firms arerecognizing welfare recipients as an untappedresource. In welfare reform’s first three years,substantial numbers of recipients have beenhired by some of the nation’s best-knowncompanies. (See Appendix B: Employers inthe Welfare to Work Partnership.) Many formerwelfare recipients now work in common entry-level occupations employing large numbers oflow-skill workers. For example, Burger Kinghas hired more than 6,300 as fast food workers;TJX clothing stores, more than 4,400 as salesclerks; Borg Warner Protective Services, 1,950as security guards; and CVS, 850 as sales clerksin its drug stores. Other employers have placedrecipients in a broader range of occupations,some beyond entry-level. United Airlines hashired 1,000 welfare recipients as aircraft servic-ing personnel, customer service representatives,and reservations agents; Cessna Aircraft, 320for airplane manufacturing; and SalomonSmith Barney, 65 as data clerks, secretaries,and customer service representatives.

Small and medium-sized firms employ adisproportionate number of low-skill workers.For example, 18.9 percent of employees inbusinesses with 500 or fewer workers do nothave a high school diploma, compared with11.5 percent in larger firms.59 Thus, it is notsurprising that recipients finding jobs underwelfare reform often do so in firms with only afew dozen or fewer employees. (See AppendixB.)

30

Many employers have been pleasantly sur-prised by the quality of the workers they havefound on the welfare rolls. Three-quarters offirms in the Welfare to Work Partnership re-port that recipients are good, productive em-ployees, and half have found retention ratesequal to or higher than those for non-welfarehires. Likewise, almost 70 percent of the morethan 14,000 former welfare recipients hired bythe federal government were still in their jobsone year later, compared with only 39 percentfor non-welfare hires in similar positions (whoprobably on average had more alternatives avail-able.)60 In light of such experiences, more em-ployers are now inclined to consider welfarerecipients as potential employees.

Other employers remain unconvinced. Onesurvey found that 63 percent of companies donot hire welfare recipients or do not have pro-grams for hiring them.61 CED urges all employ-ers to consider making use of welfare recipients’potential as productive employees in a rangeof occupations. Employers should not be de-terred from interviewing welfare job-seekers byassuming that good employees are not to befound among them. Applicants should bejudged on their individual qualifications ratherthan pre-judged on their public assistance his-tory.

Employing welfare recipients is ofteninitially more complex and expensive than hir-ing other low-skill workers, and in some casesthe difficulties persist. Realistically, some risk isoften involved, especially for recipients withmore serious skill deficiencies and work limita-tions, and some extra investment in supervi-sion and staff development is often required.

This point is illustrated by the experienceof the Marriott Corporation, for whom integra-tion of welfare recipients into their work forcerequired extensive screening, special training,and ongoing mentoring and support. The in-vestment represented by these services provedto be a good one for the firm’s initial group oftrainees. However, later efforts, whichattempted to place recipients with more exten-sive barriers to employment, were unsuccess-

ful. (See box: “Treading Carefully AlongMarriott’s Pathway to Independence.”)

We believe that it is appropriate for govern-ment to contribute toward the extra costs thatemployers incur in such circumstances. Par-ticularly when welfare hires require substan-tially more recruitment, training, andsupervisory resources than other low-skill work-ers, subsidies such as cost reimbursements ortax credits can be a wise government invest-ment. (See box, page 32: “Incentives to HireWelfare Recipients.”) In Marriott’s Pathwaysprogram, for example, the federal governmentbore 75 percent of program costs.

PROVIDING SERVICES TOSUPPORT WORK

For many employers, the support servicesthat states provide play a crucial role in hiringwelfare recipients. Over the next several years,as TANF’s work requirements increasinglyaffect recipients with very limited work readi-ness, the proportion needing substantial sup-port is likely to rise. CED urges states to providejob placement and transportation assistance,child care, substance abuse treatment, educa-tion and training, health insurance, and similarservices at the level necessary to give welfarerecipients a reasonable chance of succeedingin the job market. Equally, we call upon em-ployers to cooperate with public agencies, non-profit organizations, and public-privatepartnerships running welfare-to-work programs,to take advantage of the screening, training,mentoring, and other work support servicesthese programs offer.

Moving Welfare Recipients Into JobsOne important form of support is job place-

ment — training and assisting recipients toidentify job vacancies, file applications, andcomplete interviews. Some welfare recipientshave never worked, while others have workedonly in informal jobs such as those in smallfirms near their homes. For them, finding steadyemployment often involves more written appli-


31

Chapter 3: Completing Work-Based Welfare Reform

The Marriott Corporation’s Pathways toIndependence has been justifiably hailed as amodel corporate welfare-to-work program.Since 1990, Pathways has transformed morethan 800 public assistance recipients into full-time, permanent Marriott employees.

The core of Pathways is training, lasting 20hours per week for six weeks, that participantsattend prior to employment. Trainees learnabout the hospitality industry and Marriott’swork requirements. They are instructed inworkplace behavior, including how to relate tosupervisors and coworkers, communicateeffectively, and handle crises. They work withprogram staff to ensure that issues likely tohamper job performance — inadequate childcare, health problems, lack of appropriateclothing, unstable living situations, or unreli-able transportation — are addressed prior tocommencing work. When participants havecompleted training, problem-solving andmentoring become the responsibility of theworker’s immediate supervisor, who spends 15percent more time on these tasks than forother employees.

Pathways has proved an excellent investmentfor Marriott. In part, this outcome reflects

TREADING CAREFULLY ALONG MARRIOTT’S PATHWAY TO INDEPENDENCE 62

government subsidies covering $3,700 of the$5,000 average cost per trainee. It also reflectsa higher than usual one-year retention rate of78 percent.

Much of Pathways’ success can be attributedto its careful screening, accepting only oneapplicant in four. Enrollees must test at a sixthgrade reading level, demonstrate a willingnessto work, and pass drug screening.

Emboldened by Pathway’s initial success andfacing a tightening labor market, Marriottopened the program to harder-to-employwelfare recipients, including substance abusersand persons with criminal records. These “hardcase” training classes were much less successful.Eight months after graduating a class of 12 inWashington, D.C., Marriott fired several partici-pants for problems ranging from poor atten-dance to drug abuse, and the remaininggraduates proved to be difficult, inconsistentemployees. Even with public subsidies, Marriottdid not recover its training costs. In NorthCarolina, a similar class yielded only fourgraduates from 22 enrollees, and all of themwere separated from employment within a fewmonths. In light of this experience, Marriottreinstituted its previous screening requirements.

cations, formal interviews, and reference checksthan they have previously experienced. Mosthave to search outside their home neighbor-hoods, because the market for low-skill jobs ininner-city locales is often over-crowded. Theyhave to uncover opportunities in the “hiddenjob market” — vacancies not publicized in news-paper “help wanted” ads. Success often requiresjob leads from employed persons, who are notas common among welfare recipients’ friends,relatives, and acquaintances as in the generalpopulation. Job seekers may encounter thesechallenges even for dead-end, entry-level posi-tions; they are almost certain to do so forcareer opportunities that offer a long-termescape from poverty and dependency.63

Some states provide assistance that focuses

more broadly than job applications and inter-views — multi-week classes on workplace be-havior, counseling in arranging recipients’personal lives so that they can be reliable em-ployees, and mentoring during the crucial earlymonths on the job. (See box, page 33: “AmericaWorks’ Comprehensive Approach to Job Place-ment.”) For welfare recipients with little priorexperience, such services are often extremelyuseful. Even for entry-level positions requiringfew specific skills, employers are reluctant tohire persons without important “soft skills” —positive work attitudes and personal qualitiessuch as dependability, punctuality, honesty, ap-propriate appearance, and the ability to relateto customers, supervisors, and co-workers.64 Toavoid pressing recipients into futile job searches

32


and burdening employers with excessive screen-ing and turnover, government programs shouldinterpret work first to mean work as soon as mini-mally work-ready.

Publicly-provided support services are oftenparticularly important for smaller firms. Theseemployers generally have neither the financialnor managerial resources to provide the coun-seling, training, or employee assistance morecommon among larger employers. CED urgesstates to make services that support welfarerecipients’ transitions to work readily availableto small and medium-sized firms. Intermediaryorganizations, such as America Works, can beextremely useful in reaching out to smalleremployers.

The need for job-seeking support does notend when recipients first become employed.Washington state found that as many as 50percent of newly-employed TANF recipients losetheir jobs in the first six months, and 75 per-cent within one year.66 Innovative programs,such as Re-employ Washington Workers, can

Federal

• Welfare-to-Work Tax Credit – Reduces federal corporate income taxes for firms hiring TANF recipi-ents who had received welfare for at least 18 consecutive months. The maximum credit is $3,500for the first year of employment and $5,000 for the second year.

• Work Opportunity Tax Credit – Reduces federal corporate income taxes for firms hiring recipientsnot eligible for the Welfare-to-Work Credit. The maximum credit is $2,400 for the first year ofemployment.

States

• Tax credits – Fourteen states offer credits against state corporate income taxes to employers hiringwelfare recipients. Maryland and Pennsylvania also offer credits to companies who provide childcare assistance.

• Wage subsidies – Thirty-two states reimburse a proportion of wages paid to welfare recipients.Subsidies are typically limited to a year or less and jobs paying above the minimum wage.

• Trial employment – Some states allow work on a trial basis while job-seekers receive their TANFgrant in lieu of wages. During the trial period, employers avoid the administrative complexities ofhiring, as well as payment of payroll taxes (such as unemployment insurance).

• Other incentives – Some states offer innovative incentives. For example, through a partnership withthe state’s Board of Investments, Montana banks offer no-interest loans to firms which expandtheir staffs by hiring TANF recipients.

INCENTIVES TO HIRE WELFARE RECIPIENTS 65

help former recipients who lose their jobs be-come re-employed. (See box: “Keeping Wel-fare Recipients in the Workforce.”)

As noted in Chapter 2, some TANF recipi-ents have work-limiting disabilities and manyof these could be remedied through medicalcare, vocational rehabilitation, purchase ofwork-adaptive devices, training, work experi-ence, or counseling. Substance abuse, affect-ing some 16 to 20 percent of TANF recipients,is of particular concern.67 For public assistancerecipients whose employability can be enhancedthrough remedial services, we urge that statesinvest TANF funds, or other state or federalresources as appropriate, to provide theseservices.

Helping Welfare RecipientsStay Employed

While the impact of work-oriented welfarereform is often measured by how many recipi-ents move from public assistance to a job, anequally important concern is that these new

33


American Works is a for-profit companywhose product is to help the hard-to-employfind and retain jobs. They have achieved thisgoal for more than 12,000 persons, typically inoffice positions paying between $15,000 and$18,000 per year. Some 50 to 60 percent oftheir clients are successfully placed, and 80percent retain their jobs after two years.

This record has prompted state and localgovernments around the country to contractwith America Works. Consistent with the firm’scommitment to stable employment at abovepoverty wages, contracts typically require thatjobs pay more than the minimum wage andprovide health benefits, and that clients remainemployed full time for six months beforeAmerica Works receives its placement fee. Toensure that clients include persons with verylimited job readiness, some contracts stipulatethat 25 percent of those placed must be public

workers stay employed. As Figure 2, page 2showed, a worker earning only the minimumwage can support a typical TANF family abovethe poverty threshold if she remains employedfull time, year round. Steady employment alsoimproves an individual’s chances for advance-ment and higher wages.

For many welfare recipients, job continuityis recurrently threatened by unstable arrange-ments for transportation, child care, and healthcare. This instability may cause employees toarrive at work late or leave early, or force pain-ful choices between caring for a sick child andmeeting job requirements. Employers have littlepatience for employees who are chronicallyunreliable, particularly in entry-level positions.CED urges states to recognize that, for manywelfare recipients, publicly-funded services ad-dressing the three crucial areas of transporta-tion, child care, and health care can contributecrucially to steady employment. Services thatcontinue after individuals stop receiving TANFcash benefits can be particularly effective byreducing disincentives to leave welfare and

AMERICA WORKS’ COMPREHENSIVE APPROACH TO JOB PLACEMENT 68

housing residents.America Works’ services begin with one week

of training in which trainees prepare resumesand practice being interviewed. During thistime, they are screened to exclude persons whoare not motivated and ready to work. A limitedamount of “soft-skills” and computer training isalso provided.

To assuage employers’ skepticism aboutwelfare recipients, America Works offersemployers four months of trial employmentduring which clients remain on AmericaWorks’ payroll. Employers reimburse the firmfor employees’ wages but not payroll taxes. Atno cost to the employer, America Worksprovides ongoing counseling, regularly visitingwork sites and assisting with work-relatedproblems such as child care and transportation.The firm also assists employers in claimingfederal and state tax credits.

No matter how much up-front assistanceis provided, many welfare recipients findingemployment eventually lose their jobs. InWashington state, Re-employ WashingtonWorkers (RWW) is designed to identify suchindividuals quickly and avoid having themreturn to welfare.

RWW is available to any former TANFrecipient who applies for UnemploymentInsurance. The program offers a 30-hour jobsearch workshop, job referrals, and ongoingsupport (such as “job clubs”). Transporta-tion and child care are provided duringRWW activities. Once participants havebecome re-employed, RWW counselors stayin contact to inform them of opportunitiesoffering better pay or advancement.

Encouraged by the program’s successwith welfare recipients, the state has ex-tended its services to non-welfare applicantsfor Unemployment Insurance who havedependent children and family income lessthan 175 percent of the federal povertythreshold.

KEEPING WELFARE RECIPIENTS INTHE WORKFORCE 69

34


providing additional time for recipients toestablish their own arrangements.

Transportation to work presents a seriouschallenge for many welfare recipients, 94 per-cent of whom do not own automobiles andmany of whom do not even have driver’slicenses.70 In metropolitan areas, many promis-ing job opportunities are concentrated in thesuburbs. For example, 70 percent of all metro-politan area jobs in manufacturing, wholesal-ing, and retail nationwide are now locatedoutside the central cities where most urbanwelfare recipients live. In Boston, 98 percent ofwelfare recipients live within one-quarter mileof a bus or trolley route, but only 58 percent ofpotential employers are located within a mileof these routes. In Cleveland, families living inlow-income neighborhoods can reach only 15percent of the metropolitan area’s jobs with a

• A number of states purchase passes or vouchers on public or private transit systems. In Mississippi,individuals may receive a transportation allowance for as long as they are on TANF and for at leastsix weeks after they leave the caseload.

• Where transportation systems are not currently in place, some states organize them. In Michigan,TANF funds private contractors to operate shuttles, buses, and car pools for recipients.

• Transportation can be a job for welfare recipients. Colorado hires TANF recipients to drive statecars shuttling other recipients to work. In Maryland, recipients have received refurbished vehiclesand training to transport welfare recipients and others.

• Public vehicles, such as school buses and para-transit vans, can transport welfare recipients in thecourse of their other duties. North Carolina allows TANF recipients to ride to work on schoolbuses; while riding, the adults serve as bus monitors.

• Although private automobiles are the most practical alternative for many welfare recipients, somestates virtually preclude this possibility by counting the value of vehicles against restrictive assetlimits for TANF eligibility. For instance, in Indiana, a person is ineligible for TANF if she owns a carworth more than $1,000; in contrast, Montana exempts the entire value of any vehicle used forwork.

• Some welfare recipients may find it difficult to purchase even a modest car. Under Colorado’sWrecks to Rides program, donated vehicles are repaired by high school students and given toTANF recipients with three months’ insurance. In Nebraska, the state will purchase a vehiclecosting up to $2,000 for any TANF recipient who becomes employed. Other states provide low- orno-interest loans for car purchases.

• In New Hampshire, a TANF recipient can receive up to $750 for auto registration, insurance, taxes,licensing, or driver’s education. In New York, recipients can receive up to $500 for car repairs.

40-minute one-way public transit commute, andonly 44 percent of the jobs in 80 minutes.71 Forwelfare recipients living in rural areas, publictransportation is usually non-existent.

Nearly every state acknowledges the impor-tance of transportation by allocating someTANF resources to this issue. Because eachlocality’s circumstances are unique, states andlocalities have implemented a wide variety ofinitiatives. (See box: “TANF Support for Trans-portation to Work.”) Such assistance is oftenparticularly important during the earliestmonths of employment, before workers havehad time to save to purchase a car.

Partnerships with private employers canoften assist public agencies in meeting trans-portation needs. To avoid expense, adminis-trative complexities, and potential legal liability,most employers treat transportation as an em-

TANF SUPPORT FOR TRANSPORTATION TO WORK 72

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ployee responsibility. However, a growing num-ber realize that this hands-off approach maynot suffice, especially in the current strongeconomy. Moreover, firms that have becomeinvolved in employee transportation have of-ten found the costs unexpectedly modest andthe benefits significant in terms of expandedrecruitment, reduced staff turnover, and im-proved employee attendance. (See box: “Trans-portation Opens New Sources of Employees.”)CED urges employers to consider innovativearrangements to improve transportation to workfor welfare recipients and other members oftheir low-skill work force.

Virtually all TANF households consist ofsingle parents with young children, some fivemillion children in all. Finding safe, accessible,reliable, affordable child care often presentsthem with a major challenge. For example,among former recipients who were not em-ployed, 20 percent in Wisconsin, 24 percent inSouth Carolina, and 41 percent in Indiana citedlack of affordable child care as the reason theywere not working.74 In general, research sug-gests that the supply of child care services, bothformal and informal, has expanded substan-tially in recent years in response to rapid growthof demand. However, several areas of concernremain. Pre- and after-school supervision ofschool-age children, care during night orweekend shifts, and infant care often are noteasily arranged. Such child care is of particularrelevance to former recipients, as more than aquarter work at night and eight percent holdtwo or more jobs.75 Even when care is available,its cost can be prohibitively high in relation toa working parent’s entry-level wages. InWisconsin, unsubsidized child care wouldabsorb more than half of a family’s earningsfor two-thirds of welfare households.76

Welfare recipients without access to healthcare for themselves and their children are al-ways one accident or illness away from return-ing to welfare. Only 23 percent of formerrecipients who are employed receive healthinsurance through their employer, leaving theothers reliant on Medicaid or among the 41percent of former adult recipients withouthealth care.77 States are federally-mandated toprovide one year of Medicaid for former TANFrecipients, and 12 states offer it for longer.However, actual enrollment in Medicaid afterleaving welfare is low (see Table 6); in Wiscon-sin, a survey of former recipients indicated that39 percent were not aware that working adultscould receive Medicaid after leaving welfare.78

CED urges federal and state officials to informpotential Medicaid beneficiaries of their eligi-bility and make benefits readily available tothose who qualify.

TRANSPORTATION OPENS NEWSOURCES OF EMPLOYEES 73

In 1996, United Parcel Service of America(UPS) was having difficulty recruiting for thelate-night, part-time shift at its distributioncenter near Philadelphia InternationalAirport. Welfare officials in Camden, NewJersey offered their clients as a solution toUPS’s dilemma. Although the company wasinitially skeptical, a six-month test yielded anunusually-high retention rate of 88 percent.Camden’s welfare rolls eventually providedUPS with 700 workers.

Camden is across the Delaware Rivermore than 10 miles away from UPS, with nodirect public transportation. To accommo-date its new employees, the company initiallyoperated three buses. Once potential rider-ship had been demonstrated, UPS negotiatedwith the public New Jersey Transit to takeover the operation. The company promisedto subsidize any losses on this route, but all53 daily trips proved profitable.

UPS also uses company-operated trans-portation to fill vacancies at its facility inLouisville, Kentucky. Buses collect employeesfrom neighboring rural areas that have nopublic transportation. UPS continues tooperate the system two years after initiatingthe effort and has found that riders havebetter attendance than non-riders, especiallyduring bad weather, and higher retention.

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State Spending on Support ServicesThe combination of fixed annual Federal

TANF block grant payments and a 47 percentdecrease in the TANF caseload has providedstates with substantial short-run surpluses intheir welfare budgets, which currently total $7.3billion nationwide.79 Many states are using theseresources to support recipients’ transitions towork through the type of services describedabove. However, some states are substitutingTANF funds for activities previously paid for bystate resources. Although federal law may per-mit such substitutions, they have the effect ofdiverting TANF resources into programs unre-lated to work and welfare or to politically popu-lar tax reductions.80 A number of states havealso declined other federal funds for welfare-to-work services, thereby avoiding the commit-ment of state matching funds. About one-thirdof the $1.5 billion available annually to statesunder the federal welfare-to-work block grantremained unclaimed in FY 1998.

While the increased employment of recipi-ents should eventually reduce welfare expendi-tures substantially, in the near term manyrecipients require substantial support to suc-ceed in the labor market. In its initial phases,the transition to work is likely to require larger,rather than smaller, public outlays per recipi-ent household.81 CED believes that, in general,state expenditures on welfare should not bereduced over the next several years. Instead,we recommend that states invest temporarypublic assistance budget surpluses, other avail-able federal funds, and additional state fundsas appropriate, in aggressively supporting re-cipients’ employment efforts. To sustain thiseffort, we also strongly urge Congress not torescind federal funds simply because they havenot been obligated to date.

We address this recommendation especiallyto states that have not yet made substantialinvestments in work support services. The over-all cost of increased activity need not be dra-matic. For example, Table 2, page 15 showsthat state annual spending on work-support

services in 1998 ranged from near zero perTANF household to $3,000 or more. Withinthis range, the median state (Arkansas) spent$1,214. If the 25 states below the median wereto increase their spending to the median, out-lays nationwide would increase about $600 mil-lion annually, roughly eight percent of thecurrent unspent TANF surplus of $7.3 billion.

Our recommendation, however, is intendedfor all states, not simply those with low levels ofcurrent spending. Even states that have madeextensive commitments to work-supportservices, such as Wisconsin, now face politicalpressure to reduce the resources available forthese efforts or to divert TANF funds indirectlyto other expenditures or tax reduction. If wel-fare reform is to succeed nationally, it is essen-tial to sustain our vision and commitment. Wemust not mistake current prosperity andcaseload declines for victory in a struggle againston-going poverty and dependency. We urgeactive states to stay the course and other statesto use the leaders as models.

Data to Support State AccountabilityWe wish also to express our concern about

the adequacy of information to properly ad-minister, monitor, and evaluate welfare reform.The states must be accountable to the publicfor their management of public assistance un-der welfare reform. However, when Congresstransferred primary decision-making authorityfrom the federal government to the states, italso weakened or eliminated many require-ments that states document the policies theyhave implemented and their effects. We be-lieve the federal government must remain con-cerned about poor families across the nationand should therefore ensure that there is ad-equate information to monitor their conditionand evaluate federal and state policies that vi-tally affect them. The federal government alsomust exercise oversight over the billions offederal dollars transferred to states under theTANF block grant. In preparing this policystatement, we were often frustrated by the lackof data that would allow us to compare states in

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a consistent manner and assess the impact oftheir policies. We urge the Congress, in consul-tation with the states, to develop a nationallyuniform system for reporting on welfare poli-cies and their consequences and to assist thestates with the resources and technical assis-tance required to implement such a system.

STRENGTHENING FINANCIALINCENTIVES TO WORK

As noted in Chapter 2, financial incentivescan simultaneously encourage welfare recipi-ents to work and reduce their poverty. Manystates are currently making work under TANFfinancially rewarding, but others can do morein this regard.

One direct way to reward and encouragework is to limit reductions in TANF benefits asearnings increase. Nearly all states have raisedtheir former AFDC “earnings disregards” —the earnings allowed without offsetting reduc-tions in welfare benefits — but some still re-duce additional earnings by more than half.Demonstration programs that raised earningdisregards considerably and combined themwith work requirements and support servicesincreased the work effort and earnings of thosenot already working full time.82 Currently, afew states, such as Alabama, Mississippi, andNevada, allow recipients to keep all earningswithout benefit reduction, at least for the firstseveral months of work. CED urges states toincrease earnings disregards and lower benefitreduction rates to allow TANF recipients tokeep more of their earnings.

The federal Earned Income Tax Credit(EITC) is another important tool to make workfinancially rewarding. Between two and fourmillion families that are eligible for the EITCcurrently are not claiming it.83 CED recom-mends that the federal government, states, andbusinesses employing low-wage workers coop-erate to help eligible families claim the EITC.84

Nearly all households claiming the EITCreceive the credit as a lump sum payment afterfiling their annual tax returns. An Advance

Payment Option is available under which claim-ants can receive half their expected refund as asupplement to each paycheck. This option pro-vides an immediate financial incentive and isuseful in meeting daily and monthly living ex-penses. However, it is currently used by lessthan one percent of EITC claimants.85 CEDrecommends that the IRS undertake outreachto inform EITC recipients about the advancepayment option and to assist employers in com-plying with employee requests. We urge em-ployers to become active partners in theseefforts.

In combination with the standard exemp-tions and deductions in the federal incometax, the EITC eliminates federal income taxliability for virtually all families with earningsbelow or near the federal poverty threshold.This is also true for the majority of states withstate income taxes. However, in 19 states atypical TANF family (single parent with twochildren) earning less than the federal povertythreshold still pays state income tax.86 Taxpay-ers in such marginal economic circumstancescontribute relatively little to state treasuries,but their tax liabilities make it substantiallymore difficult to move out of poverty throughwork. CED recommends that states considerreducing or eliminating state income tax bur-dens on families below the federal povertythreshold. They can achieve this result throughappropriate changes to exemptions, rate sched-ules, or state earned income tax credits.

For many households moving from welfareto work, Food Stamps provide a significant por-tion of household purchasing power. Low-in-come households are eligible for Food Stampsregardless of their TANF status. However, manyhouseholds leaving TANF are unaware of theireligibility, and some states do little to informthem or to assist them in applying. For ex-ample, 34 percent of those leaving welfare inWisconsin were unaware that they might stillbe eligible for Food Stamps.87 Poor informa-tion and confusion about eligibility appears tobe a major source of this problem, especially inan administrative environment where many

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states have aggressively sought to “divert”potential beneficiaries from the welfare rolls towork. The complexity and restrictive rules ofFood Stamps (and Medicaid) also pose a majorproblem, since they have previously been ad-ministered “in tandem” with AFDC for depen-dent beneficiaries, not in a more flexible,work-oriented environment. In some instances,states have focused so aggressively on the goalof reducing welfare caseloads that they ham-pered Food Stamp applications or denied FoodStamp benefits in ways that courts subsequentlyfound illegal.88 We strongly urge federal andstate officials to ensure that Food Stamps, Med-icaid, and related programs’ benefits are avail-able to eligible beneficiaries under current law,to take vigorous actions to inform beneficia-ries of their eligibility, and to facilitate theirenrollment.

In the longer term, a more comprehensivereexamination of the nation’s safety net pro-grams is required, although detailed recom-mendations lie beyond the scope of this policystatement. Food Stamps and Medicaid tradi-tionally have been linked to AFDC cash assis-tance and have complex and often burdensomeeligibility mechanisms; their use by eligibleworkers is declining as those links are broken,as noted above. In a world of required work,child care has become more critical both as apre-requisite for employment and a job-relatedexpense. Child support enforcement hasemerged as a potentially important tool forboth encouraging responsibility and support-ing working mothers. And the role of DisabilityInsurance and Supplemental Security Incomewill necessarily change as disabled individualsleave welfare. We therefore urge Congress, asit considers modifications to TANF, to re-examine the design of Food Stamps, Medicaid,and other support programs. It should modifythem as required to encourage the shift from adependency-oriented public assistance systemto one centered on work. We also recommendthat Congress reexamine the EITC to deter-mine whether increasing its value, especially

for workers who accumulate longer experience,would further strengthen work incentives andreduce poverty.

PLANNING FOR ECONOMICDOWNTURNS

Rainy Day FundsAlthough the American economy has now

sustained an economic expansion for morethan eight years, it would be imprudent toignore the potential impact on welfare reformof slack national or regional labor markets. Insuch a market, as unemployment increases,the number of recipients leaving welfare is likelyto drop substantially, while the number ofapplicants will rise.

Because federal funding to states for TANFis fixed, the fiscal burden of such caseloadexpansions will fall directly on states. However,state tax revenues tend to fall sharply duringeconomic downturns, and many state constitu-tions require that budgets remain balanced. Aweaker economy could therefore leave manystates unable to serve the expanding numberof persons seeking public assistance or forcedto curtail other services to cover rising welfarecosts.

Anticipating this contingency, PRWORA al-lows states to reserve resources from currentTANF budget surpluses. Some states have takenadvantage of this option to create substantial“rainy day funds”; by the end of FY 1998, 15states had established these funds by state stat-ute, and 11 were reserving funds using otherbudgetary authority.89 The remaining states —nearly half — have made no formal provisions,yet nearly all have substantial unspent federalfunds on which they may be counting. As thisuncommitted money accumulates in the fed-eral treasury, it becomes an increasingly tempt-ing target for Congressional budget cuts.90

Congressional proposals to reallocate thesefunds have prompted states to question whetherthey will be available when the need arises.

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CED believes that the highest priority for states’unspent TANF funds should be effective ser-vices to support work and training. However,in the many states where additional funds haveaccumulated, we recommend the creation ofexplicit rainy day funds. We urge the federalgovernment to allow states to preserve theirunspent federal funds for use during periodsof economic slack.

The Congress has also created a federalTANF rainy day fund to back up state reserves.Under its provisions, states can receive addi-tional federal block grant funds if their unem-ployment rates or Food Stamps caseloads risesharply. The current authorization for this fundis $2 billion, an amount likely to be exhaustedduring even a relatively mild economic down-turn. For example, it is estimated that a reces-sion similar to that of 1990–1991 would increasecaseloads by 11 percent and raise TANF out-lays by $2.4 billion.91 In addition, to accessthese funds, states must experience a very sharpeconomic deterioration and spend consider-ably more of their own money than most arenow doing.92 CED recommends that the fed-eral government examine whether its “rainyday” fund should be supplemented and rede-signed to better meet state needs during aneconomic downturn.

The Role of Publicly Funded JobsAlthough welfare reform has shown that

work can be expected of many persons previ-ously not considered work-ready, some TANFrecipients suffer from disabling conditions that,while not precluding employment, limit it sub-stantially. In surveys in 1990 and 1992, between8.4 and 10.6 percent of TANF recipients re-ported being unable to perform at least onejob-related function. Others have limitedintellectual capacity; among participants inwelfare-to-work initiatives in Washington state,19 percent were assessed as “mildly retarded”(IQ of 80 or less).93

Recognizing the employment difficulties ofthese individuals, states may exempt up to 20percent of TANF recipients from the federally-

mandated five year time limit on cash benefits.While such exemptions may often prove neces-sary, they weaken the program’s commitmentto the goals of personal responsibility and in-creased employment. In many localities, non-profit organizations such as Goodwill and localAssociations for Retarded Citizens have longprovided “sheltered workshops” and similaradapted-work opportunities. Innovative statessuch as Wisconsin have enlisted these programsin employing welfare recipients. CED recom-mends that all states follow the example ofstates that arrange employment alternativessuitable for welfare recipients with disabilitiesor other work-limiting conditions.

Some states create jobs for welfare recipi-ents as transitional job preparation, not as apermanent work alternative. In these initia-tives, jobs may be located in government agen-cies, nonprofit organizations, or for-profit firms.The positions are temporary, typically with timelimits of one year or less, after which recipientsmust seek other work.94 They may be comple-mented by training, either on-the-job (coach-ing by supervisors and mentors) or in theclassroom, to enhance participants’ work readi-ness or occupational skills. Research indicatesthat publicly-financed work experience that istemporary and developmentally-oriented canbe cost-effective, particularly for women withthe limited work experience of many TANFrecipients.95

Sometimes, however, states create publicjobs for large numbers of non-disabled, non-traineeTANF recipients. The most prominent exampleis New York City’s Work Experience Program(WEP), which, as of November 1999, employed19,800 TANF participants as well as 14,000 re-cipients of state-funded General Assistance. Ineffect, WEP guarantees a minimum wage jobto recipients who cannot find alternative em-ployment. They enter the program after 30days of mandatory searching in the regular jobmarket, work up to 20 hours per week in citygovernment agencies (with the number ofhours determined by dividing their assistancepayment by the minimum wage), and may

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continue in WEP until their TANF eligibilityexpires.

CED believes that publicly funded jobs fornon-disabled TANF recipients are appropriateif they are temporary and prepare participantsfor regular employment. However, we do notsupport public employment programs, such asWEP, that offer a long-term alternative to pri-vate jobs. Such programs allow states and indi-viduals to side-step taking responsibility forfinding employment. We urge states with pro-grams that are long-term substitutes for privatejobs to transform them into short-term, devel-opmentally oriented work programs. 96 In Tulsa,a program that originally provided permanentemployment was successfully reoriented in justthis manner. (See box: “Shifting Publicly-Funded Jobs to a Transition Role.”)

Such programs can also provide a safety netof employment opportunities during an eco-nomic downturn. Under TANF, innovativestates such as Wisconsin have developed port-folios of employment alternatives, withunsubsidized private employment as the pre-ferred option and publicly-funded jobs (at sub-sidized private firms, nonprofit organizations,or public agencies) as a backup. In strong la-bor markets, these latter positions primarilyserve welfare recipients with disabilities, whocan function only in “sheltered” jobs, and wel-fare recipients without recent work experiencein preparing for regular employment. Duringeconomic downturns, these positions can beexpanded to serve TANF recipients who wouldfind regular jobs in a stronger labor market.

CED urges states currently without a com-prehensive range of job alternatives for TANFrecipients to develop options that include pub-licly funded jobs for limited use during pros-perity and expansion when the economy is weak.This approach can reconcile the program’swork requirements with the nation’s commit-ment to support low-income families withchildren. Government should not, however, be-come an “employer of last resort,” creatingpublic jobs for the general population of theunemployed.

SHIFTING PUBLICLY-FUNDED JOBSTO A TRANSITION ROLE 97

Each year, the Oklahoma Department ofHuman Services refers more than 200welfare recipients to IndEx, Inc., a nonprofitsubsidiary of the Tulsa Chamber of Com-merce. At IndEx’s facility in downtown Tulsa,participants spend four hours each work dayassembling and packaging products for localmanufacturers. They spend the remainingfour hours in training that ranges fromremedial basic education to computer skills.Program participants do not earn wages butinstead receive welfare benefits averaging$260 per month, Food Stamps, and subsidiesfor child care and transportation.

By being steadily employed, welfarerecipients with little prior experience gainvaluable exposure to the culture of theworkplace. Simultaneously, training en-hances their marketable skills. IndEx im-poses few prerequisites for participation,thereby opening these opportunities topersons most likely to need them beforeseeking regular jobs. However, as IndEx wasinitially operated, it did not consistently pushparticipants toward that ultimate goal. Theprogram set no time limits on trainees’participation and did not require participat-ing companies to hire program graduates.

After several years, IndEx refocused itsefforts. It began to track placement rates andinclude hiring requirements in productioncontracts. It implemented 30-day trial workperiods during which program participantswork at firms in return for continued welfarebenefits and wages of $4.50 per hour; at theend of the trial period, if the employer issatisfied, the worker is hired as a regularemployee.

Unemployment InsuranceSince its creation in the 1930’s, the federal-

state Unemployment Insurance program (UI)has provided temporary, partial wage replace-ment to the involuntarily unemployed. It as-sists families to weather financial crises, and itserves as an “automatic stabilizer” by minimiz-

41


ing reductions in consumer spending that ex-acerbate economic downturns. However, itscapacity to fulfill these roles has eroded overthe past several decades as the proportion ofjobs-losers who receive UI has declined, fromone-half in the mid-1950s to one-third today.In some states, coverage has fallen as low as 17percent of the unemployed.98

One factor in this decline has been theincrease in the proportion of American work-ers in part-time, temporary, or short-term jobsthat are categorically excluded from UI cover-age in many states. A related factor is the grow-ing number of low-wage workers whose earningsare too low to meet UI eligibility requirements.Both circumstances apply to many personsmoving into work under welfare reform, aswell as to many other low-skill households. As aresult, only 20 percent of persons leaving wel-

fare for work are likely to become eligible forUI through post-welfare employment.99 Theineligibility of the vast majority of such workersfor UI makes an already vulnerable populationeven more susceptible to poverty and a returnto welfare dependency.

Recognizing this, two-thirds of the states donot categorically exclude low-wage workers, anda number of states have removed the exclu-sions of temporary, seasonal, and part-timeworkers. We urge the remaining states to ex-pand their UI coverage in a similar manner, asrecommended by the federal Advisory Com-mission on Unemployment Compensation. (Seebox: “Reshaping Unemployment Insurance toServe More Low-Skill Workers.”) Workers wouldstill have to meet UI requirements for substan-tial work before claiming benefits and an ac-tive search for employment while collecting

In 1996, a federal Advisory Council on Unemployment Compensation presented 50recommendations for improving Unemployment Insurance (UI). Four are particularly rel-evant to former welfare recipients and other low-skill workers because of the types of jobs theydisproportionately hold:• Low-wage work: Workers can collect UI only if, prior to becoming unemployed, they earned at

least a minimum on which their employer paid unemployment tax. Some states set this minimumsufficiently high that minimum-wage earners have to work more hours than other workers tobecome eligible. The Advisory Council recommended that states set this earnings minimum nohigher than 800 hours at the state’s minimum wage.

• Part-time work: In some states, part-time workers are categorically excluded from UI benefits evenif their earnings qualify them. The Advisory Council recommended that workers not be precludedmerely because they are looking for part-time work.

• Short-term work: To be eligible for benefits, many states require that workers have been employedin two calendar quarters excluding the current, incomplete one and the most recently-completedquarter. The Advisory Council recommended that states allow the most recently completedquarter to count if that would qualify a claimant. Furthermore, many applicants denied benefitsbecause of this time lag are not aware that they can reapply once the quarter is over. The Councilrecommended that states inform claimants in writing when they should reapply.

• Seasonal work: Fifteen states permit workers in seasonal industries to collect benefits only duringthe season in which that industry is active. Thirteen states do not allow seasonal earnings to counttowards the earnings requirement. The Advisory Council recommended that states eliminateseasonal exclusions and subject seasonal workers to the same eligibility requirements as otherworkers.

RESHAPING UNEMPLOYMENT INSURANCE TO SERVEMORE LOW-SKILL WORKERS 100

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them. But they would no longer be categori-cally excluded because of the nature of thejobs they held.

If this expansion were financed by UI pay-roll taxes, the costs would be borne initially byemployers but, ultimately, largely by low-wageworkers in the form of lower wages. Further-more, by raising the cost of low-skill workerscompared to higher-skilled workers or to tech-nology that might be substituted for workers,UI payroll taxes tend to reduce their job op-portunities. To avoid these negative impactson wages and employment, we recommend thatthe federal and state government consider waysto support this expansion of benefits with gen-eral revenues rather than higher UI payrolltaxes. One approach, which would involve achange in federal law, would be to credit theUI trust fund with income taxes paid on UIbenefits, as is currently done with the SocialSecurity and Railroad Retirement trust funds.This arrangement would generate at least $3.6billion for the UI trust fund, more than cover-ing the estimated $2.0 billion annual cost ofthe Advisory Commission’s four recommenda-tions.101

WELFARE RECIPIENTS AND THEWORKING POOR

The same employment issues that hinderTANF recipients — such as job instability, healthcare, child care, and transportation — alsotrouble millions of other low-skill, working poorfamilies. Some states design relatively broadprograms to address these problems, servingwelfare and non-welfare families alike. Othersmaintain a sharp distinction between thegroups, often because they lack the fiscal re-sources or the political consensus to serve awider poverty population.

There are two major advantages to the broadapproach. First, it is more equitable to providesimilar assistance to all families who face thesame set of difficulties. Second, it removes theperverse incentive to remain on, or return to,welfare to receive more generous treatment.

CED recommends that states consider organiz-ing their work-support services to aid a broadpopulation of low-skill, low-wage workers ratherthan only TANF recipients. The broad approachcan be illustrated by several innovative stateapproaches to health insurance and child care.

While the vast majority of middle and up-per class Americans rely upon health insur-ance from their employers, only 57 percent ofworkers earning less than $20,000 benefit fromemployer coverage. After taking account of cov-erage obtained through employed spouses orpublic programs, some 17.3 million employedpersons earning $20,000 per year or less arecurrently without health insurance for them-selves and their families. The well-being of the11 million children lacking coverage is of par-ticular concern.102

The new federal State Child Health Insur-ance Program (CHIP) and recent revisions toMedicaid provide states with additional re-sources and flexibility to address health needs,with which some states now cover substantialnumbers of the working poor. (See box: “TwoWays States Can Provide Health Insurance toLow-Income Workers.”)

Child care can be a substantial expense formost families, but it is particularly burdensomefor households in poverty; it absorbs, on aver-age, 18 percent of their income, in contrast to7 percent for non-poor households. The po-tential need for additional child care assistanceis suggested by the 10.5 million children under13 in non-welfare households with workingadults and incomes below 150 percent of thefederal poverty threshold. At present only 3.3million of them are in paid care.103

Both TANF and the federal Child CareDevelopment Fund block grant allow states toset their own eligibility standards, so states canelect to cover both TANF households and theworking poor. Some states, including three ofthe ten states with the nation’s largest TANFcaseloads, have used this flexibility to base eli-gibility solely on low income, treating formerwelfare families and others on an equal basis.(See box: “Child Care for All Low-Income Work-ing Illinois Families.”) Other states guarantee

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support for welfare families or give them prior-ity, and assist others to the extent that remain-ing funds allow; about half of all states wererecently turning away non-welfare families whowere eligible on the basis of income.104

TWO WAYS STATES CAN PROVIDEINSURANCE TO LOW-INCOMEWORKERS 105

To expand health insurance coverage forlow-income working families, states caneither expand Medicaid or create a newprogram supplementing Medicaid.

In Wisconsin, a program supplementingMedicaid, Badgercare, extends state subsi-dized health insurance coverage to allfamilies with children and incomes below185 percent of the poverty threshold. Cover-age is free for households with incomes up to150 percent of poverty, while householdsbetween 150 and 185 percent of poverty paypremiums of no more than 3.5 percent ofincome. Once a household is eligible, it maymaintain its coverage until its incomereaches 200 percent of poverty. Families withaccess to employer-provided health carewhere the employer pays at least 80 percentof the costs are not eligible for Badgercare.

In contrast, Washington state uses Medic-aid only for families already eligible for thatprogram, a diverse group that includespregnant women with incomes up to 185percent of the poverty threshold, children infamilies with incomes up to 200 percent ofpoverty, and other non-elderly persons withincomes under 56 percent of poverty. Allothers with incomes under 200 percent ofpoverty, including most of the working poor,are eligible for the state’s Basic Health Plan(BHP). BHP participants pay premiums on asliding scale that range as low as $10 permonth. Persons with incomes over 200percent of poverty may also participate ifthey pay unsubsidized premiums of as muchas $242 per month. Medicaid and BHP arecoordinated to provide seamless coverage forpersons whose fluctuating incomes shift theireligibility between the programs. BHPcurrently has 219,000 enrollees.

CHILD CARE FOR ALL LOW-INCOMEWORKING ILLINOIS FAMILIES 106

By offering child-care assistance to all low-income working families in the state, notonly those receiving TANF, Illinois supportswork for all low-income parents.

To address issues of affordability, in 1997the state combined federal and state funds toincrease its annual spending on child carefrom $280 million to $380 million. The stateoffers subsidies, on a sliding scale, to allfamilies with employed parents earning lessthan 50 percent of the state’s median familyincome (about $26,000 per year). Thissupport covers an estimated 135,000 chil-dren, about 12 percent of children under sixin the state.

To address issues of quality and accessibility,the state allocates additional funds fordevelopment of child care resources, regula-tion of providers, and operation of child carereferral networks. The state provides $18million annually for special quality initiativesand innovative arrangements to accommo-date parents who work night, weekend, androtating shifts. In 1995, referral agenciesthroughout the state provided informationto 33,613 parents seeking child care, trained34,000 child care workers, and helped morethan 1,334 new providers to open or becomelicensed.

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Chapter 4.Expanding Opportunitiesto Acquire Skills

No circumstance more constrains welfarereform’s promotion of responsibility, employ-ment, and higher incomes than limited workreadiness. Welfare recipients with inadequateeducation, training, or work experience find itdifficult to envision or establish a life indepen-dent of public assistance. They struggle to landjobs and remain employed. They are frustratedwhen their limited productivity brings themonly modest wages. The working poor face simi-lar difficulties. Only by enhancing the qualifi-cations they offer employers are low-skillworkers likely to leave poverty and dependencypermanently.

The nation must not shrink from this chal-lenge. The example of welfare reform shows usthat bold restructuring of public policies ispossible. We have shifted discussion from theproblems and limitations of public assistancerecipients to their potential to contribute totheir families, the economy, and society. Thetime has come to undertake a similarly freshapproach to all the working poor.

The circumstances leading to inadequatework preparation are varied and complex. Theyinvolve problems both with individual motiva-tion and behavior and with our economic, so-cial, and educational institutions. Effectiveremedies are often difficult to identify, and adetailed agenda for private and public actionlies beyond the scope of this policy statement.However, our success in achieving the goals ofwelfare reform will ultimately depend uponthe development of adequate human capitalfor those who lack it, especially for the young.

Without such development of habits and skills,even a reformed public assistance system willdevote too many resources to “picking up thepieces” of lost human and social potential. Wetherefore outline here, in general terms, thekinds of changes we believe are needed, focus-ing on improvements in schools, publicly-funded employment and training programs,and the workplace itself.

IMPROVING BASIC EDUCATIONFOR CHILDREN AND ADULTS

Elementary and secondary schools providemany of the habits, skills, and credentials thatshape future workers’ employment prospects,especially for low-skill positions. However, manypublic school systems today turn out studentswho have not learned the skills that the newAmerican economy requires. Their deficien-cies are particularly pronounced for low-in-come and minority populations in urban areas.If the nation’s schools prepared their studentsmore adequately, the flow of adults into wel-fare and working poverty would sharply dimin-ish.

We urge federal, state, and local govern-ments to give urgent attention to improvingeducation in preschool through the twelfthgrade, particularly in schools serving low-in-come, disadvantaged students. CED has de-tailed its approach to improving elementaryand secondary schools elsewhere. (See box:“CED’s Agenda for Elementary and SecondaryEducation.”) That agenda should command

45

Chapter 4: Expanding Opportunities to Acquire Skills

first priority in improving the nation’sworkforce preparation.

Adult education programs, a largely invis-ible adjunct to elementary and secondaryschools, are often overlooked in discussions ofeducation. Upgrading basic skills and creden-tials can have significant payoffs for adult work-ers. The unemployment rate of high schoolgraduates is about half that of counterpart work-ers without diplomas.

High school graduates age 25-34 years oldearn 46 percent more than comparable drop-outs. Those who acquire a GED earn, on aver-age, 20-31 percent more than those withoutthis credential. Increased literacy and job skillssubstantially expand employment opportuni-ties and increase earnings, even among per-sons who are not high school graduates.108

Despite such potential payoffs, only about 4million out of the 44 million adults who havenot completed high school participate in adulteducation programs each year, and the lower aperson’s current income, the lower the prob-ability of participating.109 (See Figure 7, page46.)

When low-skill adults wish to enroll in fur-ther education, appropriate classes may not beavailable. In particular, in states with a largeand growing population of immigrants (suchas California, Florida, Texas, Illinois, and NewYork), increased demand for English as a Sec-ond Language has resulted in burgeoning classsizes and long waiting lists in some localities.110

Availability of adult education is also anissue with respect to the nation’s prison popu-lation. Some 1.2 million persons are currentlyin federal or state prisons, and most will even-tually rejoin the nation’s workforce. Nearly halflack high school diplomas, and 70 percent readat the two lowest literacy levels. Several studieshave found that the more actively inmates par-ticipate in education, the less likely they are torelapse into crime. Yet in the federal prisonsystem, where literacy classes are supposedlymandatory for all prisoners without a highschool diploma, only 7 to 10 percent of in-mates with low literacy receive literacy educa-tion. In state prisons, only 26 percent of inmatesparticipate in educational programs.111

A third concern about adult education isthe quality of instruction. Some deficiencieshere simply mirror the weaknesses in educa-tional management, standards, and pedagogythat prevail throughout the nation’s elemen-tary and secondary schools. However, the adult

CED’S AGENDA FOR ELEMENTARYAND SECONDARY EDUCATION 107

School reform must be based on higheducational expectations reflected in clearincentives for administrators, teachers, andstudents. While additional money may beneeded in some schools, the chief job inothers is to use resources more efficiently toimprove student learning. Research andexperience indicate that there are no “magicbullets” that will fix all public schools;context matters a great deal in identifyingappropriate and feasible reform strategies.What must undergird all reform approachesis a commitment to making performancematter for both students and schools.

While much has been accomplished bythe “standards movement” of the pastdecade, there is still much to do to refocusschools and teachers on outcomes andperformance. This includes continuingattention not only to assessment and ac-countability systems, but also to curriculumimprovement; teacher selection, retention,and promotion policies that will fosterstudent learning; and professional develop-ment to ensure that teachers have theknowledge they need to teach to the newstandards. New governance arrangements,such as greater involvement of mayors and/or school-based management, will be desir-able in some places. New institutionaloptions such as charter schools and publicschool choice should be vigorously ex-panded, especially where traditional publicschools have a history of poor performance.

46


Percentage Enrolled in Courses

Figure 7

Employed Adults Enrolled in Courses by Income, 1995

SOURCE: National Center for Education Statistics, Digest of Education Statistics 1997, p. 370.These data exclude full-time enrollment in higher education.

Annual Family Income

Career- or Job-Related Courses

Other Courses50

45

40

35

30

25

20

15

10

5

0$10,000 or less

$10,001 to$15,000

$15,001 to$20,000

$20,001 to$25,000

$25,001 to$30,000

$30,001 to$40,000

$50,001 to$75,000

More than$75,000

$40,001 to$50,000

education system often labors under additionalhandicaps as well.

At the root of many of these deficiencies islimited funding — important in itself, and alsosymbolizing the general lack of attention toadult education. Although generous fundingdoes not guarantee educational success, severeunderfunding nearly always produces unsatis-factory results. Adult education seldom receivessufficient funding to serve all students whomight benefit and to deliver effective instruc-tion. Nationwide, expenditures per full-time-equivalent adult student average only one-thirdthat of their counterparts in kindergartenthrough the twelfth grade. One Congressionalstudy summed up funding for adult educationas “meager in terms of the total population inneed, and low as a national priority.”112

One area in which funding deficiencies havetheir most direct effect is instructional staffing.Less than a third of adult education instructorsare certified to teach in their field, and morethan 80 percent work only part time. Manyprograms rely extensively on volunteers.113

In short, although adult education is poten-tially an important means of enhancing theearnings of low-skilled workers, its typical qual-ity is low and its scope is limited. CED urges thefederal and state governments to recognize theimportance of adult education and improve itsquality, availability, and funding. A greater com-mitment of federal and state attention andresources will be required to improve its effec-tiveness and, eventually, to reach millions ofpotential students who might benefit from aneffective system.

47


STRENGTHENING PUBLICLY-FUNDED EMPLOYMENT ANDTRAINING PROGRAMS

The working poor depend heavily upon thenation’s publicly-funded employment and train-ing programs. The federal government spendsabout $1 billion per year on these programs,and states add an additional $600 million.

In many localities, these efforts commandlittle respect from either employers or enroll-ees. They consist of a hodgepodge of programsthat range from the effective to the marginal.Under-subscribed and duplicative programscoexist with waiting lists, program gaps, andservices about which many potential clientsare unaware. Community-based initiatives areoften well intentioned but resource-poor, andemployer involvement is intermittent at best.

A recent federal law, the Workforce Invest-ment Act of 1998, offers an important opportu-nity to reorganize and improve this system.The Act consolidates numerous scattered pro-grams into three block grants, stipulates greateraccountability for programs, and allows servicerecipients to choose service providers througha voucher system. Development of full-servicelabor market intermediaries is another key partof this effort. State and local governments arerequired to begin reorganizing employmentand training efforts into “one stop centers” —operations that are administratively integrated,co-located, and that offer a comprehensiverange of services to both employers and work-ers. (See box, page 48: “Boston’s One-StopCareer System.”) The gains in efficiency andeffectiveness can be substantial, particularly ifthe one-stop centers operate in a consistentlycustomer-responsive, business-like manner.

The Workforce Investment Act also pro-vides for Workforce Investment Boards at thestate and local levels to improve coordinationand increase effectiveness. If properly imple-mented, these boards can draw together thestrengths of the public, private, and nonprofit

sectors and provide area-wide employment andtraining systems with a coherence they haveconsistently lacked. However, they will lack thepower and influence to affect significant changeunless senior executives from the business com-munity, as well as high-level officials from stateand local government, give them priority andserve on the boards.

The Workforce Investment Boards and one-stop centers ideally can bring greater flexibilityto public employment and training programs.Government agencies tend to organize theiroperations around narrow administrative cat-egories, such as persons eligible for assistanceunder a specific funding source. That approachis particularly troublesome when applied inthe labor market.

The advantages of programs that serve abroader clientele are significant. Througheconomies of scale, they operate more effi-ciently than programs serving narrowly-targetedpopulations. Employers often find broadly-tar-geted programs less confusing. They also aremore willing to accept applicant referrals if theagency does not offer only severely disadvan-taged individuals. Finally, agencies serving mul-tiple types of job seekers tend to be staffed bypersons whose expertise is employment andtraining, not social work. The integrated agen-cies therefore tend to deal with their clients ina more relevant style that is more consistentlywork-oriented and business-like. The practicesof innovative localities, such as Boston, in pro-moting institutions that serve welfare recipi-ents and low-skill workers alike should be closelyconsidered by other localities seeking to trans-form their workforce development system.

The quality of the individual employmentand training programs is often as problematicas the organization of the system as a whole.Some publicly-funded programs are of poorquality and do little for their clients, whileothers have consistently raised the wages oftheir trainees and won the trust of employersby providing excellent employees. (See box: “A

48


Training Program That Works.”) With its em-phasis on performance evaluation, accountabil-ity, and consumer choice, the WorkforceInvestment Act enhances the ability of stateand local governments to target employmentand training resources to their most efficientuses, but not all jurisdictions are taking fulladvantage of these mechanisms.

In short, we urge all states and localities toconsider the best practices developed by pio-neering efforts under the Workforce Invest-ment Act and other publicly-funded exemplaryemployment and training initiatives. In par-

BOSTON’S ONE-STOP CAREER SYSTEM 114

A low-skill worker seeking employment and training but unsure where to find them is fortunate ifhe lives in Boston. The same is true for an employer seeking job candidates or government funds fortraining. Boston is well along in the process of transforming a complicated and duplicative set ofprograms into an integrated system which employers or job seekers can access through a singlephone call or visit.

This redesign is part of a statewide initiative, but most decisions are made by Boston’s RegionalEmployment Board. This coalition of business, labor, education, government, and community leadersis responsible for deciding how many one-stop centers to establish, selecting center operators andevaluating their performance.

Three centers are currently open, and they are so popular that they are operating 40 percentabove capacity. Some 86 percent of their customers expressed a high or very high level of satisfaction.Even those that have not used the new system view it as a major improvement. One survey of businessexecutives found 82 percent likely to use the new centers, compared with 3 percent for previousprograms.

Boston attributes this success to four guiding principles:

• Integration – Creating a single, seamless system from numerous job placement, training, andeducation programs scattered among multiple state and city agencies is a primary goal. Theprocess of receiving information and services has become easy and understandable for bothworkers and employers.

• Universality – The centers serve a wide variety of job seekers, whether they are downsized middlemanagers, the long-term unemployed, or persons trying to leave welfare. In turn, they are able toattract employers by offering candidates for a wide range of positions.

• Accountability – Contracts to operate the centers are awarded to for-profit and nonprofit organi-zations through competitive bids. Operators must meet strict standards set by the RegionalEmployment Board and score well on customer satisfaction surveys. Those that do not must eitherimprove or go out of business.

• Consumer choice – The state requires that each region offer multiple centers from which employ-ers and workers can chose. Additionally, at each center, customers can access an education andtraining database that includes user ratings of programs.

ticular, government, employers, service pro-viders, and community-based organizationsshould cooperate in transforming the localWorkforce Investment Boards created by theAct into influential organizations that strategi-cally allocate employment and training re-sources; service delivery should be reorganizedaround “one-stop” labor market intermediar-ies that offer a range of services and a conve-nient single point of contact; and the Act’smechanisms for ensuring performanceaccountability should be aggressively imple-mented.

49


The Center for Employment Training (CET)in San Jose, California is a nonprofit, commu-nity-based organization with an unwaveringcommitment to individuals with very limitedemployment qualifications. Simultaneously, itenjoys an unparalleled reputation among em-ployers as a source of competent workers. CETis an adult skill training program that works.

The earnings of CET trainees average $6,700more over a four year period than those of acomparable group not receiving training.Typical graduates receive $15,003 ($7.21 anhour) to start and fringe benefits worth anadditional 20 percent of wages. These levels areachieved for seriously disadvantaged workers.Earnings of participants prior to entering theCET program average only $7,135 per year.Some 94 percent of participants are racial/ethnic minorities, 53 percent are high schooldropouts, 36 percent are limited Englishspeakers, and 26 percent are welfare recipients.

What accounts for this record? CET inte-grates remedial education into vocationaltraining, with participants learning reading andmathematics at the same time as occupationalskills ranging from automotive mechanics to

child care. It also replicates the work environ-ment that recipients will face, with traineespunching a time clock each morning andinstructors relating to trainees as job supervisorsrather than as teachers.

Close ties are maintained with the businesscommunity to ensure that clients are nottrained in skills for which there is no demand, acommon criticism of other training programs.Active advisory boards and technical commit-tees of local corporate executives keep CETaware of changing workplace requirements andeliminate occupational tracks when the marketfor an occupation weakens.

CET’s long-term relationships with localemployers also underlie its effectiveness in jobplacement. Many employers require personalreferrals and references when hiring, even forlow-skilled job positions. CET provides aneffective reference for its trainees because it hasa “brand-name” reputation as a source ofreliable workers. CET provides employmentnetworks that substitute for services provided tomore mainstream workers by executive searchfirms, union hiring halls, and internal labormarkets within large corporations.

A TRAINING PROGRAM THAT WORKS 115

EXPANDING OPPORTUNITIES TOADVANCE IN THE WORKPLACE

Formal public education and training areby no means the only ways for welfare recipi-ents and other low-skill workers to enhancetheir employment qualifications. Less formalopportunities to acquire skills on-the-job, di-versify work experience, demonstrate capabili-ties, and develop networks of personal contactsare also very important.

Extending Career LaddersFor many American workers, opportunities

to advance are an expected aspect of theirjobs. Employers generally assume that mana-gerial, professional, technical, and similarhigher-level employees can be hired and re-

tained only in positions that contribute to theirlong-term careers. Some firms extend the sameprinciple to more moderately-skilled employ-ees as well. However, in many workplaces, theseopportunities are available principally toemployees who already possess some post-secondary education and several years of steadywork experience. These prerequisites place thelowest rungs of career ladders above the reachof most welfare recipients and other low-skilledworkers.

This pattern is reflected in the distributionof classroom training that workers receive onthe job. Each year, American employers spendmore than $55 billion on formal training fortheir workers. However, while 90 percent ofworkers with a bachelor’s or higher degreereceive some training each year, only 60 per-

50


cent of those with a high school education doso.116

While the lack of training for lower levelemployees obviously hinders workers’ effortsto escape poverty and dependency, it may alsoraise turnover and reduce productivity and qual-ity.117 Extending opportunities for career ad-vancement to employees with limited currentqualifications is not appropriate or possible forall types of jobs and businesses. However, cre-ative redesign of entry-level job functions andpromotional paths can often benefit employ-ers as well as their employees. (See box: “Trans-forming Dead-End Jobs into Careers.”) We urgeemployers to reexamine their formal and in-formal arrangements for training and upwardmobility in the workplace and to consider ex-

Reflecting an aging population and changesin health care delivery, home health care aidesare the fastest-growing occupation in theAmerican economy, expected to employ 1.25million persons by 2005. Typical jobs in thisfield offer low wages, minimal fringe benefits,little job security, and few opportunities foradvancement.

Founded in 1985, New York City’s Coopera-tive Home Care Associates (CHCA) structuresits jobs differently. CHCA believes that homehealth care positions that are reasonablycompensated and upwardly mobile reduceturnover and recruitment costs, producing astaff that is more productive and more attrac-tive to potential clients. These productionadvantages, in turn, can pay for the enhancedwages, fringe benefits, and training that gener-ate them. CHCA’s operating experience ratifiesthis strategy. The company has been consis-tently profitable without subsidies for six years.Its staff has grown to more than 300 in NewYork City, and parallel operations are beingdeveloped in other localities.

The career-oriented approach begins whennew aides are hired, more than 80 percent of

tending them to workers with lower initial quali-fications.

Managing DiversityThe American workforce looks strikingly

different today than it did even one generationago. White, non-handicapped, prime-age malesonce dominated offices, plants, and other busi-ness places, especially in better paid, decision-making positions. Now the workforce is a highlyvariable mix of genders, races, ethnicities, ages,disabilities, and other characteristics. Most em-ployers now realize that their enterprises willthrive only if they can use such a diverseworkforce productively.

Rising to that challenge is no small matter.Few employers today knowingly tolerate ex-

them former welfare recipients. In an industryin which many aides receive virtually no training,CHCA provides four weeks of full-time initialtraining. Subsequently, supervisors providecoaching on-the-job, and four times a year, thecompany holds classes on new techniques andadvanced skills.

CHCA aides are full-time, permanent employ-ees, rather than the on-call temporaries that arecommon in the industry. They receive wagesabove the industry average, fringe benefits(including health insurance and paid vacations)not common in the industry, and year-endbonuses.

CHCA does not expect its aides to remain atthe entry-level. The first upward step is “seniorhome health aides,” who divide their time be-tween delivering services and administrativeduties such as scheduling and training. Subse-quent advancement requires additional educa-tion to become a Licensed Practical Nurse(LPN) or Registered Nurse (RN). CHCA fundson-site adult education, particularly English as aSecond Language, to prepare its employees foradditional education. Future plans call for add-ing tuition reimbursement as a fringe benefit.

TRANSFORMING DEAD-END JOBS INTO CAREERS 118

51


plicit discrimination.119 However, many strugglewith business cultures that, in varying degrees,are not fully prepared to attract and retaindiverse workers and use their talents effectively.Policies and processes for personnel selectionand assessment, compensation and fringe ben-efits, social relationships, and even habits ofthought, often enhance progress for some typesof employees and impede it for others.120

These circumstances especially affect work-ers making the transition from welfare to work,because disproportionate numbers of them arewomen, racial or ethnic minorities, personswith disabilities, or socially and culturally dif-ferent from their fellow workers. These samecircumstances disproportionately affect theworking poor. These groups accordingly ben-efit significantly when employers recognize andnurture employees from diverse backgrounds.However, the greatest benefits of improveddiversity management accrue to employersthrough higher employee morale, reducedturnover, more accurate assessments of indi-viduals’ performance and potential, and im-proved teamwork.121 CED urges employers toconsider the efforts of innovative firms to man-age diversity and the applicability of these

approaches to their own needs and practices.One aspect of diversity management par-

ticularly relevant to TANF families and theirdependent children is the compatibility of workand family responsibilities. In recent years,many employers have begun to make their work-places more family friendly. (See box: “TypicalElements of a Family Friendly Workplace.”)Leading companies such as Dupont, MBNABank, Eddie Bauer, and Motorola have estab-lished programs that give their employees morescheduling flexibility and provide such aids toparents as child care referrals and lactationrooms. These initiatives not only make employ-ees happier, but result in more loyal and pro-ductive employees and a healthier bottom line.After eliminating rules limiting employees’ con-trol over their schedules and creating a seriesof programs to help working families, First Ten-nessee National Bank saw both employee andcustomer retention grow, which contributedto a 55 percent rise in profits over two years. Byextending its unpaid parental leave to sixmonths, Aetna Life and Casualty Company cutin half the rate of resignations by new mothersand saved $1 million annually in hiring andtraining expenses.122

52


TYPICAL ELEMENTS OF A FAMILY FRIENDLY WORKPLACE 123

Child Care

• Information – Employers can contract with referral services providing information about child carealternatives and customers’ experiences with them.

• Pre-tax accounts – Employers can allow employees to estimate the cost of child-care or elder-careexpenses and put that amount in an account not subject to income tax. Firms benefit by reducingtheir total payroll, thus reducing payroll taxes.

• Emergency day-care – Employers can contract for back-up child care when an employee’s regulararrangements fail or when children are ill.

Family-Oriented Compensation

• Health insurance for all family members – Firms can offer insurance covering employees’ spouses andchildren as well as workers themselves.

• “Cafeteria” benefits – Firms can allow employees to choose among child-care reimbursement,additional vacation days, health insurance, and other fringe benefits. For example, employeesthat already have health insurance through their spouse’s employer may prefer child care benefitsinstead.

Schedule Flexibility

• Flexible working hours – Firms can allow employees to adjust work schedules to match theirchildren’s school or day care schedules.

• Flexible leave – Employers can offer employees vacation time in short increments, as little as anhour at a time, to meet family obligations such as attending parent-teacher conferences, orvisiting day-care or elder-care facilities.

• Telecommuting – Firms may allow employees to work at home when productivity would not bereduced.

• Family emergencies – Employers may permit employees to leave work for sudden illnesses or acci-dents involving family members.

Management Commitment

• Supervisor training – Supervisors must accept the concept of a family-friendly workplace, helppromote company initiatives, and allay employee concerns that they will be penalized for takingadvantage of these initiatives.

• Program marketing – Employees must be made aware of their options and feel comfortable usingthem.

53

ConclusionOn balance, we believe that welfare reform

is changing America’s public assistance systemfor the better. Fundamental changes are tak-ing place in attitudes, incentives, and assump-tions regarding individual capacities andresponsibilities. These changes are occurringamong welfare recipients, employers, officialswho administer public programs, and thepublic at large. In the longer term, thesechanges will enhance economic opportunitiesfor millions of welfare recipients and otherlow-income Americans. However, fundamen-tal change inevitably brings dislocations thatwill be painful for some individuals and fami-lies. We are acutely aware of the uneven out-comes of welfare reform to date and of theformidable problems that remain. We havetherefore focused on welfare reform as a workin progress and on the need to turn its potentialinto a reality in all the states.

As welfare was repeatedly reformed betweenthe 1930s and the 1990s, problems and solu-tions were defined in Washington. The mecha-nisms of reform were nation-wide mandates

and federal spending. Under PRWORA, re-form decisions are being made in 50 state capi-tals, and the standards for performance havebecome best practices implemented by leadingstates and localities across the country. To theextent that welfare reform has been successful,state and local public officials deserve much ofthe credit. These same officials are now re-sponsible for making the additional changesand committing the resources necessary toachieve three central goals: increased responsi-bility, expanded employment, and the reduc-tion of poverty.

Responsibility for welfare reform is alsoshared by the private sector. As welfare recipi-ents move into the labor force, employers mustbe prepared to do their part in helping themto succeed.

Lasting welfare reform is at long last withinthe nation’s grasp. If all parties — the federalgovernment, state and local governments, em-ployers, nonprofit organizations, and welfarerecipients themselves — rise to their responsi-bilities, it can be achieved.

54

NOTE: The indices are derived from the information in Table 1, Chapter 2. The index for “policies requiring work” is derived fromthe proportion of policies in the category “require work or limit eligibility” listed in the table used by each state. The index for“policies supporting work” is similarly derived from the use of listed policies that “create financial incentives to work” and “provideservices supporting work.” States were assigned 0 points for no use of a policy, 1 point for moderate use, and 2 points for extensiveuse, and the totals were standardized by conversion to an index with a range of 0-100.

Policies PoliciesRequiring Supporting

State Work Work

Alabama 50.0 50.7Alaska 43.8 50.0Arizona 68.8 60.7Arkansas 68.8 57.1California 43.8 60.7Colorado 50.0 49.3Connecticut 31.3 57.1Delaware 31.3 43.8District of Columbia 57.7 25.0(lowest)Florida 75.0 50.0Georgia 69.6 42.9Hawaii 31.3 42.9Idaho 81.3 35.7Illinois 25.0 50.0Indiana 50.0 46.4Iowa 44.9 57.1Kansas 56.3 60.7Kentucky 56.3 53.6Louisiana 50.0 42.3Maine 37.5 57.1Maryland 62.5 64.3Massachusetts 37.5 57.1Michigan 43.8 57.1Minnesota 50.0 60.7Mississippi 43.8 57.1Missouri 56.3 57.6

Montana 62.5 46.4

Nebraska 44.9 50.0

Nevada 50.0 53.6

New Hampshire 43.8 53.6

New Jersey 43.4 46.4

New Mexico 36.6 42.3New York 50.0 64.3

North Carolina 57.0 39.3

North Dakota 37.5 42.9

Ohio 68.8 42.3

Oklahoma 62.5 47.1

Oregon 50.0 59.9Pennsylvania 37.5 46.4

Rhode Island 43.8 56.3

South Carolina 56.3 53.2

South Dakota 56.3 35.7

Tennessee 56.3 57.1

Texas 62.3 53.6Utah 62.5 39.3

Vermont 31.3 78.6(highest)

Virginia 48.8 50.0

Washington 51.3 50.0

West Virginia 43.8 35.7

Wisconsin 75.0 67.9Wyoming 56.3 39.3

Policies PoliciesRequiring Supporting

State Work Work

(Figure 4, Chapter 2)

Appendix A:Indices of Policies Requiring Work and Supporting Work, by State

(lowest)(highest)

55

Appendix B:Employers in the Welfare to Work Partnership 124

Created under the auspices of the White House, the Welfare to Work Partnership is a national,nonpartisan, not-for-profit network of businesses who have hired or are planning to hire welfarerecipients. Large companies that have joined as of the end of 1999 include:

Aetna, Inc. Marriott InternationalAmerican Airlines Mashantucket Pequot Tribal NationARAMARK Corporation Molly MaidBank of America New England Electric SystemBFGoodrich New England Medical CenterBorg-Warner Protective Services Pacific BellBurger King Corp. Pep BoysCessna Aircraft Co. Salomon Smith BarneyChase Manhattan Sprint Corp.CVS Pharmacy Time Warner, Inc.Fannie Mae TJX Companies, Inc.Federal Express United Airlines Corp.Giant Foods, Inc. United Parcel ServiceKnights Franchise Systems, Inc. Wal-Mart and SAM’s ClubThe Limited, Inc. Westinghouse Electric Corp.Loews Hotels XeroxManpower, Inc.

Beverly HealthcareNew York, NYNursing/Rehabilitation200 employees

Boscart Construction, Inc.Washington, DCConstruction22 employees

Bristol Place CorporationMinneapolis, MNMental Health160 employees

Examples of smaller employers that have joined the partnership include:

Immediate Temporary HelpMidland, MITemporary Staffing150 employees

Just NailsWashington, DCBeauty Salon22 employees

Lombardi’s CucinaOlympia, WARestaurant85 employees (continued)

56

Cal InsuranceSan Francisco, CAInsurance Services27 employees

CandleworksAmes, IACandle Making30 employees

Distinctive MarketingMontclair, NJMarketing Research20 employees

Hygienic Service SystemsRed Wing, MNCommercial Laundry83 employees

Illinois School BusCrestwood, ILBus Company170 employees

M.R. Hopkins TransportationBaltimore, MDTransportation56 employees

Nursery HutWashington, DCChild Care17 employees

Office EnvironmentsCharlotte, NCFurniture Distributor135 employees

Our Valley Fence CompanyRidgecrest, CAFencing13 employees

Superior Industrial CoatingRacine, WIMetal Finishing52 employees

57

Appendix C:Sources of Further Information

Administration for Children and Families,U.S. Dept. of Health and Human Services370 L’Enfant Promenade, S.W.Washington, DC 20447202-401-9215(www.acf.dhhs.gov/news/welfare/)

American Public Human ServicesAssociation

810 First Street, N.E., Suite 500Washington, DC 20002202-682-0100(www.aphsa.org/reform/reform.htm)

America Works575 8th Avenue, 14th FloorNew York, NY 10018212-244-5627(www.americaworks.com)

Boston One-Stop Career CentersThe Work Place1-800-436-WORKBoston Career Link1-888-536-1888JobNet1-800-5JOBNET(www.masscareers.state.ma.us/)

Center on Budget and Policy Priorities820 First Street, N.E., Suite 510Washington, DC 20002202-404-1080(www.cbpp.org)

Center for Employment Training701 Vine StreetSan Jose, CA 95110408-287-7924(www.best.com/~cfet/main.htm)

Community Transportation Associationof America

1341 G Street, N.W., Suite 600Washington, DC 20005202-628-1480(www.ctaa.org)

Employment and Training Administration,U.S. Dept. of Labor200 Constitution Avenue, N.W.Washington, DC 20217202-219-6871(www.ttrc.doleta.gov/onestop/)

Local Investment Commission (LINC)3100 Broadway, Suite 226Kansas City, MO 64111816-889-5050(www.kclinc.org)

Manpower Demonstration ResearchCorporation

16 East 34 Street, 19th FloorNew York, NY 10016212-532-3200(www.mdrc.org)

Marriott International, CommunityEmployment and Training Programs

Dept. 935.471 Marriott WayWashington, DC 200581-800-638-8108, Ext. 88582

National Alliance of Business1201 New York AvenueWashington, DC 20005202-289-2888(www.nab.com)

(continued)

58

National Association of Workforce Boards1201 New York Avenue, Suite 350Washington, DC 20005202-289-2950(www.nawb.org)

National Council of State Legislatures1560 Broadway, Suite 700Denver, CO 80202303-830-2200(www.ncsl.org)

National Governors’ Association Centerfor Best Practices

444 North Capitol StreetWashington, DC 20001202-624-5300(www.nga.org)

Urban Institute Assessing the NewFederalism Project

2100 M Street, N.W.Washington, DC 20037202-833-7200(www.newfederalism.urban.org)

Welfare Information Network1000 Vermont Ave., N.W., Suite 600Washington, DC 20005202-628-5790(www.welfareinfo.org)

Welfare to Work Partnership1250 Connecticut Ave.,N.W., Suite 610Washington, DC 20036202-955-3005(www.welfaretowork.org)

Wisconsin Department of WorkforceDevelopment

P.O. Box 7905Madison, WI 53705608-267-9613(www.dwd.state.wi.us/)

59

Endnotes

1. Mary Jo Bane and David Ellwood, Welfare Realities: From Rhetoricto Reform (Cambridge: Harvard University Press, 1994), p. 31.Growth in other income-tested programs — including FoodStamps, Medicaid, Supplemental Security Income, General As-sistance, social services, school meals, housing assistance, andenergy assistance — paralleled or exceeded that in AFDC/TANF.In 1996, these programs distributed $106.4 billion, with AFDC/TANF accounting for 22.3 percent of the total. See Committeeon Ways and Means, U.S. House of Representatives, 1998 GreenBook (Washington: U.S. Government Printing Office, 1998), pp.1418, 402.

2. For example, in its policy statement Rebuilding Inner-City Com-munities: A New Approach to the Nation’s Urban Crisis (1995), CEDmade leadership by inner-city residents and institutions centralto its proposed strategy for addressing problems of inner-citypoverty.

3. For example, in opinion polls, 61 percent of a sample ofwelfare recipients in New Haven expressed feelings of shameover their dependent status; 67 percent of a sample in Chicagostated that receiving welfare has a negative effect on their familylife; 98 percent in a multi-state sample agreed that a working lifewas more interesting than a life on welfare, and 54 percentagreed that even a low-paying job was preferable to dependence.See Nancy Goodban, “The Psychological Impact of Being onWelfare,” Social Service Review (September 1985), p. 414; Susan J.Popkin, “Welfare: Views From the Bottom,” Social Problems (Feb-ruary 1990), p. 72; Jan L. Hagen and Liane V. Davis, “TheParticipants Perspective on the Job Opportunities and BasicSkills Training Program,” Social Service Review (December 1985),p. 661; and Leonard Goodwin, Causes and Cures for Welfare (Lex-ington, MA: Lexington Books, 1983). A recent large-scale studyof welfare recipients suggests that these negative views are re-flected in actual behavior, in which many low-income peopleavoid the stigma of welfare receipt even at large monetary cost.See Bruce D. Meyer and Dan T. Rosenbaum, Welfare, the EarnedIncome Tax Credit, and the Labor Supply of Single Mothers, WorkingPaper 7363, National Bureau of Economic Research, September1999.

4. Rachel Swarns, “The Search for Self-Reliance: In Welfare Of-fices, Some Welcome City’s Push Toward Jobs,” New York Times(February 23, 1999), p. A18. State surveys of persons leavingwelfare often reflect their support for their lives off of welfare.For example, in Wisconsin, only 29% of welfare leavers reportedthat life was better on welfare, and only 18% in Washingtonanswered that their family was worse off since leaving welfare.See Survey of Those Leaving AFDC or W-2 January to March 1998,Preliminary Report (Madison: Wisconsin Department of WorkforceDevelopment, 1999), p.17; and Jack Tweedie and Dana Reichert,Tracking Recipients after They Leave Welfare: Summaries of State Fol-low-up Studies (Denver: National Conference of State Legisla-tures, 1998).

5. Human capital is the knowledge, skills, abilities, and creden-tials that workers acquire through native ability, education andexperience and offer to employers; see Ronald Ehrenberg andRobert Smith, Modern Labor Economics (Reading, MA: AddisonWesley, 1997), Chapter 9.

6. In many discussions of welfare reform, “work first” refers topolicies favoring immediate employment over long-term train-ing. Throughout this statement, it refers to policies favoringimmediate employment over any form of employment prepara-tion, including training and “social work” problem solving.

7. In some states, AFDC covered two-parent families as well. Also,since welfare reform, an increasing proportion of the caseloadconsists of “child only” cases, in which TANF assists a child butnot his or her caretaker (such as a grandparent).

8. Table 1 is based on: Round Two Summary of Selected Elements ofState Programs for Temporary Assistance for Needy Families (Washing-ton: National Governors’ Association Center for Best Practices,1998); L. Jerome Gallagher, et al., One Year after Federal WelfareReform: A Description of State Temporary Assistance for Needy FamiliesDecisions as of October 1997 (Washington: The Urban Institute,1998); Nicholas Johnson, Christina Smith FitzPatrick, and Eliza-beth C. McNichol, State Income Tax Burdens on Low-Income Familiesin 1998: Assessing the Burden and Opportunities for Relief (Washing-ton: Center on Budget and Policy Priorities, 1999); Clifford M.Johnson, Public Job Creation: Current State and City Initiatives (Wash-ington: Center on Budget and Policy Priorities, 1999); NicholasJohnson and Ed Lazere, Rising Number of States Offer EarnedIncome Tax Credits (Washington: Center on Budget and PolicyPriorities, 1998); U.S. General Accounting Office, Welfare Reform:Status of Awards and Selected States’ Use of Welfare-to-Work Grants(Washington: U.S. Government Printing Office, 1999); AmyBrown, Maria L. Buck, and Erik Skinner, Business Partnerships:How to Involve Employers in Welfare Reform (New York: ManpowerDemonstration Research Corporation, 1998), p. 58-9; U.S. De-partment of Health and Human Services, State Welfare-to-WorkPolicies for People with Disabilities: Changes Since Welfare Reform(Washington: U.S. Government Printing Office, 1998); andKathleen A. Maloy, et al., Description and Assessment of State Ap-proaches to Diversion Programs and Activities Under Welfare Reform(Washington: George Washington University Center for HealthPolicy Research, 1998).

Throughout this statement, when data are reported for 51jurisdictions, they refer to the 50 states and the District of Co-lumbia.

For additional information on state TANF policies, seeHeather McCallum, Ending Welfare as We Know it: State Approachesto TANF (paper presented at the annual meeting of the Ameri-can Political Science Association, 1999).

9. Richard Bavier, An Early Look at the Effects of Welfare Reform(Washington: Office of Management and Budget, 1999), p. 12.

10. Norma Coe, Gregory Acs, Robert Lerman, and Keith Watson,Does Work Pay? A Summary of the Work Incentives Under TANF(Washington: The Urban Institute, 1998), p. 8.

11. Are Eligible Workers Not Claiming their Earned Income Credit?(Washington: Center on Budget and Policy Priorities, 1998), p.4; and Council of Economic Advisors, Good News for Low IncomeFamilies: Expansions in the Earned Income Tax Credit and the Mini-mum Wage (Washington: U.S. Government Printing Office, De-cember 1998), p. 4.

12. Ron Haskins, Welfare in a Society of Permanent Work (Washing-ton: U.S. House of Representatives, 1999), p. 15.

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13. 1998 Green Book, pp. 411, 479; FY 1998 State Spending Under theNew Welfare Program (Washington: Department of Health andHuman Services, 1999), Tables A, B, and C.

14. Table 2 is based on calculations from data in FY 1998 StateSpending Under the New Welfare Program (Washington: U.S. Gov-ernment Printing Office, 1999), Tables A, B, and C.

15. One of the tasks that states have found most difficult ischanging the culture in their public assistance agencies andretraining staff to become employment oriented. See U.S. Gen-eral Accounting Office, Welfare Reform: States are RestructuringPrograms to Reduce Welfare Dependence (Washington: U.S. Govern-ment Printing Office, 1998).

16. See Richard Nathan and Thomas Gais, Implementing the Per-sonal Responsibility Act of 1996: A First Look (Albany: State Univer-sity of New York, 1999). For a thoughtful discussion of the far-reaching changes required in the “culture” of welfareadministration, see Midwest Welfare Peer Assistance Network(WELPAN), Transforming the Culture of Welfare (Madison, WI:Institute for Research on Poverty, University of Wisconsin-Madison, forthcoming Spring, 2000).

17. Nathan and Gais, p. 45. Another study reaching similarconclusions is Marcia Meyers, Bonnie Glaser, and KarinMacDonald, “On the Front Lines of Welfare Delivery: Are Work-ers Implementing Policy Reform?” Journal of Policy Analysis andManagement (Winter 1998), pp. 1-22.

18. Wisconsin Work (W-2) Overview (Madison: State of Wisconsin,Division of Economic Support, 1998).

19. Larry Mead, “The Decline of Welfare Rolls in Wisconsin,”Journal of Public Administration Research and Theory (October 1999),and Larry Mead, Statecraft: The Politics of Welfare Reform in Wiscon-sin (paper presented at the annual conference of the AmericanPolitical Science Association, 1998).

20. Pamela Loprest, Families Who Left Welfare: Who Are They andHow Are They Doing? (Washington: The Urban Institute, 1999), p.5.

21. Council of Economic Advisors, The Effects of Welfare Policy andthe Economic Expansion on Welfare Caseloads: An Update (Washing-ton: U.S. Government Printing Office, 1999), p. 23.

22. Welfare rolls can shrink by reducing new enrollments as wellas by increasing exits. However, no studies presently estimate theextent to which fewer people are applying for welfare becausethey have found jobs instead.

23. U.S. Census Bureau, Income, Poverty, and Valuation of NoncashBenefits: 1994 (Washington: U.S. Government Printing Office,1996), p. 41; and Joseph Dalaker, Poverty in the United States 1998(Washington: U.S. Government Printing Office, 1999), p. 17.

24. Jeffrey B. Liebman, “The Impact of the Earned Income TaxCredit on Incentives and Income Distribution,” Tax Policy and theEconomy 12, James M. Poterba, ed. (Cambridge, MA: MIT Press,1998), pp. 8-120; Meyer and Rosembaum, op. cit. See also Eco-nomic Report of the President, 1999, pp. 112-5.

25. Bavier, p. 12.

26. Loprest, Chart 3.

27. Loprest, pp. 7-13. Part of this difference is explained by thefact that low-income mothers are more likely than former recipi-ents to be in two-parent families, in which fewer mothers gener-ally work.

28. Washington Work First: Building Better Lives, Results of the FirstYear (Olympia: Washington Work First, December 1998), p. 9.

29. U.S. General Accounting Office, Welfare Reform: Informationon Former Recipients’ Status (Washington: U.S. Government Print-ing Office, 1999), p. 18; and Loprest, pp. 7-8.

30. Loprest, Table 3.

31. Pamela Loprest and Sheila Zedlewski, Current and FormerRecipients: How Do They Differ? (Washington: The Urban Institute,1999), p. 9. See also Megan DeBell, Hsiao-Ye Yi, and HeidiHartman, Single Mothers, Jobs and Welfare: What the Data Tell Us(Washington: Institute for Women’s Policy Research, 1997), p.5.

32. Loprest and Zedlewski, pp. 3, 6.

33. Sue Kirchhoff, “Pushing the Limits of Welfare Overhaul,”Congressional Quarterly (February 6, 1999), p. 323; and “CitingDrop in Welfare Rolls, Clinton to Seek Further Cuts,” WashingtonPost (January 25, 1999), p. A12.

34. Unpublished tabulations, Current Population Survey for 1998;Haskins, p. 27; Wendell Primus, Lynette Rawlings, Kathy Larin,and Kathryn Porter, The Initial Impacts of Welfare Reform on theIncomes of Single-Mother Families (Washington: Center on Budgetand Policy Priorities, 1999), p. 47; and Bavier, p. 10.

35. U.S. Census Bureau, Poverty in the United States, 1998, p. B-10

36. Pamela Loprest, “Families Who Left Welfare: Who Are Theyand How Are They Doing?” (Washington: The Urban Institute,May 1999).

37. Measuring Poverty: A New Approach, National Research Council(Washington: National Academy Press, 1995).

38. See also Welfare Reform: Information on Former Recipients' Status,p. 18; and Sarah Brauner and Pamela Loprest, Where Are TheyNow? What States’ Studies of People Who Left Welfare Tell Us (Wash-ington: The Urban Institute, May 1999).

39. Megan DeBell, Hsiao-Ye Yi, and Heidi Hartman, Single Moth-ers, Jobs and Welfare: What the Data Tell Us (Washington: Institutefor Women’s Policy Research, 1997), p. 7. These data are basedupon the 1990 and 1991 Survey of Income and Program Partici-pation. Average hourly wage data are in 1997 dollars. Column(b) assumes employment for 78 percent of a 2,080 hour workyear at the hourly wage rate in Column (a). Column (c) isColumn (b) divided by the federal poverty threshold for a familyof one adult and two children in 1997, which was $12,931.



42. Loprest, Table 1, Chart 13. Among families leaving the wel-fare rolls who do not have an employed spouse or partner, theproportion of female-headed families living with non-familyhousehold members increased in the poorest quintile of thisgroup from 16 to 21 percent between 1996 and 1997. See Bavier,Appendix A. See also Jason DeParle, “As Welfare Rolls Shrink,Load on Relatives Grows,” New York Times (February 21, 1999), p.A1, and Douglas Besharov, Testimony before the U.S. House ofRepresentatives, Subcommittee on Human Resources of theCommittee on Ways and Means, May 27, 1999.

43. Bavier, Appendix A.

44. Haskins, p. 27-28; Primus, et al., p. 47.

45. Loprest, Chart 13, Table 4; Arloc Sherman, Cheryl Amey,Barbara Duffield, Nancy Ebb, and Deborah Weinstein, Welfare toWhat? Early Findings on Family Hardship and Well-Being (Washing-ton: Children’s Defense Fund and National Coalition for theHomeless, December 1998).

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46. The Urban Institute, Snapshots of America’s Families (Washing-ton: Urban Institute, January, 1999).

47. Brauner and Loprest, pp. 6-7; Sheila Zedlewski and SarahBrauner, Declines in Food Stamps and Welfare Participation: Is Therea Connection? (Washington: The Urban Institute, 1999).

48. See, for example, Jared Bernstein, The Challenge of Movingfrom Welfare to Work: Depressed Labor Market Awaits Those Leavingthe Rolls (Washington: Economic Policy Institute, 1997).

49. U.S. Department of Labor, Bureau of Labor Statistics, LaborForce Statistics from the Current Population Survey, Unemploy-ment Rate, 25 Years and Over, Less than a High School Diploma,and Labor Force Statistics from the Current Population Survey,Number At Work Part-time for Economic Reasons, Table A-4.

50. Catherine Newman and Chauncey Lennon, “The Job Ghetto,”The American Prospect (Summer 1995), pp. 66-7; and WilliamJulius Wilson, When Work Disappears, The World of the New UrbanPoor (New York: Knopf, 1996), p. 19.

51. Timothy J. Bartik, The Labor Supply Effects of Welfare Reform(Kalamazoo, MI: W.E. Upjohn Institute for Employment Re-search, 1998), Table 3.

52. George T. Silkvestri, “Occupational Employment Projectionsto 2006,” Monthly Labor Review (November 1997), pp. 58-83.Total job openings include both net employment growth andthe replacement of workers who retire, leave the labor force, orenter other occupations. Net employment growth during thesame period is projected to be 6.9 million.

53. U.S. Bureau of Labor Statistics, Labor Force Statistics(www.bls.gov, 6/99); Richard W. Judy and Carol D’Amico,Workforce 2020: Work and Workers in the 21st Century (Indianapolis:Hudson Institute, 1997), p. 98; and Louise B. Russell, The BabyBoom Generation and the Economy (Washington: The BrookingsInstitution, 1982), p. 51.

54. Robert Solow, “Guess Who Pays for Workfare?” New YorkReview of Books (November 5, 1998), pp. 27-37. Solow predictedthat the increase in workers generated by welfare reform wouldreduce wage rates throughout the low-skill labor market by 3 to 5percent.

55. Economic Report of the President,1999, pp.104, 106.

56. Robert I. Lerman, Pamela Loprest, and Caroline Ratcliffe,How Well Can Urban Labor Markets Absorb Welfare Recipients? (Wash-ington: The Urban Institute, 1999), p. 5.

57. Lerman, et al., Figure 1; Bartik, pp. 18-20.

58. Unless otherwise noted, data for adult recipients of AFDCare from Characteristics and Financial Circumstances of AFDC Recipi-ents, Fiscal Year 1995, while data for working poor are fromThomas Hale, A Profile of the Working Poor, 1995 (Washington:U.S. Government Printing Office, 1997). Here, the workingpoor are defined as individuals who spent at least 27 weeks in thelabor force in a year but whose annual household incomes fellbelow the federal poverty threshold. Data for the working poorcount Hispanics both as Hispanics and Whites. Data for educa-tion of AFDC recipients are only for adult females, and educa-tion attainment is unknown for 43 percent; data are from 1998Green Book, Table 7-19, p. 440. Data for residence of AFDCrecipients are from Martina Shea, Dynamics of Economic Well-Being: Program Participation, 1990 to 1992 (Washington: U.S. Gov-ernment Printing Office, 1995), Table 1. Data for residence ofworking poor are based on children in working poor families,

reported in William O’Hare and Joseph Schwartz, “One StepForward, Two Steps Back,” American Demographics (September1997), p. 54.

59. U.S. Small Business Administration, Characteristics of SmallBusiness Employees and Owners, 1997 (Washington: U.S. Govern-ment Printing Office, 1998), pp. 6, 9.

60. The Welfare to Work Partnership, 1998 No. 1 Member Survey:Executives Speak Out (www.welfaretowork.org/facts/98survey1.htm, 3/99); and The Federal Welfare to Work HiringInitiative, Second Annual Report (Washington: National Partner-ship for Reinventing Government, 1999).

61. The Welfare to Work Partnership, Welfare by the Numbers(www.welfaretowork.org/facts/bythenumbers.html, 5/99).

62. Dana Milbank, “Hiring Welfare People, Hotel Chain Finds,Is Tough But Rewarding,” Wall Street Journal (October 31, 1996),p. A1; Michael Grunwald, “Welfare-to-Work: The Challenge GrowsHarder,” Boston Globe (April 20, 1998), p. A1.

63. Neil Smelser (ed.), Handbook of Economic Sociology (New York:Russell Sage Foundation, 1996), Chap. 15; Harry Holzer, WhatEmployers Want: Job Prospects for Less-Educated Workers (New York:Russell Sage Foundation, 1996).

64. Holzer, Richard J. Levy and Frank Murnane, Teaching the NewBasic Skills : Principles for Educating Children to Thrive in a ChangingEconomy (New York: The Free Press, 1996).

65. Brown, et al., Business Partnerships: How to Involve Employers inWelfare Reform, pp. 58-9; U.S. Department of Labor, Work Opportu-nity and Welfare-to-Work Tax Credits (www.doleta.gov/employer/wotc.htm, 11/98).

66. Washington Work First, p. 9.

67. About 47% of TANF recipients with unresolved substanceabuse problems (about 330,000 persons) are not currently re-ceiving any substance abuse treatment services; see FredricaKramer, “The Hard-to-Place: Understanding the Population andStrategies to Serve Them,” Welfare Information Network Issue Notes(March 1998), p. 4; and Albert Woodward, et al., “The DrugAbuse Treatment Gap: Recent Estimates,” Health Care FinancingReview (Spring 1997), pp. 5-17. Another 42 percent of adultwomen on public assistance may suffer from clinical depression;see Rukmalie Jayakody, Sheldon Danziger, and Harold Pollack,Welfare Reform, Substance Abuse and Mental Health (Presented atthe Annual Meeting of the Association for Public Policy Analysisand Management, October 1998), p. 5. See also Sheila R.Zedlewski, Work-Related Activities and Limitations of Current WelfareRecipients (Washington: Urban Institute, July 1999).

68. America Works’ website (www.americaworks.com).

69. Building Better Lives: Re-employment Services for Low-Wage Work-ers (Olympia: Washington Work First, 1999).

70. Access To Jobs, A Guide to Innovative Practices in Welfare-to-WorkTransportation (Washington: Community Transportation Asso-ciation of America, 1998), p. 5.

71. John D. Kasarda, “Industrial Restructuring and the Chang-ing Location of Jobs,” in Reynolds Farley (ed.), State of the Union:America in the 1990s, Volume I: Economic Trends (New York: RussellSage Foundation, 1995), p. 235; Annalynn Lacombe, WelfareReform and Access to Jobs in Boston (Washington: U.S. GovernmentPrinting Office, 1998), p. 7; and Access to Jobs: A Guide to Innova-tive Strategies in Welfare-to-Work Transportation , p. 3.

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72. Transportation and Welfare: States on the Move (Washington:Community Transportation Association of America, 1998).

73. “Welfare-to-Work: A Good Start,” Business Week (June 1, 1998),pp. 102-6.

74. Survey of Those Leaving AFDC or W-2 January to March 1998,p.17; and Tweedie and Reichert, Tracking Recipients after TheyLeave Welfare.

75. Loprest, p. 11.

76. Margy Waller, Welfare-to-Work and Child Care, A Survey of theTen Big States (Washington: Progressive Policy Institute, 1997), p.3; Sharon K. Long and Sandra J. Clark, The New Child Care BlockGrant: State Funding Choices and Implications (Washington: TheUrban Institute, 1998); and Council of Economic Advisers, TheEconomics of Child Care (Washington: U.S. Government PrintingOffice, 1997).

77. Loprest, pp. 12, 21.

78. Survey of Those Leaving AFDC or W-2 January to March 1998,p. 18.

79. Data refer to unclaimed federal obligations to states, as of theend of Fiscal Year 1999, Ed Lazere, Welfare Balances After ThreeYears of TANF Block Grants: Unspent TANF Funds at the End ofFederal Fiscal Year 1999 (Washington: Center on Budget andPolicy Priorities, January 2000), Table 3. See also Jason DeParle,“Leftover Money for Welfare Baffles, or Inspires, States,” NewYork Times (August 29, 1999), p. A1.

80. In Minnesota, for instance, federal TANF funds have beentransferred to child care and social service programs and statecontributions to these programs reduced by an equal amount,freeing state funds for other purposes; see Jason Walsh, “TANFSupplants Minnesota State Child Care,” CLASP Update (February26, 1999), p. 11. See also DeParle, “Leftover Money,” p. A1.

81. Judith Gueron and Edward Pauley, From Welfare to Work (NewYork: Russell Sage Foundation, 1991); Daniel Friedlander andDavid Greenberg, “Evaluating Government Training Programsfor the Economically Disadvantaged,” Journal of Economic Litera-ture 35 (December 1997), pp. 1809-55.

82. Johannes M. Bos, et al., New Hope for People With Low Incomes,(New York: Manpower Demonstration Research Corporation,August, 1999); see also Michael C. Laracy, Making Wages Work:Demonstrating the Role of Financial Incentives and Income Supplementsas a Welfare-to-Work Strategy (Washington: The Annie E. CaseyFoundation, May 1998).

83. Are Eligible Workers Not Claiming, p. 1.

84. If additional outreach increased enrollment by 10%, pro-gram costs would increase about $2.9 billion.

85. Are Eligible Workers Not Claiming, p. 4. Among the reasonsEITC claimants list for not using the Advance Payment Optionare that they are unaware of the option, they are fearful that theywill overclaim and owe taxes in the future, and that they some-times prefer a single large payment. See Earned Income Tax Credit:Advance Payment Option Is Not Widely Known or Understood by thePublic (Washington: U.S. General Accounting Office, February1992); and Advance Earned Income Tax Credit: 1994 and 1997Notice Study, A Report to Congress (Washington: Internal RevenueService, U.S. Dept. of the Treasury, August 1999).

86. Nicholas Johnson, Christina Smith FitzPatrick, and ElizabethC. McNichol, State Income Tax Burdens on Low-Income Families in1998: Assessing the Burden and Opportunities for Relief (Washington:

Center on Budget and Policy Priorities, 1999). States with taxthresholds below the poverty line (in ascending order by level oftax threshold) are: Illinois, Alabama, Hawaii, Kentucky, Virginia,Montana New Jersey, Indiana, Michigan, Oklahoma, West Vir-ginia, Ohio, Delaware, Missouri, Louisiana, Georgia, Oregon,Utah, and Arkansas.

87. Survey of Those Leaving AFDC, p. 19.

88. For example, New York City did not allow households toapply for Food Stamps at the time they applied for TANF, anddid not inform applicants about Food Stamp availability if theywere found ineligible for TANF benefits. Michigan denied FoodStamps benefits to entire households rather than individualmembers who had violated TANF work requirements. Both prac-tices have been deemed illegal by federal courts. Practices re-stricting households’ access to Food Stamps have also beeninvestigated by the Food and Nutrition Service in Portland andMilwaukee. See U.S. General Accounting Office, Food StampProgram: Various Factors Have Led to Declining Participation (Wash-ington: U.S. Government Printing Office, July 1999), pp. 2,12.

89. State Approaches to Human Services Future Investment Funds (Wash-ington: American Public Human Services Association, March1999).

90. On March 16, 1999, a letter to state governors from Rep.Nancy Johnson (R-CT), Chairman of the House of Representa-tives Subcommittee on Human Resources warned “Unless statesbegin spending more of this money, we will eventually lose thebattle to protect it here in Washington.” The current unspentbalance is estimated to grow to $25.2 billion by 2004; see PaulCullinan, Statement on CBO’s Spending Projections for the TANFProgram and Federal Child Care Programs before the Subcommittee onHuman Resources, Committee on Ways and Means, U.S. House ofRepresentatives (March 16, 1999), Table 1.

91. Donald J. Boyd and Elizabeth I. Davis, “How Would a Reces-sion Affect Welfare Spending?” Rockefeller Institute Bulletin (1999),p. 48.

92. To tap the federal fund, a state must experience one of twocircumstances: (1) in the most recent 3 months, its averageunemployment rates must have been at least 6.5 percent andhave increased at least 10 percent from the corresponding ratein one of the two preceding years, or (2) its average monthlyFood Stamp caseload for the most recent 3 months must haveincreased at least 10 percent compared with the correspondingperiod in 1994 or 1995. A state must also spend at least 100percent of its AFDC expenditures prior to welfare reform. Fi-nally, states must match any funds received from the fund at thematching rate under the Medicaid program; see U.S. GeneralAccounting Office, Welfare Reform: Early Fiscal Effects of the TANFBlock Grant (Washington: U.S. Government Printing Office, Au-gust 1998), pp. 23-5.

93. Pamela Loprest and Gregory Acs, Profile of Disability AmongAFDC Families (Washington: The Urban Institute, 1996).

94. Marie Cohen, Work Experience and Publicly-Funded Jobs for TANFRecipients (Washington: Welfare Information Network, 1998).

95. Larry Orr, et al., Does Training for the Disadvantaged Work?Evidence from the National JTPA Study (Washington: The UrbanInstitute, 1996); and Clifford Johnson and Ana Carricchi Lopez,Shattering the Myth of Failure: Promising Findings from Ten Public JobCreation Initiatives (Washington: Center on Budget and PolicyPriorities, 1997).

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96. Programs consistent with this recommendation generallyhave four characteristics:

• To make the created jobs less attractive than other alternatives,wages should be lower than for regular employment. For example, inWisconsin, community service jobs pay the equivalent of $3.91per hour, substantially below the $5.15 per hour federal mini-mum wage.

• Work experience should build participants’ work readiness. Throughclose attention from supervisors as well as mentoring and otherforms of peer support, participants should be assisted to developbehavior and attitudes appropriate to the workplace. As rapidlyas they can adapt, they should become subject to the same workrequirements, production expectations, and discipline as regu-lar employees.

• Participants with barriers to employment should receive services toremove these barriers. Among the issues commonly arising amongTANF recipients are health problems (include substance abuse)and unstable home situations (including domestic violence).

• Participation should be time-limited. For example, in Wisconsin,a welfare recipient may hold a community service job for nomore than nine months.

97. Maria L. Buck, Tulsa’s IndEx Program: A Business-Led Initiativefor Welfare Reform and Economic Development (New York: ManpowerDemonstration Research Corporation, 1997).

98. U.S. Department of Labor, A Dialogue: Unemployment Insur-ance and Employment Service Programs (Washington: U.S. Govern-ment Printing Office, 1998), p. 5. In 1998, the proportion of theunemployed who received unemployment insurance paymentsranged from 67 percent in Alaska to 17 percent in Oklahoma.

99. Wayne Vroman, Effects of Welfare Reform on UnemploymentInsurance (Washington: The Urban Institute, 1998).

100. Advisory Council on Unemployment Compensation, Col-lected Findings and Recommendations: 1994-1996 (Washington: U.S.Government Printing Office, 1996), pp. 18-20.

101. Unpublished data from the Unemployment Insurance Ser-vice, U.S. Department of Labor. Estimates are for implementa-tion of an alternative base period, inclusion of part-time work-ers, and inclusion of low-wage workers.

102. EBRI Databook on Employee Benefits (Washington: EmployeeBenefit Research Institute, 1996), p. 227, data refer to 1995; andMedicaid and Title XXI Eligibility of Uninsured Children Under Age19, 1998 — Legislated Eligibility (Washington: American Academyof Pediatrics, December 1997).

103. The Economics of Child Care, p. 1; and Long and Clark, Table3.

104. Helen Blank, Child Care Falling Short for Low-Income WorkingFamilies (Washington: Children’s Defense Fund, 1998), p. 5.

105. Wisconsin Department of Health and Family Services,Badgercare Program Summary (www.dhfs.state.wi.us/badgercare,11/99); and Len Nichols, Leighton Ku, Stephen Norton, andSusan Wall, Health Policy for Low-Income People in Washington (Wash-ington: The Urban Institute, 1997).

106. Illinois Department of Children and Family Services(www.state.il.us/dcfs, 10/99). Data for median income is for a 4person family, Fiscal Year 1997, Federal Register, Vol. 61, No. 54, p.11213; The number of children served is calculated from data inStatistical Abstract of the United States 1995 (Washington: U.S.Government Printing Office, 1995), Table 34.

107. This box is adapted from American Workers and EconomicChange (New York: Committee for Economic Development,1996), p. 12. Other CED policy statements on education includeThe Employer’s Role in Linking School and Work (1998), Why ChildCare Matters (1994), Putting Learning First: Governing and Manag-ing the Schools for High Achievement (1994), The Unfinished Agenda:A Vision for Child Development and Education (1991), and Childrenin Need: Investment Strategies for the Educationally Disadvantaged(1987).

108. U.S. Department of Education, Digest of Education Statistics1997 (Washington: U.S. Government Printing Office, 1997), p.417; U.S. Bureau of the Census, Educational Attainment in theUnited States: March 1997 (Washington: U.S. Government Print-ing Office, 1997), Table 9; David Boesel, Nabeel Alsalam, andThomas M. Smith, Educational and Labor Market Performance ofGED Recipients (Washington: U.S. Government Printing Office,1998); and Marc Bendick, Jr. and Mary Lou Egan, Jobs: Employ-ment Opportunities in the Greater Washington Area for People WithoutHigh School Diplomas (Washington: Greater Washington ResearchCenter, 1986).

109. U.S. Department of Education, Forty Percent of Adults Partici-pate in Adult Education Activities: 1994-95 (Washington: U.S. Gov-ernment Printing Office, 1995), p. 2.

110. U.S. Department of Education, Adult Education for LimitedEnglish Proficient Adults, Fact Sheet 3 (Washington: U.S. Govern-ment Printing Office, 1995).

111. “Education Opportunities in Correctional Settings,” Correc-tions Compendium (September 1997), p. 4; U.S. Department ofEducation, Literacy Behind Prison Walls (Washington: U.S. Gov-ernment Printing Office, 1998); U.S. Department of Education,Fact Sheet...Correctional Education (Washington: U.S. GovernmentPrinting Office, 1998). Data are for 1996. See also Jamie Lillis,“Prison Education Programs Reduced,” Corrections Compendium(March 1994), p. 2.

112. Data are for FY 1995, calculated from data in Appendix,Budget of the U.S. Government, Fiscal Year 1997, (Washington: U.S.Government Printing Office, 1996), p. 405; U.S. Department ofEducation, Adult Secondary Education Program (Washington: U.S.Government Printing Office, 1996); and U.S. Department ofEducation, Digest of Education Statistics 1997, pp. 11, 161. Thequotation is from the Office of Technology Assessment, U.S.Congress, Adult Literacy and New Technologies: Tools for a Lifetime(Washington: U.S. Government Printing Office, 1993), p. 12.

113. Richard L. Venezky and Daniel A. Wagner, Supply andDemand for Literacy Instruction in the United States (Philadelphia:National Center on Adult Literacy, University of Pennsylvania,1994), p. 4; and Hal Beder, The Infrastructure of Adult LiteracyEducation: Implications for Policy (Philadelphia: National Centeron Adult Literacy, University of Pennsylvania, 1996), p. 6.

114. Fiscal Year 1997 Annual Report, Building a Better Way to Work:Year III of the Massachusetts One-Stop Career Center Implementation( w w w . m a s s c a r e e r s . s t a t e . m a . u s / s c r i p t s / r u n i s a . d l l ?CCIApp:1997:457239, 1/99); see also Survey Results: One-StopStates and National Learning Laboratories Best Practices to Meet Em-ployer Needs (Washington: National Alliance of Business, 1998).

115. Center for Employment Training website (www.best.com/~cfet/main.htm).

116. 1998 State of the Industry Report: Training Expenditures (Alex-andria, VA: American Society for Training and Development,1998); U.S. Department of Labor, 1995 Survey of Employer Pro-

64

vided Training-Employee Results (Washington: U.S. GovernmentPrinting Office, 1996), Table 3; and Levy and Murnane.

117. Basil J. Whiting, Judith Combes Taylor, and Richard Kazis,Job Retention and Advancement Strategies for Low-Wage Young AdultWorkers (Boston: Jobs for the Future, 1997), p. A2.

118. Demetra Nightingale and Nancy Pindus, Improving the Up-ward Mobility of Low-Skill Workers: The Case of the Health Industry(Washington: The Urban Institute, 1995), pp. 41-3.

119. Studies using teams of equally qualified applicants fromdifferent ethnic groups estimate that about one employer in fivetreated minority job applicants for entry-level positions less fa-vorably than equally-qualified whites. See Marc Bendick, Jr.,“Adding Testing to the Nation’s Portfolio of Information onEmployment Discrimination,” in Michael Fix and Margery Turner(eds.), A National Report Card on Discrimination: The Role of Testing(Washington: The Urban Institute, 1999).

120. Susan Jackson, et al., Diversity in the Workforce (New York:Guilford, 1992); and Roosevelt Thomas, Beyond Race and Gender,Unleashing the Power of Your Total Workforce by Managing Diversity(New York: American Management Association, 1991).

121. For examples of productivity-enhancing diversity initiatives,see Marc Bendick, Jr., Mary Lou Egan, and Suzanne Lofhjelm,The Documentation and Evaluation of Anti-Discrimination Trainingin the United States (Geneva: International Labor Office, 1998),pp. 73-6, and American Workers and Economic Change, pp. 50-1.

122. Keith Hammonds, “Balancing Work and Family: Big Re-turns for Companies Willing to Give Family Strategies a Chance,”Business Week (September 16, 1996), pp. 74-80.

123. Information available at (www.kidscampaigns.org, 10/98);and Rosalind Barnett and Caryl Rivers, She Works/He Works: HowTwo Income Families are Happy, Healthy, and Thriving (Cambridge:Harvard University Press, 1998).

124. Based on data available at the Welfare to Work Partnershipwebsite (www.welfaretowork.org).

65

Memoranda of Comment,Reservation, or DissentPage 3, COLETTE MAHONEY, with whichJOHN DIEBOLD has asked to be associated

This report is impressive, and its researchand analysis will be most useful to those in thepublic and private sectors who continue effortsto make work work.

Although work may offer a realistic alterna-tive for many welfare families, it does not do sofor all, especially in the short run. Eager todeclare welfare reform a success, the nationtends to applaud heartening stories of familiesthat succeed under the new rules without bal-ancing concern for families that do not. Be-tween 1995 and 1997, the poorest 10 percentof single mothers with young children saw theiralready-meager incomes decline by 14 percent,and the number of children living below halfthe poverty threshold rose by 9 percent. Themost extreme cases are found doubled up withfamily or friends who are themselves poor andseverely stressed, or in growing numbers inhomeless shelters and feeding programs.

This report properly identifies part of theappropriate response to these unacceptabledevelopments: more extensive and effectivework-supportive services, especially by statescurrently ignoring this obligation; aggressiveoutreach to ensure that needy families receiveall the public assistance to which they are cur-rently entitled; and review of programs such asDisability Insurance to ensure that they actu-ally meet the needs of those they are supposedto serve. But beyond that, the nation shouldreconsider the provisions in PRWORA thatended entitlement to support for single par-ents with young children and imposed severe,arbitrary time limits. Some families simply re-quire more time and more help. Their veryreal needs should not be sacrificed in subservi-ence to abstract principles, even worthy onessuch as work.

Page 8, PRES KABACOFF and STEFFEN E.PALKO with which ALAN BELZER andPETER A. BENOLIEL have asked to beassociated

Individuals who work full time, year roundat jobs that pay slightly above the minimumwage can move their families toward the offi-cial federal poverty threshold, roughly $13,000per year for a typical welfare household. Butthat income still leaves families struggling tomeet essential expenses, including rent in de-cent housing, three meals a day, basic healthcare, and work-related costs such as child careand transportation. A more realistic measureof livable income is half the median householdincome, now averaging $19,500 per year. Thecorresponding hourly wage, up to twice theminimum wage, often exceeds what employerscan justify paying low-skill workers based onproductivity.

The federal Earned Income Tax Credit(EITC) already plays an essential role in bridg-ing this income gap. Its current cap of $3,816urgently needs to be raised so that it can movelow-skill working families well beyond the pov-erty threshold to a livable income. This raiseshould be shaped to provide incentives to workfull time or stay continuously employed, en-couraging low-wage workers to work in waysthat will speed them toward eventual self sup-port. The nation must make substantial expan-sion of the EITC its highest anti-poverty priority.

Above all, we must not forget that the house-holds on welfare are primarily single motherswith young children. Research has found (asCED also noted in its 1993 report, Why ChildCare Matters) that high-quality child care canhave significant immediate benefits for chil-dren in terms of improved cognitive ability,early school achievement, and social adjust-ment, and there is increasing evidence of longer

66

term educational gains as well. In addition,participation in such programs generates physi-cal health, nutrition, and family benefits. Wetherefore believe that our society will eventu-ally realize sizable returns from investments inquality child care in the form of more produc-tive adults, who will also pay taxes, and lowercosts for welfare, criminal justice, and reme-dial education. A substantial increase in theEITC is the best way to assist working poorfamilies to afford the $5,000 or more per yearthat quality child care typically costs.

On the report as a whole, JOSH S. WESTONwith which PETER A. BENOLIEL AND JOHNDIEBOLD have asked to be associated

I enthusiastically endorse this CED policystatement. However, I do wish to call attentionto three issues that the statement either doesnot address or that require further comment:

1. I believe that Congress should again in-crease the minimum wage as a means of bothencouraging more welfare recipients to workand helping them to become more self-suffi-cient. Relatively few workers are currently attoday’s minimum wage of $5.15 per hour, andthe last increase in the minimum wage doesnot appear to have reduced the demand for

low-skill labor significantly, either for theeconomy as a whole or for a noticeable num-ber of employers.

2. (Page 41) The policy statement recom-mends extending Unemployment Insurance(UI) to seasonal, temporary, and part-timeworkers, some of whom are currently coveredin some states. I believe that the states, in imple-menting this recommendation, must pay care-ful attention to the many non-full-timeemployees who choose voluntarily to work parttime. It would be inappropriate for them toreceive UI benefits during their self-imposedunemployment.

3. (Page 23) The policy statement notesthat the official federal poverty thresholds,which are used as the reference point for de-fining poverty, are now out of date and inmany respects inappropriate. It points out thatthe current measure excludes importantsources of non-cash income and taxes, neglectsdifferences between the needs of workers andnon-workers, takes no account of differencesin health status and insurance coverage, andignores large geographic differences in the costof living. Without endorsing the specific rec-ommendations of the 1995 National ResearchCouncil panel, I agree with its recommenda-tion that immediate action should be taken toupdate and improve the poverty measure.

67

We wish to give special thanks to the followingfoundations and companies whose generoussupport made this policy statement possible.

The Chase Manhattan Foundation

The Commonwealth Fund

Federated Department Stores

The John D. and Catherine T. MacArthur Foundation

Northwestern Mutual Life Foundation

FUNDERS

68

For more than 50 years, the Committee forEconomic Development has been a respectedinfluence on the formation of business andpublic policy. CED is devoted to these twoobjectives:

To develop, through objective research andinformed discussion, findings and recommenda-tions for private and public policy that will contributeto preserving and strengthening our free society, achiev-ing steady economic growth at high employment andreasonably stable prices, increasing productivity andliving standards, providing greater and more equalopportunity for every citizen, and improving the qual-ity of life for all.

To bring about increasing understanding bypresent and future leaders in business, government,and education, and among concerned citizens, of theimportance of these objectives and the ways in whichthey can be achieved.

CED’s work is supported by private volun-tary contributions from business and industry,

foundations, and individuals. It is independent,nonprofit, nonpartisan, and nonpolitical.

Through this business-academic partner-ship, CED endeavors to develop policy state-ments and other research materials thatcommend themselves as guides to public andbusiness policy; that can be used as texts incollege economics and political science coursesand in management training courses; thatwill be considered and discussed by newspaperand magazine editors, columnists, and com-mentators; and that are distributed abroad topromote better understanding of the Ameri-can economic system.

CED believes that by enabling businessleaders to demonstrate constructively their con-cern for the general welfare, it is helping busi-ness to earn and maintain the national andcommunity respect essential to the successfulfunctioning of the free enterprise capitalistsystem.

OBJECTIVES OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT

*Life Trustee

ChairmanFRANK P. DOYLE, Retired Executive Vice PresidentGE

Vice ChairmenROY J. BOSTOCK, Chairman and Chief

Executive OfficerThe MacManus Group, Inc.JOHN H. BRYAN, Chairman and Chief

Executive OfficerSara Lee CorporationDONALD R. CALDWELL, Chief Executive OfficerCross Atlantic Capital PartnersRAYMOND V. GILMARTIN, Chairman, President

and Chief Executive OfficerMerck & Co., Inc.JAMES N. SULLIVAN, Vice Chairman of the BoardChevron Corporation

TreasurerREGINA DOLANExecutive Vice President, Chief Financial Officer and

Chief Administrative OfficerPaineWebber Group Inc.

ROGER G. ACKERMAN, Chairman and ChiefExecutive Officer

Corning IncorporatedREX D. ADAMS, DeanThe Fuqua School of BusinessDuke UniversityPAUL A. ALLAIRE, ChairmanXerox CorporationIAN ARNOF, ChairmanBank One, Louisiana, N.A.HANS W. BECHERER, Chairman and Chief

Executive OfficerDeere & CompanyHENRY P. BECTON, JR., President and

General ManagerWGBH Educational FoundationALAN BELZER, Retired President and Chief

Operating OfficerAlliedSignal Inc.PETER A. BENOLIEL, Chairman, Executive CommitteeQuaker Chemical CorporationMELVYN E. BERGSTEIN, Chairman and Chief

Executive OfficerDiamond Technology PartnersJON A. BOSCIA, President and Chief Executive OfficerLincoln National CorporationROY J. BOSTOCK, Chairman and Chief

Executive OfficerThe MacManus Group, Inc.JOHN BRADEMAS, President EmeritusNew York University

CED BOARD OF TRUSTEES

WILLIAM E. BROCK, ChairmanIntellectual Development Systems, Inc.STEPHEN L. BROWN, Chairman and Chief

Executive OfficerJohn Hancock Mutual Life Insurance CompanyGORDON F. BRUNNER, Chief Technology Officer

and DirectorThe Procter & Gamble CompanyJOHN H. BRYAN, Chairman and Chief

Executive OfficerSara Lee CorporationMICHAEL BUNGEY, Chairman and Chief

Executive OfficerBates Worldwide, Inc.J. GARY BURKHEAD, Vice ChairmanFMR CorporationW. VAN BUSSMANN, Corporate EconomistDaimlerChrysler CorporationFLETCHER L. BYROM, President and Chief

Executive OfficerMICASU CorporationDONALD R. CALDWELL, Chief Executive OfficerCross Atlantic Capital PartnersFRANK C. CARLUCCIWashington, D.C.MARSHALL N. CARTER, Chairman and Chief

Executive OfficerState Street CorporationROBERT B. CATELL, Chairman and Chief

Executive OfficerKeySpan Energy CorporationJOHN B. CAVE, PrincipalAvenir Group, Inc.JOHN S. CHALSTY, ChairmanDonaldson, Lufkin & Jenrette, Inc.RAYMOND G. CHAMBERS, Chairman of the BoardAmelior FoundationMARY ANN CHAMPLIN, Retired Senior Vice

PresidentAetna Inc.ROBERT CHESS, Co-Chief Executive OfficerInhale Therapeutic Systems, Inc.CAROLYN CHIN, Executive Vice PresidentMarketXTJOHN L. CLENDENIN, Retired ChairmanBellSouth CorporationNANCY S. COLE, PresidentEducational Testing ServiceFERDINAND COLLOREDO-MANSFELD, Chairman

and Chief Executive OfficerCabot Industrial TrustGEORGE H. CONRADES, Chairman and Chief

Executive OfficerAkamai Technologies, Inc.KATHLEEN B. COOPER, Chief EconomistExxonMobil CorporationJAMES P. CORCORAN, Executive Vice President,

Government & Industry RelationsAmerican General Corporation

*

*

*Life Trustee

GARY L. COUNTRYMAN, ChairmanLiberty Mutual Insurance CompanySTEPHEN A. CRANE, Former President and Chief

Executive OfficerGryphon Holdings, Inc.RONALD R. DAVENPORT, Chairman of the BoardSheridan Broadcasting CorporationROBERT M. DEVLIN, Chairman and Chief

Executive OfficerAmerican General CorporationJOHN DIEBOLD, ChairmanJohn Diebold IncorporatedREGINA DOLAN, Executive Vice President, Chief

Financial Officer and Chief Administrative OfficerPaineWebber Group Inc.IRWIN DORROS, Executive Vice President, RetiredTelecordia TechnologiesFRANK P. DOYLE, Retired Executive Vice PresidentGEE. LINN DRAPER, JR., Chairman, President and Chief

Executive OfficerAmerican Electric Power CompanyT. J. DERMOT DUNPHY, Chairman and Chief

Executive OfficerSealed Air CorporationCHRISTOPHER D. EARL, Managing DirectorPerseus Capital, LLCW. D. EBERLE, ChairmanManchester Associates, Ltd.WILLIAM S. EDGERLY, ChairmanFoundation for PartnershipsWALTER Y. ELISHA, Retired Chairman and Chief

Executive OfficerSprings Industries, Inc.JAMES D. ERICSON, President and Chief

Executive OfficerThe Northwestern Mutual Life Insurance CompanyWILLIAM T. ESREY, Chairman and Chief

Executive OfficerSprintPATRICIA O’DONNELL EWERS, PresidentPace UniversityKATHLEEN FELDSTEIN, PresidentEconomic Studies, Inc.RONALD E. FERGUSON, Chairman, President and

Chief Executive OfficerGeneral RE CorporationE. JAMES FERLAND, Chairman, President and Chief

Executive OfficerPublic Service Enterprise Group Inc.EDMUND B. FITZGERALD, Managing DirectorWoodmont AssociatesHARRY L. FREEMAN, PresidentThe Freeman CompanyMITCHELL S. FROMSTEIN, Retired Chairman, President

and Chief Executive OfficerManpower Inc.JOSEPH GANTZGantz FoundationTHOMAS P. GERRITY, DeanThe Wharton SchoolUniversity of Pennsylvania

RAYMOND V. GILMARTIN, Chairman, President andChief Executive Officer

Merck & Co., Inc.FREDERICK W. GLUCK, Of CounselMcKinsey & Company, Inc.CAROL R. GOLDBERG, PresidentThe Avcar Group, Ltd.ALFRED G. GOLDSTEIN, Chief Executive OfficerAG AssociatesELLEN R. GORDON, President and Chief

Operating OfficerTootsie Roll Industries, Inc.JOSEPH T. GORMAN, Chairman and Chief

Executive OfficerTRW Inc.RICHARD A. GRASSO, Chairman and Chief

Executive OfficerNew York Stock Exchange, Inc.EARL G. GRAVES, SR., Publisher and Chief

Executive OfficerBlack Enterprise MagazineWILLIAM H. GRAY, III, President and Chief

Executive OfficerThe College FundROSEMARIE B. GRECO, PrincipalGreco VenturesGERALD GREENWALD, Chairman EmeritusUAL CorporationBARBARA B. GROGAN, PresidentWestern Industrial ContractorsPATRICK W. GROSS, Founder and Chairman,

Executive CommitteeAmerican Management Systems, Inc.JEROME GROSSMAN, Chairman and Chief

Executive OfficerLion Gate Management CorporationRONALD GRZYWINSKI, Chairman and Chief

Executive OfficerShorebank CorporationJUDITH H. HAMILTON, Chief Executive OfficerClassroom ConnectWILLIAM A. HASELTINE, Chairman of the Board and

Chief Executive OfficerHuman Genome Sciences, Inc.WILLIAM F. HECHT, Chairman, President and Chief

Executive OfficerPP&L Resources, Inc.JOSEPH D. HICKS, Retired President and Chief

Executive OfficerSiecor CorporationHEATHER HIGGINS, PresidentRandolph FoundationRODERICK M. HILLS, ChairmanHills Enterprises, Ltd.HAYNE HIPP, President and Chief Executive OfficerThe Liberty CorporationRONALD N. HOGE, Former President and Chief

Executive OfficerMagneTek, Inc.DEBORAH C. HOPKINS, Senior Vice President and

Chief Financial OfficerThe Boeing Company

*

*Life Trustee

MATINA S. HORNER, Executive Vice PresidentTIAA-CREFAMOS B. HOSTETTER, ChairmanPilot House Associates, LLCPHILIP K. HOWARD, Vice ChairmanCovington & BurlingWILLIAM R. HOWELL, Retired Chairman of the BoardJ. C. Penney Company, Inc.ROBERT J. HURST, Vice ChairmanGoldman, Sachs & Co.ALICE STONE ILCHMAN, ChairRockefeller FoundationGEORGE B. JAMES, Retired Senior Vice President and

Chief Financial OfficerLevi Strauss & Co.WILLIAM C. JENNINGS, Senior Partner (Retired)PricewaterhouseCoopersJAMES A. JOHNSON, Chairman and Chief

Executive OfficerJohnson Capital PartnersROBBIN S. JOHNSON, Corporate Vice President,

Public AffairsCargillROBERT M. JOHNSON, Chairman and Chief

Executive OfficerBowne & Co., Inc.H.V. JONES, Office Managing DirectorKorn/Ferry International, Inc.PRES KABACOFF, President and Co-ChairmanHistoric Restoration, Inc.JOSEPH J. KAMINSKI, Corporate Executive

Vice PresidentAir Products and Chemicals, Inc.EDWARD A. KANGAS, Chairman, Global Board

of DirectorsDeloitte Touche TohmatsuJOSEPH E. KASPUTYS, Chairman, President and

Chief Executive OfficerPrimark CorporationEAMON M. KELLY, Professor and President EmeritusTulane UniversityJAMES P. KELLY, Chairman and Chief

Executive OfficerUnited Parcel Service of America, Inc.THOMAS J. KLUTZNICK, PresidentThomas J. Klutznick CompanyCHARLES F. KNIGHT, Chairman and Chief

Executive OfficerEmerson Electric Co.CHARLES E.M. KOLB, PresidentCommittee for Economic DevelopmentALLEN J. KROWE, Retired Vice ChairmanTexaco Inc.C. JOSEPH LABONTE, ChairmanThe Vantage GroupCHARLES R. LEE, Chairman and Chief

Executive OfficerGTE CorporationROBERT H. LESSIN, ChairmanWit Capital CorporationWILLIAM W. LEWIS, DirectorMcKinsey Global InstituteMcKinsey & Company, Inc.

IRA LIPMAN, Chairman of the Board and PresidentGuardsmark, Inc.MICHAEL D. LOCKHARTRembert, South CarolinaJOSEPH T. LYNAUGH, Retired President and Chief

Executive OfficerNYLCare Health Plans, Inc.BRUCE K. MACLAURY, President EmeritusThe Brookings InstitutionCOLETTE MAHONEY, RSHM, President EmeritusMarymount Manhattan CollegeELLEN R. MARRAM, President and Chief

Executive Officerefdex, inc.ALONZO L. MCDONALD, Chairman and Chief

Executive OfficerAvenir Group, Inc.EUGENE R. MCGRATH, Chairman, President and

Chief Executive OfficerConsolidated Edison Company of New York, Inc.DAVID E. MCKINNEYThomas J. Watson FoundationDEBORAH HICKS MIDANEK, PrincipalJay Alix & AssociatesHARVEY R. MILLER, Senior PartnerWeil, Gotshal & MangesNICHOLAS G. MOORE, ChairmanPricewaterhouseCoopersDIANA S. NATALICIO, PresidentThe University of Texas at El PasoMARILYN CARLSON NELSON, Vice Chair and Chief

Executive OfficerCarlson Holdings, Inc.THOMAS H. O’BRIEN, Chairman and Chief

Executive OfficerPNC Bank CorporationLEO J. O’DONOVAN, S.J., PresidentGeorgetown UniversityDEAN R. O’HARE, Chairman and Chief

Executive OfficerChubb CorporationJOHN D. ONG, Chairman EmeritusThe BFGoodrich CompanyANTHONY J.F. O'REILLY, Retired ChairmanH.J. Heinz CompanyJAMES F. ORR III, Retired Chairman and Chief

Executive OfficerUnumProvident CorporationROBERT J. O'TOOLE, Chairman and Chief

Executive OfficerA.O. Smith CorporationSTEFFEN E. PALKO, Vice Chairman and PresidentCross Timbers Oil CompanySANDRA PANEMPanem & Company, LLCCAROL J. PARRY, Retired Executive Vice PresidentThe Chase Manhattan CorporationVICTOR A. PELSON, Senior Advisor Warburg Dillon Read LLCDONALD K. PETERSON, Executive Vice President and

Chief Financial OfficerLucent Technologies Inc.

*Life Trustee

PETER G. PETERSON, ChairmanThe Blackstone GroupRAYMOND PLANK, Chairman and Chief

Executive OfficerApache CorporationARNOLD B. POLLARD, President and Chief

Executive OfficerThe Chief Executive GroupS. LAWRENCE PRENDERGAST, Director and

Retired Chairman and Chief Executive OfficerAT&T Investment Management CorporationHUGH B. PRICE, President and Chief

Executive OfficerNational Urban LeagueNED REGANThe Jerome Levy Economics InstituteWILLIAM R. RHODES, Vice ChairmanCitigroupJAMES Q. RIORDANQuentin Partners Co.E. B. ROBINSON, JR., Chairman and Chief

Executive OfficerDeposit Guaranty National BankROY ROMERFormer Governor of ColoradoDANIEL ROSE, ChairmanRose Associates, Inc.HOWARD M. ROSENKRANTZ, Chief Executive OfficerGrey Flannel AuctionsJOHN A. ROTH, President and Chief

Executive OfficerNortel Networks CorporationMICHAEL I. ROTH, Chairman and Chief

Executive OfficerThe MONY Group Inc.JOHN W. ROWE, Chairman, President and Chief

Executive OfficerUnicom CorporationLANDON H. ROWLAND, Chairman, President and

Chief Executive OfficerKansas City Southern Industries, Inc.NEIL L. RUDENSTINE, PresidentHarvard UniversityWILLIAM RUDER, PresidentWilliam Ruder IncorporatedGEORGE RUPP, PresidentColumbia UniversityGEORGE F. RUSSELL, JR., ChairmanFrank Russell CompanyEDWARD B. RUST, JR., Chairman and Chief

Executive OfficerState Farm Insurance CompanyARTHUR F. RYAN, Chairman and Chief

Executive OfficerThe Prudential Insurance Company of AmericaSTEPHEN W. SANGER, Chairman and Chief

Executive OfficerGeneral Mills, Inc.JOHN C. SAWHILL, President and Chief

Executive OfficerThe Nature Conservancy

HENRY B. SCHACHT, Director and Senior AdvisorE.M. Warburg, Pincus & Co. LLCJONATHAN M. SCHOFIELD, Chairman and Chief

Executive OfficerAirbus Industrie of North America, Inc.DONALD J. SCHUENKE, Retired ChairmanNorthern Telecom LimitedWALTER H. SHORENSTEIN, Chairman of the BoardThe Shorenstein CompanyGEORGE P. SHULTZ, Distinguished FellowThe Hoover InstitutionStanford UniversityJOHN C. SICILIANO, Managing PrincipalPayden & RygelRUTH J. SIMMONS, PresidentSmith CollegeRONALD L. SKATES, President and Chief

Executive OfficerData General CorporationFREDERICK W. SMITH, Chairman, President and

Chief Executive OfficerFederal Express CorporationTIMOTHY P. SMUCKER, ChairmanThe J.M. Smucker CompanyHUGO FREUND SONNENSCHEIN, PresidentThe University of ChicagoALAN G. SPOON, PresidentThe Washington Post CompanyJOHN R. STAFFORD, Chairman, President and

Chief Executive OfficerAmerican Home Products CorporationSTEPHEN STAMAS, ChairmanThe American AssemblyJOHN L. STEFFENS, Vice ChairmanMerrill Lynch & Co., Inc.PAULA STERN, PresidentThe Stern Group, Inc.DONALD M. STEWART, Senior Program Officer and Special Advisor to the PresidentThe Carnegie CorporationROGER W. STONEChicago, IllinoisMATTHEW J. STOVER, Group President, Bell Atlantic

Directory GroupBell Atlantic CorporationJAMES N. SULLIVAN, Vice Chairman of the BoardChevron CorporationRICHARD J. SWIFT, Chairman, President and Chief

Executive OfficerFoster Wheeler CorporationRICHARD F. SYRON, President and Chief

Executive OfficerThermo Electron CorporationHENRY TANG, ChairmanCommittee of 100FREDERICK W. TELLING, Vice President Corporate

Strategic Planning and Policy DivisionPfizer Inc.RICHARD L. THOMAS, Retired ChairmanFirst Chicago NBD Corporation

*

*Life Trustee

JAMES A. THOMSON, President and ChiefExecutive Officer

RANDCHANG-LIN TIEN, NEC Distinguished Professor of

EngineeringUniversity of California, BerkeleyTHOMAS J. TIERNEY, Worldwide Managing DirectorBain & CompanySTOKLEY P. TOWLES, PartnerBrown Brothers Harriman & Co.ALAIR A. TOWNSEND, PublisherCrain’s New York BusinessJAMES L. VINCENT, Chairman and Chief

Executive OfficerBiogen, Inc.ROBERT WAGGONER, Chief Executive OfficerBurrelle’s Information ServicesDONALD C. WAITE, III, Managing DirectorMcKinsey & Company, Inc.ARNOLD R. WEBER, President EmeritusNorthwestern UniversityJOHN F. WELCH, JR., Chairman and Chief

Executive OfficerGEJOSH S. WESTON, Honorary ChairmanAutomatic Data Processing, Inc.CLIFTON R. WHARTON, JR., Former Chairman

and Chief Executive OfficerTIAA-CREFDOLORES D. WHARTON, Chairman and Chief

Executive OfficerThe Fund for Corporate Initiatives, Inc.MICHAEL W. WICKHAM, Chairman and Chief

Executive OfficerRoadway Express, Inc.HAROLD M. WILLIAMS, Of CounselSkadden Arps Slate Meagher & Flom LLPJ. KELLEY WILLIAMS, Chairman and Chief

Executive OfficerChemFirst Inc.LINDA SMITH WILSON, President EmeritaRadcliffe CollegeMARGARET S. WILSON, Chairman and Chief

Executive OfficerScarbroughsHUGH WOOD, ChairmanHugh Wood, Inc.KURT E. YEAGER, President and Chief Executive

OfficerElectric Power Research InstituteMARTIN B. ZIMMERMAN, Vice President,

Governmental AffairsFord Motor Company

RAY C. ADAM, Retired ChairmanNL IndustriesO. KELLEY ANDERSONBoston, MassachusettsROBERT O. ANDERSON, Retired ChairmanHondo Oil & Gas CompanyROY L. ASHLos Angeles, CaliforniaSANFORD S. ATWOOD, President EmeritusEmory UniversityROBERT H. B. BALDWIN, Retired ChairmanMorgan Stanley Group Inc.GEORGE F. BENNETT, Chairman EmeritusState Street Investment TrustHAROLD H. BENNETTSalt Lake City, UtahJACK F. BENNETT, Retired Senior Vice PresidentExxon CorporationHOWARD W. BLAUVELTKeswick, VirginiaMARVIN BOWERDelray Beach, FloridaALAN S. BOYDLady Lake, FloridaANDREW F. BRIMMER, PresidentBrimmer & Company, Inc.HARRY G. BUBB, Chairman EmeritusPacific Mutual Life InsuranceTHEODORE A. BURTIS, Retired Chairman

of the BoardSun Company, Inc.PHILIP CALDWELL, Chairman (Retired)Ford Motor CompanyEVERETT N. CASECooperstown, New YorkHUGH M. CHAPMAN, Retired ChairmanNationsBank SouthE. H. CLARK, JR., Chairman and Chief

Executive OfficerThe Friendship GroupA.W. CLAUSEN, Retired Chairman and Chief

Executive OfficerBankAmerica CorporationDOUGLAS D. DANFORTH, Retired ChairmanWestinghouse Electric CorporationJOHN H. DANIELS, Retired Chairman and

Chief Executive OfficerArcher-Daniels Midland Co.RALPH P. DAVIDSONWashington, D.C.ALFRED C. DECRANE, JR., Retired Chairman and

Chief Executive OfficerTexaco, Inc.ROBERT R. DOCKSON, Chairman EmeritusCalFed, Inc.LYLE EVERINGHAM, Retired ChairmanThe Kroger Co.THOMAS J. EYERMAN, Retired PartnerSkidmore, Owings & Merrill

CED HONORARY TRUSTEESJOHN T. FEYPark City, UtahJOHN M. FOXSapphire, North CarolinaDON C. FRISBEE, Chairman EmeritusPacifiCorpRICHARD L. GELB, Chairman EmeritusBristol-Myers Squibb CompanyW. H. KROME GEORGE, Retired ChairmanAluminum Company of AmericaWALTER B. GERKEN, Chairman, Executive CommitteePacific Mutual Life Insurance CompanyPAUL S. GEROTDelray Beach, FloridaLINCOLN GORDON, Guest ScholarThe Brookings InstitutionKATHARINE GRAHAM, Chairman of the

Executive CommitteeThe Washington Post CompanyJOHN D. GRAY, Chairman EmeritusHartmarx CorporationJOHN R. HALL, Retired ChairmanAshland Inc.RICHARD W. HANSELMAN, Retired Chairman and

Chief Executive OfficerGenesco Inc.ROBERT A. HANSON, Retired ChairmanDeere & CompanyROBERT S. HATFIELD, Retired ChairmanThe Continental Group, Inc.ARTHUR HAUSPURG, Member, Board of TrusteesConsolidated Edison Company of New York, Inc.PHILIP M. HAWLEY, Retired Chairman of the BoardCarter Hawley Hale Stores, Inc.ROBERT C. HOLLAND, Senior FellowThe Wharton SchoolUniversity of PennsylvaniaLEON C. HOLT, JR., Retired Vice ChairmanAir Products and Chemicals, Inc.SOL HURWITZ, Retired PresidentCommittee for Economic DevelopmentGEORGE F. JAMESPonte Vedra Beach, FloridaDAVID KEARNS, Chairman EmeritusNew American SchoolsGEORGE M. KELLER, Chairman of the Board, RetiredChevron CorporationJAMES R. KENNEDYKaysville, UtahFRANKLIN A. LINDSAY, Retired ChairmanItek CorporationROY G. LUCKSSan Francisco, CaliforniaROBERT W. LUNDEEN, Retired ChairmanThe Dow Chemical CompanyIAN MACGREGOR, Retired ChairmanAMAX Inc.

R. STEWART RAUCH, Former ChairmanThe Philadelphia Savings Fund SocietyJAMES J. RENIERRenier & AssociatesIAN M. ROLLAND, Former Chairman and Chief

Executive OfficerLincoln National CorporationAXEL G. ROSIN, Retired ChairmanBook-of-the-Month Club, Inc.WILLIAM M. ROTHPrinceton, New JerseyJOHN SAGAN, PresidentJohn Sagan AssociatesRALPH S. SAUL, Former Chairman of the BoardCIGNA CompaniesGEORGE A. SCHAEFER, Retired Chairman of the BoardCaterpillar, Inc.ROBERT G. SCHWARTZNew York, New YorkMARK SHEPHERD, JR., Retired ChairmanTexas Instruments, Inc.ROCCO C. SICILIANOBeverly Hills, CaliforniaDAVIDSON SOMMERSWashington, D.C.ELMER B. STAATS, Former Controller

General of the United StatesFRANK STANTON, Former PresidentCBS, Inc.EDGAR B. STERN, JR., Chairman of the BoardRoyal Street CorporationALEXANDER L. STOTTFairfield, ConnecticutWAYNE E. THOMPSON, Past ChairmanMerritt Peralta Medical CenterCHARLES C. TILLINGHAST, JR.Providence, Rhode IslandHOWARD S. TURNER, Retired ChairmanTurner Construction CompanyL. S. TURNER, JR.Dallas, TexasTHOMAS A. VANDERSLICETAV AssociatesJAMES E. WEBBWashington, D.C.SIDNEY J. WEINBERG, JR., Limited PartnerThe Goldman Sachs Group, L.P.ROBERT C. WINTERS, Chairman EmeritusPrudential Insurance Company of AmericaARTHUR M. WOODChicago, IllinoisRICHARD D. WOOD, DirectorEli Lilly and CompanyWILLIAM S. WOODSIDE, ChairmanLSG Sky ChefsCHARLES J. ZWICKCoral Gables, Florida

RICHARD B. MADDEN, Retired Chairman and Chief Executive Officer

Potlatch CorporationFRANK L. MAGEEStahlstown, PennsylvaniaSTANLEY MARCUS, ConsultantStanley Marcus ConsultancyAUGUSTINE R. MARUSILake Wales, FloridaWILLIAM F. MAY, Chairman and Chief

Executive OfficerStatue of Liberty-Ellis Island Foundation, Inc.OSCAR G. MAYER, Retired ChairmanOscar Mayer & Co.GEORGE C. MCGHEE, Former U.S. Ambassador

and Under Secretary of StateJOHN F. MCGILLICUDDY, Retired Chairman

and Chief Executive OfficerChemical Banking CorporationJAMES W. MCKEE, JR., Retired ChairmanCPC International, Inc.CHAMPNEY A. MCNAIR, Retired Vice ChairmanTrust Company of GeorgiaJ. W. MCSWINEY, Retired Chairman of the BoardThe Mead CorporationROBERT E. MERCER, Retired ChairmanThe Goodyear Tire & Rubber Co.RUBEN F. METTLER, Retired Chairman and

Chief Executive OfficerTRW Inc.LEE L. MORGAN, Former Chairman of the BoardCaterpillar, Inc.ROBERT R. NATHAN, ChairmanNathan Associates, Inc.ALFRED C. NEALHarrison, New YorkJ. WILSON NEWMAN, Retired ChairmanDun & Bradstreet CorporationJAMES J. O’CONNOR, Former Chairman and Chief

Executive OfficerUnicom CorporationLEIF H. OLSEN, PresidentLeif H. Olsen Investments, Inc.NORMA PACENew York, New YorkCHARLES W. PARRY, Retired ChairmanAluminum Company of AmericaWILLIAM R. PEARCE, DirectorIDS Mutual Fund GroupJOHN H. PERKINS, Former PresidentContinental Illinois National Bank and Trust CompanyRUDOLPH A. PETERSON, President and Chief

Executive Officer (Emeritus)BankAmerica CorporationDEAN P. PHYPERSNew Canaan, ConnecticutEDMUND T. PRATT, JR., Retired Chairman and

Chief Executive OfficerPfizer Inc.ROBERT M. PRICE, Retired Chairman and

Chief Executive OfficerControl Data Corporation

CED RESEARCH ADVISORY BOARD

ChairmanJOHN P. WHITEProfessorJohn F. Kennedy School of GovernmentHarvard University

JAGDISH BHAGWATIArthur Lehman Professor of Economics

and Professor of Political ScienceColumbia University

JOHN COGANSenior FellowThe Hoover InstitutionStanford University

ALAIN C. ENTHOVENMarriner S. Eccles Professor of Public

and Private ManagementGraduate School of BusinessStanford University

RONALD F. FERGUSONProfessorJohn F. Kennedy School of GovernmentHarvard University

HELEN F. LADDProfessor of Public Policy Studies and

EconomicsDuke University

LINDA YUEN-CHING LIMProfessorUniversity of Michigan Business School

ROBERT E. LITANDirector of Economic StudiesThe Brookings Institution

PAUL ROMERSTANCO 25 Professor of EconomicsGraduate School of BusinessStanford University

CECILIA ROUSEAssociate Professor of Economics

and Public AffairsPrinceton University

MURRAY WEIDENBAUMChairman, Center for the Study

of American BusinessWashington University

CHARLES E.M. KOLBPresident

CED PROFESSIONAL AND ADMINISTRATIVE STAFF

Communications/Government RelationsCLAUDIA P. FEUREYVice President for Communications

and Corporate Affairs

MICHAEL J. PETROVice President and Director of Business and Government Policy

and Chief of Staff

KAREN CONNELLPublic Affairs Associate

CHRIS DREIBELBISBusiness and Government Policy

Associate

VALERIE MENDELSOHNConference Manager and Secretary of

the Research and Policy Committee

JESSICA B. ORKINAssistant Director, Special Projects and Communications

DevelopmentKELSEY MURDOCHVice President for Development and

Secretary of the Board of Trustees

JAMES WRIGHTDirector of Development

KATHLEEN EDMONDSONContributions Secretary

DEOKI PESTANOGrants Manager

Finance and AdministrationKAREN CASTROAccounting Manager

SHARON A. CLATTERBAUGHExecutive Assistant to the President

PETER E. COXOperations Manager

ARLENE M. MURPHYExecutive Assistant to the President

AMANDA TURNEROffice Manager

ResearchVAN DOORN OOMSSenior Vice President and

Director of Research

JANET HANSENVice President and Director

of Education Studies

SCOTT MORRISVice President and Senior

Economist

ELLIOT SCHWARTZVice President and Director

of Economic Studies

ALASTAIR SMITHResearch Associate

SETH TUROFFResearch Associate

HELENA ZYBLIKEWYCZResearch Associate

Advisor on InternationalEconomic PolicyISAIAH FRANKWilliam L. Clayton Professor

of International EconomicsThe Johns Hopkins University

*Statements issued in association with CED counterpart organizations in foreign countries.

STATEMENTS ON NATIONAL POLICY ISSUED BY THECOMMITTEE FOR ECONOMIC DEVELOPMENT

SELECTED PUBLICATIONS:

Breaking the Litigation Habit: Economic Incentives for Legal Reform (2000)New Opportunities for Older Workers (1999)Investing in the People's Business: A Business Proposal for Campaign Finance Reform (1999)The Challenge to Lead: U.S. Global Economic Responsibilities in the 21st Century (1999)The Employer’s Role in Linking School and Work (1998)Employer Roles in Linking School and Work: Lessons from Four Urban Communities (1998)America’s Basic Research: Prosperity Through Discovery (1998)Modernizing Government Regulation: The Need For Action (1998)U.S. Economic Policy Toward The Asia-Pacific Region (1997)Connecting Inner-City Youth To The World of Work (1997)Fixing Social Security (1997)Growth With Opportunity (1997)American Workers and Economic Change (1996)Connecting Students to a Changing World: A Technology Strategy for Improving Mathematics and

Science Education (1995)Cut Spending First: Tax Cuts Should Be Deferred to Ensure a Balanced Budget (1995)Rebuilding Inner-City Communities: A New Approach to the Nation’s Urban Crisis (1995)Who Will Pay For Your Retirement? The Looming Crisis (1995)Putting Learning First: Governing and Managing the Schools for High Achievement (1994)Prescription for Progress: The Uruguay Round in the New Global Economy (1994)*From Promise to Progress: Towards a New Stage in U.S.-Japan Economic Relations (1994)U.S. Trade Policy Beyond The Uruguay Round (1994)In Our Best Interest: NAFTA and the New American Economy (1993)What Price Clean Air? A Market Approach to Energy and Environmental Policy (1993)Why Child Care Matters: Preparing Young Children For A More Productive America (1993)Restoring Prosperity: Budget Choices for Economic Growth (1992)The United States in the New Global Economy: A Rallier of Nations (1992)The Economy and National Defense: Adjusting to Cutbacks in the Post-Cold War Era (1991)Politics, Tax Cuts and the Peace Dividend (1991)The Unfinished Agenda: A New Vision for Child Development and Education (1991)Foreign Investment in the United States: What Does It Signal? (1990)An America That Works: The Life-Cycle Approach to a Competitive Work Force (1990)Breaking New Ground in U.S. Trade Policy (1990)Battling America's Budget Deficits (1989)*Strengthening U.S.-Japan Economic Relations (1989)Who Should Be Liable? A Guide to Policy for Dealing with Risk (1989)

Investing in America's Future: Challenges and Opportunities for Public Sector EconomicPolicies (1988)

Children in Need: Investment Strategies for the Educationally Disadvantaged (1987)Finance and Third World Economic Growth (1987)Reforming Health Care: A Market Prescription (1987)Work and Change: Labor Market Adjustment Policies in a Competitive World (1987)Leadership for Dynamic State Economies (1986)Investing in Our Children: Business and the Public Schools (1985)Fighting Federal Deficits: The Time for Hard Choices (1985)Strategy for U.S. Industrial Competitiveness (1984)Productivity Policy: Key to the Nation's Economic Future (1983)Energy Prices and Public Policy (1982)Public-Private Partnership: An Opportunity for Urban Communities (1982)Reforming Retirement Policies (1981)Transnational Corporations and Developing Countries: New Policies for a Changing

World Economy (1981)Stimulating Technological Progress (1980)Redefining Government's Role in the Market System (1979)Jobs for the Hard-to-Employ: New Directions for a Public-Private Partnership (1978)

CE Circulo de EmpresariosMadrid, Spain

CEDA Committee for Economic Development of AustraliaSydney, Australia

EVA Centre for Finnish Business and Policy StudiesHelsinki, Finland

FAE Forum de Administradores de EmpresasLisbon, Portugal

FDE Belgian Enterprise FoundationBrussels, Belgium

IDEP Institut de l’EntrepriseParis, France

IW Institut der Deutschen WirtschaftCologne, Germany

Keizai DoyukaiTokyo, Japan

SMO Stichting Maatschappij en OndernemingThe Netherlands

SNS Studieförbundet Naringsliv och SamhälleStockholm, Sweden

CED COUNTERPART ORGANIZATIONS

Close relations exist between the Committee for Economic Development andindependent, nonpolitical research organizations in other countries. Such counter-part groups are composed of business executives and scholars and have objec-tives similar to those of CED, which they pursue by similarly objective methods.CED cooperates with these organizations on research and study projects ofcommon interest to the various countries concerned. This program has resultedin a number of joint policy statements involving such international matters asenergy, East-West trade, assistance to developing countries, and the reductionof nontariff barriers to trade.

Documents

WELFARE REFORM AND BEYOND · ences resulting from the 1996 federal welfare reform legislation. Welfare Reform and Beyond is the most recent in CED’s ongoing series of policy studies