From Welfare to Poverty

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Heather Boushey and Randy Albelda
TomPaine.com, August 23, 2006

This week marks the 10th anniversary of the Personal Responsibility and Work Opportunity Reconciliation Act—commonly known as "welfare reform." The much hailed legislation abolished a cornerstone of the New Deal known as the Aid to Families with Dependent Children program which was criticized for discouraging work. But 10 years later, we know that the program Congress put in its place—Temporary Assistance to Needy Families— encouraged work, but many remain in poverty and struggle to make ends meet.

Since welfare reform was passed, poor women have moved into jobs in record numbers. In 1996, more than half (54 percent) of low-income mothers with children under 6 years old were in the labor force. By 2002, that share jumped to over two-thirds (67 percent).

But, the workplace has not adapted to the needs of the millions of new working single mothers. Studies of people leaving welfare consistently find that the wages of those leaving welfare average between $7 and $8 per hour , which are above the minimum wage but leave families close to or even below the poverty threshold. Further, most people found jobs that do not offer the kinds of benefits middle- and upper-class workers take for granted. Only about half of those leaving welfare report having employer-sponsored health insurance and no more than half had paid sick leave or pension coverage. Most do not have access to paid maternity/paternity or family leave and many do not even have access to unpaid leave.

In short, welfare reform was effective in getting more mothers to work, but not at making jobs work for low-wage mothers.

And, don’t be fooled by the higher employment numbers into thinking that welfare reform eliminated poverty. Around the time of welfare reform’s passage, Congress increased some of the benefits of working—raising the minimum wage and expanding the Earned Income Tax Credit in 1996, and creating the Child Health Insurance Program in 1997. Yet it has not significantly expanded benefits in recent years. Rather, as states struggled to balance their budgets in the early 2000s, many work-support programs have been cut. Meanwhile, the real value of the minimum wage is lower today than it was when welfare reform passed, and so far Congress has resisted raising it at every turn.

By definition, welfare recipients are virtually all single-parent families and they now face the same problems faced by millions of low-income working families: not enough time and not enough income. For working parents, gainful employment requires not only a good job, but also reliable child care. While the wages of most parents leaving welfare are relatively low, child care costs remain high—more expensive than attending the state university in most states—and subsidized slots continue to be elusive.

For many families, moving to work has meant become “working poor,” rather than “welfare poor.” Work supports are available for some low-income workers, but evidence indicates that the percentage of eligible families receiving food stamps, earned income tax credits, housing assistance or child care vouchers is quite small relative to the need. Those lucky enough to access work supports find that they often phase out too rapidly, as each rise in income reduces benefit levels. Thus, employment creates the “running in place” dilemma: Every additional dollar earned means close to a dollar lost in benefits.

And, those finding jobs are the lucky ones. While the poverty rate has fallen dramatically since 1996, welfare caseloads have fallen even more. Between 1996 and 2004 , the poverty rate for single mothers fell from 42 to 36 percent, a 14.3 percent decline, but the percentage of families using welfare fell by close to 60 percent, meaning that far fewer poor families are being served by welfare. Families who face enormous barriers to employment still need cash assistance, especially when family circumstances preclude a single parent from holding any job or a full-time job.

Nobody liked the old welfare system. It provided disincentives to employment, treated people poorly, and didn’t provide enough income to support a family.

But, the current system isn’t working very well, either. Too many families struggle too hard in a country that has enormous wealth. Ten years later, many low-income working families are wondering when we will insist that work should work for families—that jobs pay enough to afford the basics, that they come with health care and access to paid sick leave, and that every parent has access to safe, affordable and enriching child care for their children while they’re at work.


Heather Boushey is a senior economist at the Center for Economic and Policy Research.