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America's Safety Net will not Catch The Poor This Time Around
Warning: Policy Wonkish post below.
I have been meaning to blog about this NYT article on the recession and America's safety net for quite some time:
Now, to bring it back around to the NYT article. The next few years will drastically test TANF's ability to serve the poor during this recession. It has been 12 years since welfare reform, 12 years of recipients floating on and off the rolls. As unemployment continues to skyrocket, many of these current and past recipients will be cycled off the payrolls and forced to find menial work in order to receive TANF benefits. Given the severity of this recession, it is likely that the labor market will take 2-3 years to recover. It is thus likely that we will begin to see the first round of TANF recipients that exhaust their benefits. They will not have any more benefits available to them for the rest of their life. If this happens, poverty rates will begin to rise again and we will be forced to revisit welfare reform.
UPDATE - This was cross-posted to a Daily Kos diary, where I was honored by its mention in the Diary Rescue
I have been meaning to blog about this NYT article on the recession and America's safety net for quite some time:
Unemployment insurance is not as generous now. Yet the unemployment rate is at 6.5 percent and some forecasters say it could top 8 percent next year. It hit 10.8 percent in the early 1980s.
This is also the first severe economic slump since President Bill Clinton overhauled the welfare system and made it tougher to qualify for, and keep receiving, benefits. Many people who lose their jobs now and fall into poverty may not qualify for public assistance. Other programs designed in part to counter hard times -- like job training and housing subsidies -- have also been cut back.If you are a follower of my blog or know me personally, you have probably picked up on some anti-Bill Clinton sentiment. The primary reason for my President Clinton hate is the 1996 PRWORA welfare-reform bill which should serve as primary example as to how triangulated policies result in very bad policies. I will get to the NYT article, but first let me point out TANF's (welfare) failures:
- By establishing welfare as a maintenance-of-effort grant, states are tasked with setting benefit levels themselves. This has the effect of fracturing the risk pool. By doing so, it is impossible for high poverty risk states (poor states like Mississippi) to be subsidized by the low poverty risk states (wealthy states like Connecticut). This has made it impossible for TANF to actually reduce poverty rates as the states where poverty is concentrated cannot afford to payout enough benefits to the impoverished.
- Because 54% of African Americans live in the South, where conservative ideology, racial stereotypes of welfare recipients, and poverty are concentrated, TANF has perpetuated the wage differentials between races.
- It is economically inefficient - the argument behind unemployment insurance is that substantial time is required to match our labor resources with our employment opportunities. If someone has to settle on the first job available to them, it is an inefficient allocation of the nation's labor resources. However, if someone loses their job but does not qualify for Unemployment, they are forced to take TANF which mandates that they be employed to receive benefits. Thus they are incentivized to take the first job offered to them no matter if they are overqualified or not.
- By capping the number of months that can be spent on benefits, recipients must go off TANF every month that they possibly can. Thus many recipients live in constant flux between the TANF rolls and living around the poverty line.
Now, to bring it back around to the NYT article. The next few years will drastically test TANF's ability to serve the poor during this recession. It has been 12 years since welfare reform, 12 years of recipients floating on and off the rolls. As unemployment continues to skyrocket, many of these current and past recipients will be cycled off the payrolls and forced to find menial work in order to receive TANF benefits. Given the severity of this recession, it is likely that the labor market will take 2-3 years to recover. It is thus likely that we will begin to see the first round of TANF recipients that exhaust their benefits. They will not have any more benefits available to them for the rest of their life. If this happens, poverty rates will begin to rise again and we will be forced to revisit welfare reform.
UPDATE - This was cross-posted to a Daily Kos diary, where I was honored by its mention in the Diary Rescue
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"America's Safety Net" was NEVER intended to catch the poor. It had to be SOLD as a policy intending to move people from poverty to self-sufficiency but that is not what Jason and the others had in mind when it was being developed. No matter how you look at it--from a policy perspective or from a performance perspective--it is clear that poverty reduction was not its intent.
If you remember when TANF was being developed American businesses were experiencing severe labor shortages. There were simply not enough workers to do the jobs to satisfy our growing SERVICE SECTOR economy. Employers needed a new labor pool and needed cheap workers and with women pretty much maxing out their labor force participation--the only available and half-way attractive untapped pool of workers were women (mostly...) on AFDC.
It was perceived that this pool of people had no experience working and therefore needed to be trained up in "soft skills"--showing up for work on time, dressing appropriately for work, answering "Who is Soc Sec and why do they get so much of my paycheck?" kinds of questions that provided an understanding of the basics about work. Great. But employers did not want to pay for this--so they tied the benefits received through TANF to obtaining those skills through soft skills training and on the job training type of programs. People on TANF could get their GED/HSED's.
Then, in order to make work pay more than cash benefits AND to keep WAGES LOW, TANF subsidized wages by paying for Child Care expenses, TANF paid for health care (CHIP), paid for housing (Section 8 and other HUD housing programs), paid for transportation (in rural areas--car purchase programs, in urban areas--public transportation because vehicle purchases were not allowed in areas that competed with already heavily subsidized transportation programs) and paid for income taxes through the Earned Income Tax Credit Program. The only one of these to survive at the same level as 12 years ago has been the EITC--but that is another topic entirely.
Something like 80% who left TANF for jobs worked at TEMP agencies and a majority who received training received training as Certified Nursing Assistants. The next largest group worked as child care providers--a growth industry under TANF--because child care was subsidized because TANF policies created the need for more child care providers as TANF requires participation in some sort of work or work activity but will pay for child care. Yikes. Also, there was no corresponding training program for non-custodial parents--mostly men--and it is men that suffer disproportionally when it comes to unemployment--particularly African American men.)
TANF was NEVER INTENDED to lift people out of poverty. As a policy--it was intended to supply employers with a pool of low wage workers. The reason why this program fails so miserably is because the labor market has changed and the economy has changed--but it would fail under any economy--because TANF success was measured as lowered welfare cases--not increased income or wealth for participants.
I agree that TANF is going to fail this country because so many have exhausted their benefits--but there won't be money laying around to help them--as there will be the "newly poor" (whom I see everyday in my line of work) lined up to apply. Speaking as a pessimist, there will be a lot more poor people in the near future and I hope--I HOPE-- that we will revisit welfare reform before TANF fails. We need to toss out TANF and quit thinking that poverty is a social problem with economic consequences. It is an economic problem with social consequences.
December 4, 2008 2:33 PM | Reply | Permalink
All good stuff, M, and quite accurate. You are well-informed on the research that's been done in this area. You must have some citations and links that you can share. I believe that Urban Institute has done a lot of the work in this area.
December 5, 2008 7:42 AM | Reply | Permalink
I am working backward on your blogs. Your info is very helpful to me. And I must admit that from the start of this misnomer of "welfare reform," my instinctive feeling was dislike. Both the post and the comment above this one have provided me with data and analysis which is refreshing and depressing at the same time.
Keep on posting here. Your fan base will grow.
December 5, 2008 1:51 AM | Reply | Permalink