195 July 9, 1982 WORKFARE BREAKING THE POVERTY CYCLE INTRODUCTION Expenditures on welfare programs have been rising at an alarming rate over the last two decades A principal cause of this enormous expansion is the work disincentive cr eated by continual benefit liberalizations. Rather than paving the way for a higher standard of living, however, many of these government programs have tended to foster permanent dependency on welfare by providing benefits of greater value than the income an individual could earn by working In effect, the American welfare system allows an able-bodied individual to ask himself Will I be better off if I work or if I allow myself and my family to become dependent upon the work of other individuals this questi on to be posed is a system desperately in need of review and reform A system permitting Encouraging welfare recipients to become self-supporting is supposed to be a major objective of many government programs.

Most of these programs provide recipients cash incentives to work their way off the dole. In many cases, however, the result has been that individuals with relatively high incomes continue to receive welfare benefits.

David Stockman has voiced skepticism concerning such a system 1 just don't accept t he assumption that the federal government has a responsibility to supplement the income of the working poor through a whole series of transfer payments. We believe that the guy who takes two jobs and makes $26,000 a year shouldn't be obligated to transfer part of his income and taxes to the guy who's making $lO,OOO.ll Moreover, although these programs may be designed to aid the poor, in the long run they actually may lower their living standard by discouraging them from entering the labor market where they could acquire the job skills that eventual ly could lift many from poverty's depths Office of Management and Budget Director 2 There is system of the system. This an alternative to the self-defeating, degrading dole which long has characterized the U.S. w e lfare alternative is widely known as Community Work Experience Programs (CWEP) or more commonly as "workfare I in which employable recipients of public assistance--primarily able-bodied males and mothers of school age children--must perform some public se r vice without pay in return for their welfare benefits. Robert Carleson, who was Governor Reagan's welfare director in California, and who as Special Assistant to the President for Policy Development helped draft the Administra tion's current workfare prop osals, maintains: "Anyone who is capable of working should expect to earn their own welfare benefit."

As such, workfare reflects the American work ethic. Its objective is to promote financial independence by giving people greater incentives to seek out uns ubsidized employment. This work require ment is crucial for successful welfare reform because it is the most effective way to offset the work disincentives now created by the welfare system I As part of an overall welfare reform package, the Reagan Admini s tration is proposing "workfare" for beneficiaries of the Aid to Families with Dependent Children program (AFDC).l This would replace the Work Incentive Program (WIN which was estab lished in 1967 to provide eligible recipients with training and job placem ent services. While the Omnibus Reconciliation Act of 1981 gave states the option of requiring AFDC recipients to work in exchange for their benefits, the Administration's new proposals would make this mandatory.

BACKGROUND The Omnibus Reconciliation Act o f 1981 substantially altered the structure of the AFDC program. Particularly controversial were reforms affecting the Ifworking poor,11 many of whom had their benefits reduced because of limits placed on the ''disregards subtracted from earnings. Prior to this.legislation, benefits were determined by disregarding a recipient's first $30 earned in a month plus one-third of his remaining income. In addition child care and work-related expenses were deductible. The original intent of these disregards was to e n courage AFDC recipients to find work and become self-supporting. Congress did not intend these provisions to become permanent income supplements to working families. These provisions, however, often allowed extraordinarily large deductions, permitting fam i lies with relatively high earnings to remain on AFDC. In June 1980, for example, a family of four could receive benefits even if the family's yearly earnings were AFDC is a joint federal-state welfare program that provides cash assistance to needy familie s with children in which at least one parent is deceased disabled, or absent from the home. In some states, families with unem ployed fathers are also eligible for benefits under the AFDC program. 3 above $18,000 in four states, above $15,000 in fifteen st ates and above 10,000 in all but seven states.2 The 1981 reforms placed a cap on the work and child care disregards and only allowed application of the 30 and one-third disregards to the first four months of a recipient's employment.

These reforms became necessary because the disregards apparently had failed to achieve the results originally envisioned by Congress they did not significantly alter work incentives for the poor.

Indeed, the proportion of AFDC mothers who have worked has remained constant over the years 14.3 percent in 1961, 14.9 percent in 1967 (when the $30 plus one-third disregards were passed by Congress), and 14.1 percent in 19

79. There was, moreover, little increase in the number of welfare mothers achieving self-sufficien cy. These disregards frequently subsidized families quite capable of supporting themselves. Last year's changes still offer some incentives to seek employme nt, while ensuring that dependency on welfare ends when a family's earnings are sufficient for self support.

Critics of these reforms argue that they may actually discour age many AFDC recipients from working because, in many states What these critics igno re, however, is that those recipients considered employable may not be given a choice. The 1981 reforms allow states to set up workfare programs requiring recipients to work in exchange for benefits in public service jobs at public or nonprofit agencies, k nown as work-site sponsors. These sponsors are usually responsible for supervising the participants; some sponsors supply the equipment necessary for the work. But because this program was not mandatory, fewer than half the states have embraced workfare d o ing so would add little or nothing to a family's net income. I PROGRAM DESIGN The Administration has now introduced proposals that would strengthen and complement last year's reforms. AFDC applicants currently are not required to seek employment until aft e r their eligibility has been established, and then for no more than eight weeks a year. The current proposals would mandate that applicants seek work during the application period as well as after, at periodic intervals as determined by the states. Mandat ory job search is designed to ensure that private sector employnent remains the primary objective for these individuals.

If the job search fails, able-bodied recipients of assistance would be required to participate in a Community Work Experience Program. States would also be given flexibility to develop job These figures are based on child care costs of $150 and work-related expenses equal to 20 percent of income. 4 search and work programs that most effectively meet the needs of both the state and the pr o gram participants. Many public and private nonprofit agencies have the capacity to administer the workfare program without additional staff. Employees of these agencies, moreover, may gain supervisory experience by dealing with workfare participants. In a d dition, a state has the flexi bility to create day care centers that make use of the services of AFDC recipients on CWEP assignment where they take care of the children of other AFDC recipients on CWEP assignment. According to the 1977 Recipient Character istic Study, 41.5 percent of the families on AFDC nationwide reported that their youngest child was between the ages of 6 and

20. This indicates that many such families have children who are in school and would not require full time day care if their work ing hours were adjusted to coincide with school hours. be determined by taking the amount of the grant and dividing it by the federal minimum wage. States would be allowed to apply for a special waiver of this requirement to set a standard hour work requi r ement, if they so desired. The number of hours worked could then be bound by an upper limit to allow individuals time for job search and a lower limit to assure work-site sponsors a stable work force. The federal government also would provide a maximum of $25 per month for work-related expenses. Those failing to meet their assigned work requirements would be dropped from the rolls, unless they are participating in a program of job search or employment activities or training The number of hours a participan t works would RATIONALE The primary purpose of the Administration's strict job search requirements is to assure that employable adults applying for AFDC actively will pursue unsubsidized employment. By divert- ing potential recipients 'into employment, the cost of the program eventually could be cut. Several existing job search programs already are cost-effective.

Example: Oregon's Coordinated Job Placement Program. About 10 percent of the applicant pool was kept off the rolls in fiscal 1981 because the app licants had found employment. Oregon's AFDC caseload has declined by 25 percent since the job search program began in August 1980, despite a 40 percent rise in the unemployment rate.

Example: In Kent County, Michigan, the job search demonstra tion program for unemployed parents cut the caseload by 60 percent.

Of that, one-third found jobs before collecting benefits and the remainder either withdrew their applications or were dropped from consideration for refusing to participate.

The program thus tends t o discourage those unwilling to work from viewing welfare as an alternative. Other states and locali ties also report that job search is an effective tool in placing welfare recipients in jobs, even in areas plagued by high unemploy5 ment. The Administrat ion projects that the AFDC caseload will be reduced by over 150,000 through a national mandatory job search program.

There are several inherent advantages to the quid pro quo I. The community receives something in exchange for its concept of workfare assis tance. All communities surely have work that needs doing but has been ignored because of budgetary constraints workfare participants' contributions may be small, but since the welfare grants wo'uld be paid whether or not work is performed the community's g ain nevertheless is real. Among the jobs created by workfare in some of the optional CWEP programs are maintenance custodial, day care and library services and assistance to police and emergency medical personnel. Existing workers are not displaced since w orkfare project tasks would not otherwise have been per formed In fact, federal requirements prohibit any CWEP assignments from replacing paid positions Admittedly 11. Participants in the program may find that their attrac tiveness to potential employers h as been enhanced through their exposure to a working environment. Even if the jobs provided give little in the way of training, they introduce work disci plines. Such informal training encourages development of crucial work habits--punctuality, dependabil ity and good working rela tions with fellow workers. The work experience also gives parti cipants a chance to gain the kind of references, such as a letter of recommendation, which will help them in future job searches.

The workfare experience thus may very well enhance the value of participants as productive members of the workforce and ease their transition into unsubsidized employment 1

11. A workfare program may reduce welfare costs by deterring some persons who should be self-supporting from remaining on the dole. Though not intended as a primary objective, workfare has a deterrent effect" that eliminates welfare recipients who either refuse to participate or have another source of employment which prevents them from doing so. Establishing a work requ i rement would give employable recipients an incentive to seek other, more attractive means of support when they realize that their benefits no longer are free. Workfare has proved an effective means of sizeably reducing the fraud and abuse so prevalent in our current system by encouraging the departure of undeserving recipients thereby reducing the burden on the taxpayer and making more money available for those in genuine need.

EXPERIENCE IN WORKFARE The record of other current and past experiences in mand atory work programs is mixed. Careful analysis, however, indicates that these programs can work if they are properly administered 6 One of the most efficiently administered workfare programs Most of the work has little is in Cincinnati, which has been par t of the General Relief welfare program for over 40 years skill content, with heavy emphasis placed on having the partici pants put in their time. The program appears to have been cost effective. Notes one evaluation There is a very high initial attrition r ate, when people realize they have to work for their benefits It is sometimes necessary to assign 200 people to get 50 to show up at the work site. The average no show rate may run as high as 60-75 although the deterrent effect and the reduction in the ca seload is not an explicit objective, it is an obvious reality.

Although no formal costbenefit assessments have been made, the amount of GR grants money saved from case closings and the deterrent effect, appear to be far more than the costs of administering the program.

On that score alone the program has won general support and agency end~rsement Critics o f the Administration's workfare proposals contend that, unlike the General Relief population, most AFDC recipients are mothers with small children and, therefore, are not able to work. The 1980 Census Report, however, reveals that over half of America's m o thers, in fact, do work. Moreover, because of the flexibility that states are given in setting up their programs some workfare participants could be employed as day care center aides, thereby alleviating child care problems for mothers receive a great dea l of attention because it is part of the AFDC program, is the Utah Work Experience. and Training Program (WEAT).

For many years, Utah was the only state with a statewide mandatory work program that included AE'DC recipients, although it exempted mothers wi th children under the age of six. Utah's WEAT program established in 1974, requires employable recipients to work three days a week and to participate in job search for two days.4 This approach assures work-site sponsors a stable work schedule. A twelve-w e ek limit on workfare participation ensures that workfare participants do not become permanently dependent on workfare in place of regular employment because they failed to perform program, acknowledges that WEAT had a general housecleaning effect." In add ition, the program also helped many of those assigned work by enhancing their employability.

Journal reported A second workfare program, and one which very likely will Of those assigned to projects, 27 percent were removed Usher West, who heads the Utah Th e Wall Street Office of Work Incentive Programs Work Relief Search for a Positive Position unpublished draft, June 6, 1979, pp. 16-17.

This differs from the federal legislation, which bases the number of hours worked on the value of the grant divided by t he minimum wage. 7 One of those who benefited is Dennis Wickert, a 42-year old Marine Corps veteran with a ninth-grade education A combination of inadequate training and absences caused by problems with bad gums, plus relentless bill collectors, bounced h im from the last of several service station jobs and back onto AFDC several years ago, Mr.

Wickert recalls. Indeed, he was feeling like a loser until the WEAT program assigned him to a neighborhood maintenance crew working out of a local community-action office.

After that III could walk up to my neighbor and say I earn. my welfare money, it's honest,Il he says with conviction. Mr. Wickert's performance persuaded his employer to hire him as a crew chief. Today he is off AFDC; earning 800 a month plus some extra cash from odd hauling jobs done with his own truck.5 A third workfare experience is the California Community Work Experience Program (CWEP). This program is also likely to be scrutinized.carefully since President Reagan initiated it while governor o f California and because it is the blueprint of the Administration's current proposals. CWEP was a three-year demon stration project, developed as part of the 1971 Welfare Reform Program twenty hours a week in public service jobs in exchange for their welf are grants. Although there was no monetary reward for the work, the state reimbursed participants for work-related expenses.

The basic goals of the program were AFDC recipients were required to work a maximum of to demonstrate that mandatory participation of employable AFDC recipients in a community work program a b C d is both administratively feasible and practical reduces the extent of dependency on welfare by facilitat ing recipients in obtaining regular employment diminishes the rate of the new welfar e applications by encouraging potential applicants who are employable or have an employable family member to seek out other means of support; and results in a reduction in overall welfare costs; i.e reductions in aid payments or in caseload growth rates wi ll be greater than the additional costs involved in Community Work Experience Programs and will result in a savings. E June 4, 1981, p. 20.

State of California Development Department Third Year and Final Report on the Community Work Experience Program Apri l 1976, p. 2. 8 A year after the experiment ended, a California Employment Development Department report concluded that CWEP had failed to achieve its initial objectives. According to the report, the program did not. demonstrate that workfare would deter p eople from applying for welfare by warning them that they would have to work even if they did receive assistance or that those already on the rolls would get off them to take jobs on their own In fact fewer people in CWEP counties left welfare to take job s than in non-CWEP counties. The program also did not prove to be admini stratively successful.

There were several important factors, however, constraining the effective implementation of CWEP. First, a pending court case and the threat of an injunction ma de many counties unwilling to establish workfare programs until well into the second year of the project, while 23 of California's 58 counties did not establish a program at all A decision that further eroded any chances for success was the California leg islature's vote in 1974 to abolish the program altogether, a bill subsequently vetoed by the governor.

Moreover, programs such as the Work Incentive Program and the Public Employment Programs also tended to compete with CWEP for the employment of welfare r ecipients. This led to fluctuating participation levels. Stated the Employment Development Depart ment: "Such an off-and-on approach to a program neither built enthusiasm in responsible staff, nor caused user agencies to look upon CWEP as a reliable sourc e of workers CWEP failed, in sum not because it was based on flawed principles, but because it was never really given a chance to work. Charles D. Hobbs, Chief Deputy Director of Social Welfare for California during the Reagan Administration and one of the chief architects of the California Welfare Reform Program, observed An attitude of polite disdain and inaction toward the legislative directives to implement CWEP has been fostered by the liberal elements of the Legislature who opposed its inclusion in th e 1971 Welfare Reform Act, and has filtered down through the ranks of employ ment and welfare workers reflecting the attitudes of their Washington, D.C. and Sacramento bureaucratic leaders. Appraisals of CWEP's performance have been and will continue to be negative, for the simple reason that, to repeat, CWEP has not really been implemented as it was conceived emphasis in ~riginal Among the examples of state workfare programs, the most instructive may be that of.West Virginia. It takes advantage of a 1981 f e deral law allowing states to design their own Community Work Experience Programs in the public and nonprofit sectors Charles D. Hobbs A Review of California Welfare Work Programs Final Report, November 1, 1974, p. 4. 9 West Virginia began its CWEP and job search program for AE'DC recipients on January 4, 19

82. The progam already has assigned 1,200 individuals to jobs at 350 different organizations in countries throughout the state. These people are working in a wide variety of areas. Among the jobs create d are meter maids police helpers, ambulance assistants, library and park aides clerical workers and laborers. These jobs did not exist before the workfare program because there were no revenues to fund them.

The work performed by these individuals would n ot otherwise be done, thereby providing the taxpayer with public services and the program participants with on-the-job training. By integrating the CWEPs with existing work programs, West Virginia has not had to expand its administrative staff. The succes s of the program among the public and the participants thus far has evoked the praise of the state's Welfare Commissioner, Dr. Leon Ginsberg There is enthusiasm on the part of many of these indivi duals to work, and many are regularly engaged in looking fo r jobs. We think that the Community Work Experience local government in carrying out some of their responsi bilities and will also help the clients maintain their work skills and motivation to be employed I believe it is correct to suggest that this progra m is widely popular with the public.8 Program will both assist non-profit 'organizations and States preparing to establish workfare programs of their own would do well to closely monitor the experience of West Virginia WORKFARE FOR FOOD STAMP RECIPIENTS Th e concept of workfare should be expanded to other welfare programs, such as food stamps. Preliminary review of seven pilot workfare projects run for the food stamp program indicates that savings in this program could also be achieved by reducing depen denc y . The first-year results of the program show that 28 percent of the 3,515 individuals eligible to participate lost their benefits because they did not meet the program requirements. John Flynn, county supervisor in Berkley County, South Carolina attribute d the success of their food stamp demonstration program to several factors They either didn't need food stamps or they went out and got gainful employment. Either way it takes the people off the food stamp program because if they don't show up to work they don't get the food stamps obviously.11g Cited in Tom Mack Welfare Reform: Making Workfare Work American Legislative Exchange Council The State Factor, May 1982, p. 3.

Karen Turner and Karen Eastman Workfare: Can It Really Solve Our Welfare Dilemma County Employment Reporter Vol. 10, No. 3, June 1981 p. 16. lo On June 14, the Senate Agriculture Committee, by a vote of 11 to 5, adopted an amendment to the Food Stamp Act of 1977 to require states to impose either a mandatory workfare program administer an em ployment requirement, or both, effective July 1 19

83. Under the program, able-bodied recipients would be required to perform public service work under a workfare job or to obtain employment in the private sector to remain eligible for food stamps. Senator S. I. Hayakawa (R-CA who pushed for the work requ i rement asserted We've got to stop giving in to the food stamp recipients here and there and start considering the rights of the millions of hard-working Americans who pay the bill.I1 Exempted from any work requirement would be 1) recipients under the age o f 18 or over 60; 2) persons certified by a physician to be physically or mentally unfit for employment 3) unmarried parents or caretakers of children under the age of 6; 4) married persons or caretakers of children under 6 if there is another non-exempt p a rent in the household who was working at least 20 hours a week or participating in a workfare program; and 5 recipients of unemployment compensation. Individuals able to prove that they had searched for a job but could not find one would be allowed to con tinue to receive food stamps, if there is no workfare program.

Some have questioned the purpose of the new employment provision given the current work registration and job search regulations. It appears, however, that the new requirement sets more stringen t standards for demonstrating the ability and willing ness for applicants to accept employment.

CONCLUSION Although not all experiences in workfare have met expecta tions, it does appear that a properly administered program could reduce significantly burg eoning welfare costs while helping many of the poor overcome the llpoverty wallf1 created by America's current welfare and tax systems It is quite possible that the recent immigrants to this country who speak no English are better off than many of the poo r because the newcomers do not know how to take advantage of the welfare programs. Social analyst Tom Bethell has characterized their plight: "The newcomers are compelled to take those demean ing jobs at the bottom, butthey soon work their way up, as immig r ants always have in the past, and eventually rise above those on the isolated welfare platform.'Il0 Tfie purpose of workfare is not to put the poor to work on workfare projects, but to get lo Tom Bethell Treating Poverty: Wherein the Cure Gives Rise to th e Disease International Institute for Economic Research, Reprint Paper 16, October 1980, p. 8. 11 them into the productive and rewarding labor force by improving the incentives for serious job search The Reagan Administration is committed to establish the AFDC program as a well-run temporary assistance program to move indivi duals through work programs. By reducing welfare dependency a comprehensive workfare program would play an integral role in revitalizing the economy.

Peter G. Germanis Policy Analyst