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Is Welfare Working?

Twelve years ago, Bill Clinton and the U.S. Congress ended "welfare as we know it." Gone was the idea of an open-ended entitlement for...

Twelve years ago, Bill Clinton and the U.S. Congress ended "welfare as we know it." Gone was the idea of an open-ended entitlement for those mired in poverty. In its place came Temporary Assistance for Needy Families and the notion that families could -- and should -- work their way out of their impoverished straits.

More than a decade into the change -- including major revisions that were part of a 2005 reauthorization of TANF -- the question today is not so much whether TANF works but whether welfare as we now know it still matters. As with any program that profoundly changes its ground rules, the original TANF and its subsequent 2005 revisions have unleashed a series of fallouts -- some surprising, others not so. While they have relieved pressure on the program itself -- welfare caseloads have fallen dramatically -- there has been a notable and increasingly sharp uptick in the demand for services in other parts of the safety net.

"We really don't do much cash assistance to families anymore," says Sharon Hirsch, an assistant director in the Durham County (North Carolina) Department of Social Services. That money, she reports, is now going mostly to child-only cases where no parent and no work requirement is involved and to child care for the few families on the rolls. Meanwhile, welfare spending is dwarfed by what the county is now spending on other supplemental assistance programs, such as food stamps and Medicaid.

That trend has led many to wonder whether TANF has essentially run its course and whether welfare as we've come to know it is now a thing of the past, supplanted by a network of different safety net programs supporting the working poor.


The single most stunning effect of the 1996 TANF law has been the winnowing of welfare caseloads. Even in cities such as New York that had long hosted large numbers of people in need of assistance, caseloads tumbled and remain at historic lows. Since TANF went into effect, they are down nationally between 50 and 90 percent, depending on the city or state.

The reductions have been impressive, but have people been better off under the new regime? There is considerable evidence that many have. Through the late 1990s, poverty among single-parent families fell by 30 percent. Black-child poverty reached its lowest level in history.

A strong economy played a key role in driving down poverty rates during that period, says Isabel Sawhill, senior fellow and director of economic studies with the Brookings Institution. But, she notes, so did welfare reform, which, besides emphasizing work gave states the flexibility to help clients with things such as child care, transportation, clothing and whatever else a family needed in order to get on its feet.

Another factor behind improved financial circumstances was the federal earned income tax credit, which could add thousands of dollars to a low-wage worker's income. With a good package of work supports, including a state as well as a federal EITC, Medicaid, food stamps and child care, a state could, says David Hansell, commissioner of New York State's Department of Temporary and Disability Services, "double someone's actual income up to 200 percent of the poverty level."

That's the good news. In the past few years, things have not been going quite as well. Caseloads aren't escalating back up but, says Robert Doar, commissioner of New York City's Human Resources Administration, "we've stalled." There's also evidence that the welfare program has become a more punitive system -- one geared to pushing people off the rolls rather than helping them become employed and self-sufficient. And the cost of that approach is showing up in increased use of food stamps, Medicaid and other safety net programs.


The word "stalled" is now being applied in more and more places. In most states, caseloads have either stabilized or are trending slightly upward.

One reason is that the easy cases have been washed out of the system. Those who were essentially work-ready -- they just needed a little push and a little extra help -- are off the rolls. Now the caseload is made up of those who have more serious and numerous barriers to employment. In New York, for instance, only about one-third of the state's caseload has as much as a high school education. Many are immigrants who don't speak English.

According to a recent Urban Institute report, more than half of all post-2005 TANF recipients have at least two significant barriers to work. "The people coming for assistance now," says Kevin McGuire, who oversees TANF in Maryland, "are people with physical, mental and emotional problems."

This more challenging cohort has distilled out at a particularly bad time: The economy has softened considerably since the late 1990s and is showing signs of getting worse. On top of that, Congress and the Bush administration imposed new rules in 2005 that reset the odometer on work participation rates and narrowed the definition of what states could count as work activity.

In other words, a dozen years into the boldest experiment in social policy in generations, states are finding that new federal policies and the national economy are lining up against a harder-to-serve group of clients. In the face of the twin challenges, states have -- to varying degrees -- been looking at two kinds of responses. One is to find ways to accommodate those with multiple barriers to work. The other is to toughen up the use of sanctions when individuals either fail or refuse to live up to the new work requirements.

Two years ago, for example, New York City launched a program, WeCare, to help clients with multiple barriers to work. Those who need extra help are steered to one-stop service providers who have contracted with the city to perform a full assessment that takes into consideration everything from an individual's physical and mental health to his or her social circumstances. The same contractor is then responsible for coming up with a plan to get the client work-ready, implementing that plan and doing a job placement. If a client is clearly incapable of getting and holding a job, that person is diverted out of the welfare program and into more permanent assistance, including the federally funded Supplemental Security Income program.

In Pennsylvania, programs aimed at working with harder-to-place welfare clients started as early as 2001, with the state's Maximizing Participation Program. The program targeted TANF recipients who had been exempted from work requirements because of some mental or physical disability. As a matter of policy, MPP favors continued education over work where appropriate and tries to engage those with multiple barriers in alternative work activities. As in New York City, if clients are simply incapable of further progress, MPP tries to divert them out of TANF altogether and into state or federal assistance.


There has always been the threat and use of sanctions. Those clients who don't live up to work requirements could be hit with penalties, which include everything from a gradual ratcheting down of benefits to an immediate and complete cutoff of benefits. But the use of sanctions has become an even more prominent feature of the program in the wake of the 2005 reauthorization, which changed the welfare-to-work landscape in two fundamental ways.

As part of the original 1996 bargain, states were granted more flexibility in how they handled welfare but had to achieve a 50 percent work participation rate for single-parent cases and 90 percent for households with two parents. States hit those percentages with ease early on, and then were allowed to continue using those gains to calculate participation rates for the life of TANF I. Under the 2005 reauthorization rules, Congress reset the clock -- states would have to meet participation rates anew and, as it turns out, among a tougher-to-place clientele. At the same time, the new rules tightened up the definition of "work," disallowing activities -- such as work-readiness classes -- that in the past could be counted as having a job.

Critics of the new body of rules say that the most pernicious effect is that it has nudged state and local welfare workers back toward a focus on compliance as an outcome, rather than actually helping people work toward permanent independence, making TANF a meaner program that discourages people from signing up for it in the first place. "The system has become totally punitive," argues Evelyn Ganzglass with the left-leaning Center on Law and Social Policy. "We were moving in the right direction for nine years and then everything changed."

The trend -- for states to be more aggressive about diverting or sanctioning people -- is particularly troubling, critics say, because studies suggest that those enrolled in TANF are better off than otherwise-eligible families that either have been sanctioned off TANF or never signed up in the first place.

Those who argue that welfare today has reverted to more of a sanction-driven numbers game hold up Georgia as Exhibit A. TANF caseloads have declined "consistently and substantially" since 2004, according to a study by Mathematica Policy Research. Meanwhile, during the same time period, the state's work-participation rates for TANF recipients have skyrocketed from around 11 percent to nearly 70 percent.

That sounds impressive, except the gains in the percentage of those participating in work have been won not by placing more TANF recipients in work but by pushing down total caseloads. According to the Mathematica report, staff in Georgia "may be dissuading families from ever applying for TANF." In the wake of the state's aggressive push on work participation, the number of adults on TANF in Georgia has collapsed from a high of more than 50,000 at any one time to around 3,000 today.

Critics of the approach, such as Alan Essig, executive director of the Georgia Budget and Policy Institute, argue that the result is more Georgians living in poverty, not fewer. He notes that as participation in TANF has tumbled in Georgia -- by 83 percent between 2002 and 2006 -- poverty rates have increased from 12 percent to just over 14 percent. At the same time, participation in other public assistance programs has gone up, increasing 160 percent in the case of food stamps and 15 percent for Medicaid.

The two trends taken together suggest that what Georgia has achieved through its aggressive stance on TANF is not a class of citizens working to become financially independent but rather the creation of a group of working poor, who seem to be slipping further behind and who require increasing amounts of other types of public assistance to survive.

If that's the case, it's still better than being on TANF, argues Donna Gunter, TANF unit manager for Georgia. "We operate on the assumption that welfare is not good enough for any family," she says. "If you're on welfare, we're maintaining you below the poverty level, so caseworkers are trying very hard to get families to see employment and other options that are available to them."

The overall trend in welfare that is on display in Georgia -- a small but still-poor cadre of citizens stuck in poverty -- appears to be one that is taking place in quite a few states and localities. Even states that aren't being accused of force-them-off-TANF tactics are seeing TANF participation among adults stay low, while food stamp and Medicaid participation and costs swing upward.

For Wade Horn, who helped craft the 2005 reauthorization legislation when he was assistant secretary for children and families at the U.S. Department of Health and Human Services, having people leave the cash-welfare program and become high users of other programs isn't a bad thing. "The framers of reform," he says, "didn't say people were going to leave welfare and their first job would put them into the middle class."

But the change in safety-net dymanics has been so pronounced in some places that TANF as a family welfare program has almost become irrelevant. In Durham County, Sharon Hirsch reports, the number of cases that are subject to work requirements has dwindled to around 100 in any given month.

Hirsch has seen welfare reform play out since before 1996. Under Governor Jim Hunt, North Carolina was granted a waiver to become an early adopter of the "work-first" approach to welfare. Counties were on the front line of that reform -- North Carolina is one of about a dozen states where welfare is county-administered -- and Hirsch at the time was executive director of the North Carolina Association of County Directors of Social Services.

The uncertainty around what welfare reform would mean, says Hirsch, was quickly replaced by something close to shock at the huge number of cases that simply dropped off the rolls as soon as the work requirements kicked in. And the drop not only proved to be permanent but continued to ratchet down.

The transformation has been profound, and that is why Hirsch says the county and state have substantially moved out of the cash-assistance game. "Welfare isn't a cash-assistance check anymore," she says, "But that doesn't mean we're not giving people help." What has shifted, she says, is the nature of the county's social services caseload: from those on traditional welfare to working poor who "struggle with food, health care, child care."

Other jurisdictions report a similar shift. "No one really even talks about welfare anymore because the caseload numbers have gone down so much," says Suzanne Wagner, a research assistant with Project Match, a welfare-to-work organization. "TANF is no longer seen as an avenue for intervention."

Which may be the shape of the new welfare reality, say seasoned veterans, such as New York's David Hansell: Even as TANF replaced the old welfare system, TANF itself is being supplanted by a network of other types of assistance programs aimed at helping the working poor stay employed or simply survive once they are off the TANF rolls. "Most of the people who leave TANF leave for low-wage jobs that don't bring them close to the poverty level," Hansell says. "So now we're thinking about what is our responsibility after people leave public assistance and how can we support them economically."

A Senior Editor of Governing, Jonathan has been covering state and local public policy and administration for more than 30 years.
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