USA welfare reform-and It's lessons
USA welfare reform-and It's lessons
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JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
We often talk about the problems of welfare dependency in this country but we usually only discuss it in terms of the UK experience-other countries face similar problems and it is interesting to see how they deal with them.

In the states for instance as recently as the mid nineties 1 in every 7 children were dependent on state welfare. They then began a far reaching and sweeping reform, a collaboration between a Democratic President and a Republican Congress.

The whole emphasis of welfare spending switched from income support to getting people back to work. New time limits were imposed-poor people with dependent children could only receive benefits for 5 years over their entire lifetimes.

The effect has been dramatic welfare rolls have fallen from 5.1m families at the peak in 1994 to just over 2m now(in 2001)

The unemployment rate for single mothers had been stuck at around 43% for most of the 1980s and early 1990s. After reform, the rate fell to 28% by 1999.


Full Economist article below.


America's great achievement

Aug 23rd 2001
From The Economist print edition


Welfare reform has worked better than anyone expected. That does not help policymakers decide what to do next


AUGUST 22nd marked a milestone in American social policy. On that day, five years ago, Bill Clinton, having promised to “end welfare as we know it”, signed into law the Personal Responsibility and Work Opportunity Reconciliation Act, otherwise known as welfare reform. This ended welfare as an entitlement, available to all the parents who qualified, and required recipients—mostly single mothers— to look for work. Rather than simply paying up on demand, the federal government switched to a “block grant” programme, handing over a fixed sum to states ($16.5 billion a year), to disburse as they wished, within limits. There are now, in effect, 51 different plans—one in each state plus a central set of guidelines.

One of those guidelines stipulated that poor people with dependent children would get federal payments for only five years over a lifetime. Their time is up, so payments to parents who have been on the rolls since then should stop. In fact, things should not change much. No one is sure how many of today's 2m welfare families have been on the rolls for the maximum period. Not many probably, because the states have already pushed some recipients off the lists; and the 1996 law also allowed them to exempt up to a fifth of welfare recipients from the five-year time limit. More generally, federal payments now make up a smaller portion of the welfare system than payments from states and local governments.

Still, the beginning of the end of federal welfare funding marks a natural point of reflection for “the most sweeping social change in America in more than half a century” (as Tommy Thompson, one of the reform's pioneers and now its overseer as secretary for health and human services, has put it). Congress must also reauthorise the law next year. What has welfare reform achieved? And can it be improved?

When the reform became law, welfare rolls were near their all-time high. The “revolutionary” Republican Congress of Newt Gingrich tried to turn several social programmes—including Medicaid, the part-state, part-federal health-care system for the poor—into block grants. Welfare was the only Republican plan Bill Clinton did not veto. And he signed it in the teeth of vociferous Democratic opposition.

Welfare is only part of the country's poverty-reduction system, which includes public housing, food stamps, day-care subsidies, Medicaid and the Child Health Insurance Programme. But it has long been the most notorious part, not just because of its scale (in the mid-1990s, one in seven children was on welfare) but because it supposedly bred a culture of dependency.

The first aim of the 1996 law was to break that culture by moving people off welfare and into jobs. Before the reform, states gave out about 80% of the federal money that they dispensed in cash benefits. Now only half goes in cash. The rest goes on job searches, education, training and day-care for children of working mothers. Welfare offices have turned from cash-dispensing machines into job-centres, all using different sticks and carrots to push welfare recipients into work.

Critics on the left predicted disaster: unskilled welfare recipients would be unprepared for the discipline of work. In fact, welfare rolls have fallen more than even supporters predicted: from 5.1m families at the peak in 1994 to just over 2m now . In Wisconsin, where Mr Thompson was governor, Florida and Mississippi the rolls fell by more than 75%. Around two-thirds of those who left welfare are still working. Of the large minority, some returned to welfare, some subsist on other forms of government support and a few—an unknown number—have fallen through the cracks.


The unemployment rate for single mothers had been stuck at around 43% for most of the 1980s and early 1990s. After reform, the rate fell to 28% by 1999. The unemployment rate of never-married mothers fell even faster, from just over half in 1996 to one-third three years later. In the early 1990s, the average stay on welfare had been more than eight years: dependency, indeed. Now, the stay is probably less than half that. In the narrowest sense of the law's aim, it has been a triumph.

This has not been achieved merely by skimming the cream: the worry was that the employable minority would find jobs quickly, leaving behind an unemployable residue who would not find work, even if their benefits were cut off. At some point, presumably, the law of diminishing returns must set in. But that point has not been reached yet.

Studies by the Urban Institute, a Washington think-tank, show that the most recent batch of welfare leavers (those who left in 1997-99) have similar levels of employment and wages as the first batch (who left in 1995-97). And they suffer less hardship than the earlier group, with “only” 41% living below the poverty line, compared with 48% in 1997. There has been no build-up of the worst cases on the rolls. Welfare recipients seem far more employable than critics feared.

It's not the economy, stupid
The reforms took place at a time of unprecedented economic growth. Some wonder whether their success has been enhanced by transient economic factors that have begun to change. Just before the economic slowdown became apparent there was a rise in the caseload between July and September 2000—a mere 8,000 families, but the first time that more than a handful of states had seen the numbers rise.

Yet the connection between welfare rolls and the economy is less firm than you would expect. During the 1980s, when America added 20m new jobs, welfare rolls grew by over 500,000 families. Rolls also rose quickly at the beginning of the economic recovery of the early 1990s. The good news did not begin until 1994—when welfare reform began experimentally in some states. It was strongest in those, such as Wisconsin, that went furthest with their own reform measures.

A review by the Urban Institute shows that six studies before 1996 all gave more weight to the economy than policy. Two even found the economy accounted for three-quarters of the change in caseloads. But the two more recent studies of effects after 1996 placed policy above the economy by a ratio of at least four to one.

This hardly settles the argument conclusively. The success so far must owe something to the economy—and a downturn will, at the very least, affect the pace of improvement. On the other hand, worries about the economy should not be allowed to denigrate the achievement. Reform has left recipients better off than they would otherwise have been.

“Better off”, however, does not mean much. The first aim of reform was to get people into jobs; the second was to improve the income of the poor. Here reform has been less successful. Reductions in poverty have occurred, but at a slower rate than reductions in welfare rolls

In terms of wages, poor parents improved their lot (albeit at miserable levels). Annual wages for the bottom fifth of single-mother households rose from $1,350 in 1993 to $2,400 in 1999—a nominal rise of more than 80%. Earnings for the next 20% of wage earners increased even more, from $4,800 to $9,600.




Employed, but not richer
The trouble is that for every dollar gained in extra earnings, people lost around 40 cents in benefits. The poorest 40% of single-mother households increased earnings by about $3,000 between 1993 and 1999. But their disposable incomes rose by only about $1,850. The poorest of all have been hit hardest. According to Wendell Primus, a former Clinton administration official, and Ron Haskins of the Brookings Institution, 700,000 families are worse off under reform than they were before; and the child-poverty gap—the total amount that would be needed to bring all children up to the poverty line—fell only slightly in 1993-99, from $59.8 billion to $56.3 billion.

That still marks an improvement in the number of children escaping poverty. Until the mid-1990s, the proportion of children living in poverty had been rising erratically (see chart 3). Since then, the trend reversed sharply. In 1999, the child-poverty rate was back to its lowest since 1979 and poverty among black children was at its lowest level ever. Using a broader measure of poverty, the decline in poverty has been comparable to the big gains of the 1960s and was more than twice as great as during the 1980s.


Yet the fact remains: poor parents have seen less improvement in incomes than in their chance of a job. This gets more troubling when you look at wider benefits to children (such as higher school grades and keeping out of trouble with the law). Such things, according to a study of 11 different welfare schemes by the Manpower Demonstration Research Corporation, improve significantly only when the reforms boost both jobs and income.

But breaking the culture of dependency had wider goals than these. If you read the early pages of the welfare-reform bill, it is startling to find how often the word “marriage” appears. Welfare reform, for many of its proponents, was not to be judged by economic statistics. Rather, as one commentator, Mickey Kaus, says, it was about taking a “culture characterised by welfare dependence, a high rate of births out of wedlock, high male unemployment, and crime and replac[ing] it with a new, more virtuous social dynamic.” Marriage is the best indicator of this complex change—and it is here that the most surprising good news is to be found.

For decades before welfare reform there had been a relentless rise in the number of out-of-wedlock births (from 18% in 1980 to 33% in 1999). The number of children living with single mothers was especially marked among the poor and among blacks. Yet in about 1996, these apparently unstoppable trends stopped. According to a study by the Centre for Budget and Policy Priorities (CBPP), the share of children living with single mothers on less than twice the poverty rate fell from 34.2% in 1995 to 32.8% in 2000. This group includes most welfare recipients.

The revival of the nuclear family in the past few years has been driven by many things (from education to a new long-lasting injectible contraceptive). But it has been particularly notable amongst welfare beneficiaries. The proportion of black children living with their married parents rose from 35% in 1995 to 39% in 2000—a rise almost three times bigger than that in the whole population. And a welfare programme in Minnesota which rewarded married couples has yielded startling results. After three years, married couples on the scheme were considerably more likely to stay together than comparable couples on other programmes. Single parents joining the programme were also slightly more likely to get hitched.

One of the authors of the CBPP study, Mr Primus, resigned from the Clinton administration in protest at the decision to sign welfare reform. He now credits that change for creating this most unexpected good news on the family. “Whatever we have been doing over the last five years,” he says, “we ought to keep going.” That depends on Congress, which has to reauthorise the welfare laws by October 2002.

There is no constituency for a radical overhaul. Welfare hardly merited a mention in the presidential election last year—a remarkable testament to the way in which success in the field has produced political consensus out of controversy in five years. However, there is still room for Congress both to mess things up and improve them.

The big danger, inevitably, involves money. Some congressmen cite the plummeting welfare rolls as a reason to chop the block grant. Yet part of the success of the block-grant system is that, as those falling rolls have left behind the harder cases, it has increased the amount of money available to find jobs for each of those people. That virtuous circle would turn vicious if the money were reduced. Indeed, the possibility of recession suggests that the $2 billion contingency fund—which provides extra money for hard-hit states—should be both increased and made easier to tap. At the moment, states virtually have to declare bankruptcy to get the cash.

The problems to do with “ancillary benefits” (like food stamps) fortunately do not require Congress to authorise more money, just to simplify the rules. Fewer than half the working mothers who leave welfare continue to get food stamps, even though they are entitled to them. Cutting red tape—both at state and federal level—would do more than any single thing to boost the disposable incomes of welfare-leavers and to reduce child poverty.

The third tricky area is how much welfare reform can be used to promote marriage. This is mostly a matter for the states, and at least two—Oklahoma and Arizona— have set up ambitious programmes that are supposed to boost marriage rates among the poor (including marriage-training classes). Congress could set up additional matching funds to encourage such programmes. Perhaps more important, it could end the marriage penalties in its own tax code, especially in the earned-income tax credit. A study by the Urban Institute found that if a single working mother on the minimum wage marries a man earning $8 an hour, she loses a staggering $8,060 in annual benefits.

These problems are mere sun spots. It is rare enough that any government policy, let alone one dealing with poverty, is so near an unambiguous success as welfare reform has been. For decades, the underclass has loomed as America's deepest social problem. In just five years, reform has halved the size of the problem and made it possible to move on to the next stage. Pray that Congress doesn't blow it.

Plotloss

67,280 posts

299 months

Tuesday 22nd March 2005
quotequote all
Give a man a fish...

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
Plotloss said:
Give a man a fish...


Exactly

anonymous-user

83 months

Tuesday 22nd March 2005
quotequote all
Tell me to shut up and read the article if necessary (haven't read it all), but although I broadly agree with this sort of approach, what happens to the complete no hopers?

Imagine a family with 3 or 4 kids who resolutely fail completely to work. After their 5 years of welfare is up, do we really just let them starve out on the streets?

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
LexSport said:
Tell me to shut up and read the article if necessary (haven't read it all), but although I broadly agree with this sort of approach, what happens to the complete no hopers?

Imagine a family with 3 or 4 kids who resolutely fail completely to work. After their 5 years of welfare is up, do we really just let them starve out on the streets?


it's a real problem and something I've thought about alot. Evil has not led us to the current situation but compassion-and as someone said 'the road to hell is paved with good intentions.'

The only thing I can say is that with such a policy in place women will a) be much less likely to have children without a stable long term partner and b) will have a much greaterincentive to seek work.

You I and I both know there is work out there, after all hundreds of thousands of people are coming to this country to this work-it just not work that they want to do.

I think a carrot and a stick approach is needed-the carrot will be training, support and child care for the kids-the stick something similar to the policy above.

Ultimatly sometimes you have to make hard choices to achieve great things.

Plotloss

67,280 posts

299 months

Tuesday 22nd March 2005
quotequote all
The genuinely unable to work aside, of which there are comparatively few.

There are very few people who cant dig a ditch or carry a hod.

Workshyness is a bigger problem than lack of jobs...

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
[quote=Plotloss]The genuinely unable to work aside, of which there are comparatively few.

[quote]

Agreed and I would like to make it perfectly clear that in all my proposals for welfare reform I have always advocated generous benefits for those so disabled they are unable to work.

Plotloss

67,280 posts

299 months

Tuesday 22nd March 2005
quotequote all
Indeed a nation has a duty to protect the truly unfortunate. It is not a bosom for the bone idle though.

Dakkon

7,829 posts

282 months

Tuesday 22nd March 2005
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Plotloss said:
Indeed a nation has a duty to protect the truly unfortunate. It is not a bosom for the bone idle though.


Pah!! The world owes me!!! My mum said so!!!

Wait, If I breed lots of little workshy sods then the benefit state will give me a house for free and I can spend my money on Burberry, signet rings, and other bling

Sigh.....

anonymous-user

83 months

Tuesday 22nd March 2005
quotequote all
Thinking about this a little more, something mentioned on another thread previously comes to mind...

After the 6 months in a row or 5 years in total or whatever of welfare, further welfare payments have to be earnt through community service or similar - even if it's just picking up litter in a local park.

My concern about this idea would mainly be that with the civil service we have in place at the moment, the multi tiered management that would be put in place to support this would destroy any possibility of it working.

The difficult bit is providing a safety net so that we don't let people die on the streets, but one that is uncomfortable enough that people don't want to rely on it. One that would really get people's backs up would be to say that anyone reaching this level has their kids taken into care until they resolve their situation.

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
LexSport said:
The difficult bit is providing a safety net so that we don't let people die on the streets, but one that is uncomfortable enough that people don't want to rely on it. One that would really get people's backs up would be to say that anyone reaching this level has their kids taken into care until they resolve their situation.



Yes as i've said hard decisions

Perhaps the American reforms were a one off, their electoral system encourages Bi-partisan measures, because often Congress and the Presidency are controlled by different parties.

In this case the ideological zeal of a revolutionary Republican Congress met the pragmatism of a Centrist Democratic president.




>> Edited by JagLover on Tuesday 22 March 16:48

catretriever

2,090 posts

271 months

Tuesday 22nd March 2005
quotequote all
JagLover said:


The only thing I can say is that with such a policy in place women will a) be much less likely to have children without a stable long term partner


I can't say I agree with this point. Peoples propensity to have sex is based on basic instincts and no amount of policy making will affect it one way or the other IMO

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
catretriever said:

JagLover said:


The only thing I can say is that with such a policy in place women will a) be much less likely to have children without a stable long term partner


I can't say I agree with this point. Peoples propensity to have sex is based on basic instincts and no amount of policy making will affect it one way or the other IMO


Are peoples use of contraceptives based on basic biological urges as well

catretriever

2,090 posts

271 months

Tuesday 22nd March 2005
quotequote all
JagLover said:


Are peoples use of contraceptives based on basic biological urges as well


Well no...and that's the point isn't it. How many people do you reckon are thinking about possible future welfare reforms and their potential detrimental effect on their incomes when they're about to get jiggy with it?

Having said that, I imagine a mental image of Michael Howard is one of the most effective contraceptives known to Man

JagLover

Original Poster:

46,737 posts

264 months

Tuesday 22nd March 2005
quotequote all
catretriever said:

JagLover said:


Are peoples use of contraceptives based on basic biological urges as well



Well no...and that's the point isn't it. How many people do you reckon are thinking about possible future welfare reforms and their potential detrimental effect on their incomes when they're about to get jiggy with it?

Having said that, I imagine a mental image of Michael Howard is one of the most effective contraceptives known to Man


I will concede that many pregnancies are unplanned and even that a mental image of Mr Howard might be an effective contraception for some people.

However my general point still remains-many people plan pregnancies on the basis of family finances.