Commentary

Ending Welfare Reform as We Know It

Alas, welfare reform, we hardly knew ye.

Last summer, as the election approached, President Clinton and congressional leaders gathered on the White House lawn to celebrate legislation to “end welfare as we know it.” While it is unlikely to receive the same ceremony, the budget deal quietly ends welfare reform as we know it.

Under pressure from organized labor, President Clinton threatened to veto congressional provisions that would have overturned a Labor Department ruling. Previously, the Labor Department had ruled that workfare participants were entitled to all the labor law protections of regular employees. Congress’s proposal overturned that budget-busting provision. But Republicans — ultimately unwilling to risk Clinton’s displeasure, even on an issue central to their entire agenda — meekly acquiesced to the Clinton veto threat and withdrew their objection to the Labor Department policy. As a result, states will be required to pay minimum wage to workfare recipients, which will raise program costs enormously. States might also be required to pay unemployment, workers’ compensation and FICA taxes on behalf of workfare recipients. Potentially, the Davis-Bacon wage law could also apply, which means that some workfare recipients would have to be paid, not just the minimum wage, but the prevailing union wage. Workfare recipients would be entitled to overtime pay, would have the right to join unions and would even be able to take family and medical leave.

But workfare was never intended to be a job in any traditional sense. It is designed to be a transitional program to assist individuals until they are able to get real jobs. Almost as important as the benefits people on workfare receive are the skills they learn that will allow them to enter the real world of work. Critics of workfare warn that, if poorly implemented, welfare-to-work programs could simply become a source of government-guaranteed jobs. The Labor Department’s ruling makes that far more likely.


Even under welfare reform, welfare spending was scheduled to rise by nearly $400 billion by 2002, despite declining caseloads.


Moreover, welfare recipients already receive benefits far in excess of the minimum wage. Although the Labor Department’s ruling counts only food stamps and cash grants under Temporary Assistance to Needy Families against the minimum wage, most people on welfare receive benefits from a wide variety of other government sources, such as public housing, Medicaid and various nutritional programs. A 1995 Cato Institute study found that the value of the full package of welfare benefits — which exceeded the minimum wage in all 50 states and the District of Columbia — ranged from a high equivalent to $17.62 an hour in Hawaii to a low equivalent to $5.53 per hour in Mississippi.

Those benefits are discounted under the Labor Department’s ruling. An individual could live in public housing; have health insurance provided through Medicaid; receive food through the Special Supplemental Food Program for Women, Infants and Children; and receive special grants for clothing, transportation and child care, yet still be entitled to the minimum wage on his or her workfare job. What a slap in the face to hard-working Americans who have played by the rules and taken low-paying jobs rather than go on the dole.

Since the new rules will drive up the cost of workfare, we can expect states to require fewer welfare recipients to work. Unfortunately, the budget agreement makes it easier for states to relax their requirements. Last year’s welfare reform defined work as — not surprisingly — work. However, the budget agreement redefines work to include a number of non-work activities, including job training, job search and even attending a community college. In addition, the budget agreement allows states to exempt up to 15 percent of food stamp recipients from that program’s work requirement.

Finally, the budget bill restores welfare benefits to legal immigrants, thus eliminating the commonsense idea that we should welcome new immigrants but should expect them to work.

Even under welfare reform, welfare spending was scheduled to rise by nearly $400 billion by 2002, despite declining caseloads. By some estimates, the new budget agreement will add an additional $100 billion to that amount. That does not count two new welfare programs created by the budget agreement: a new $24 billion entitlement for children’s health care and a $500 per child refundable income tax credit for people who pay no income taxes.

Slowly but surely, welfare as we knew it is being recreated. Instead of the promised changes from welfare and waste to opportunity and work, the budget deal apparently offers little more than a larger, more expensive and more problematic version of the failed welfare and job-training programs of the last three decades.

Michael Tanner is director of health and welfare studies at the Cato Institute.