Welfare Work Requirements Have to Go

I used to believe Clinton’s welfare reform would fix the old system and help millions, but the must-work rules backfired. There’s a better way.

Since taking office, President Joe Biden has been quietly unwinding one of the most heartless policies of the heartless Trump era: Work requirements on low-income Americans receiving food stamps and Medicaid.

So far, the Biden Administration has rescinded Medicaid work rules in Arkansas, New Hampshire, Wisconsin, and Michigan—products of the Trump administration allowing states to insist poor families work in exchange for their Medicaid health insurance. Biden has also reversed a Trump Administration plan to tighten work rules for childless adults on food stamps (SNAP), a move that would have ended nutrition assistance for 700,000 people had it not been blocked by a federal court

Biden’s next step should be bold: Removing work requirements for any social policy program—especially the federal cash welfare program, Temporary Assistance for Needy Families (TANF). Twenty-five years after welfare reform enshrined work requirements into federal law, the record is clear: They’re a failure.

TANF is the famed welfare reform of the Clinton era that replaced the disastrous Aid to Families with Dependent Children (AFDC) program. Among its flaws, AFDC’s structure penalized work by cutting benefits dollar-for-dollar on the wages recipients earned. Critics rightly argued it discouraged work and encouraged a lifetime of government dependency. It was hard to find anyone in the mid-1990s, left or right, who thought this system was a smashing success.

TANF promised to solve these problems, and as a young policy analyst working at a center-left think tank in the early years after reform, I defended welfare’s work requirements. I even advocated their expansion. It’s a stance I regret. TANF’s work requirements got welfare recipients off the rolls but usually pushed them into poverty, not family-sustaining work. They encouraged states to game the system and skimp on helping the nation’s poorest citizens gain self-sufficiency.

The Trump Administration took the worst aspects of the Clinton policy and made them exponentially vindictive, and even less effective at helping the poor. Arkansas’ Medicaid work rules, according to a Department of Health and Human Services (HHS) report, forced the disenrollment of about 18,000 people but prompted “no increase in employment or other community engagement activities.” The tightening of SNAP or food stamp work requirements was especially nonsensical, given the program’s traditionally countercyclical role as a safety net for Americans who’ve lost their jobs during a recession. “Taking away food benefits doesn’t make it easier for anyone to find a stable job; it just makes people hungrier,” as Ed Bolen of the Center on Budget and Policy Priorities recently wrote.

TANF’s work rules are no better.

Mandating work was a key element of President Bill Clinton’s bipartisan push to “end welfare as we know it,” along with a five-year time limit on benefits, a crackdown on child support enforcement, and new investments in child care. Signing welfare reform legislation in 1996, Clinton lauded the new law’s “firm but fair work requirements” as a means of ensuring “personal responsibility.” “Today we have an historic opportunity to make welfare what it was meant to be: a second chance, not a way of life,” he said.

Ending welfare as an entitlement and making it conditional on work seemed like a good idea at first. Many Democrats agreed, including Senate liberals like John Kerry, Joe Biden, Tom Harkin and Barbara Mikulski. The early years of reform also seemed promising, as employment rates among single mothers rose and caseloads plunged, the poverty rate dropped, and newspapers offered inspiring personal stories of mothers who went from the dole to a job.

The gains proved illusory. The hot economy of the late ‘90s cooled. Many welfare recipients remained mired in poverty even if they did work. Second chances never materialized. If the goal was reducing poverty over time, work requirements failed miserably.

A review of federally-funded “welfare-to-work” programs from 1996 until 2004 showed modest impacts at best, with most participants unable to find stable employment. Those who did work earned an average wage (in 2004 dollars) of only $8 an hour and had no access to employer-sponsored benefits like health insurance (albeit many continued on Medicaid). Welfare recipients subject to work requirements “were more likely to live in deep poverty than to have incomes above the poverty line,” according to a lengthier 2016 analysis by the Center on Budget’s LaDonna Pavetti, whose data included the Great Recession. Gains in earnings were minimal or offset by cuts in benefits, and many recipients were trapped in dead-end, low-wage jobs. Yes, welfare reform led to work for some. But it didn’t lead to work that remotely approached a middle-class life.

One reason TANF’s work requirements failed is that stingy states found plenty of strategies to avoid their responsibilities, says Doug Steiger, former Counselor to the Secretary for Human Services HHS under President Barack Obama. TANF’s block grant structure gave states flexibility in their funding, but it also allowed for gamesmanship. For instance, some states gave token TANF supplements to working food stamp recipients just so they could add them to the welfare rolls and then count them as “working.” This was a cynical, bookkeeping ruse intended only to make the work numbers look good. “States took credit for [these] families, but they may not have invested to help the families actually get those jobs in the first place,” Steiger said

Other states simply discouraged TANF enrollment—since fewer recipients means fewer people to monitor and help. “For a lot of states, it’s been an easy way over the years to meet their requirements,” said Steiger. That’s likely one reason welfare caseloads stayed flat in 2020, which is amazing if you think about it. The pandemic should have swelled the welfare rolls as shutdowns sent the unemployment rate surging. In fact, the number of families receiving TANF declined last year in 37 states.

Welfare’s work requirements did not encourage robust state investment in successful welfare-to-work strategies, creating the hoped-for “laboratories of democracy” that so many Democrats wished for in the ‘90s. Instead, the law pushed recipients off the rolls but not into anything better.

In 2020, just two million Americans were on TANF, down from 14.1 million in 1993. But that’s not a sign of success. In some states, like Michigan, TANF is practically nonexistent, even though the state’s current poverty rate – at 13.0 percent– is higher than the national poverty rate by 2.5 percentage points. “We have record low cash assistance rates,” said Peter Ruark, Senior Policy Analyst at the Michigan League for Public Policy. “We’re at below 20,000 [families].” What’s worse, Michigan used the money freed up by lower caseloads as a slush fund for itself. Ruark, for instance, discovered that TANF money was funding college scholarships largely flowing to wealthy students attending private schools. “The general purposes of TANF are so broad you can drive a truck through the loopholes,” Ruark said.

The statutory mechanism that encouraged states like Michigan to displace so many from TANF is the “caseload reduction credit,” a giant loophole in states’ obligations to help welfare recipients find work. Though current law requires states to ensure that a target percentage of recipients are working or in “work-related activities” (such as job search or training), states can limit their commitments simply by dumping people from the rolls.

Each percentage point reduction in caseloads translates into a percentage point reduction in the required “workforce participation rate,” which gives states a powerful incentive to thin enrollment. In 2019, 27 states had large enough reductions in their caseloads to push their required workforce participation rates to zero, while another 11 states had target rates in the single digits. As a consequence, most welfare recipients aren’t working, despite the law’s stated requirements. In fiscal 2019, HHS reported an overall “work” rate of 47.1 percent, with 12 states reporting work rates below 25 percent.

At the same time, there’s been a troubling rise in deep poverty—where families are living on incomes less than half the poverty line. In places like Detroit and Oklahoma City, according to scholar Pavetti, the share of former welfare recipients reporting no income from either work or welfare ranged from 19 percent to nearly 40 percent in the years immediately following reform. Another researcher, Luke Shaefer of the University of Michigan, estimates that as many as 1.2 million households with children receiving food stamps had no source of income in 2018. Work requirements thus delivered the worst of both worlds for many welfare recipients: deeper poverty and no work.

Mechanics aside, welfare’s work requirements have also failed because the underlying “grand bargain” that created them fell apart.

President Clinton’s embrace of welfare reform was based on policy and politics. After the electoral shellacking of a succession of Democratic presidential candidates—Jimmy Carter in 1980, Walter Mondale in 1984, and Michael Dukakis in 1988—Clinton won the White House in 1992 as a “new” Democrat who eschewed the big-government liberalism voters rejected. Welfare reform was central to this makeover of the party’s image, as was support for free trade and a tough stance on crime. As a governor, he had seen the failures of AFDC and wanted something better. He didn’t get it.

Conservatives’ punitive and judgmental view of welfare recipients meant that the investments Clinton called for in conjunction with welfare reform—such as a higher minimum wage, more money for child care and private-sector wage subsidies to encourage more hiring—never materialized to the extent necessary to support successful transitions from welfare to work. Instead, Republicans in Congress in the years after reform repeatedly called for deep cuts in federal programs for the working poor, including Medicaid, food stamps, housing assistance and job training.

Helping low-income Americans enter the workforce and gain livable-wage jobs should still be the central goal of the nation’s anti-poverty programs. But punitive work requirements are not the answer. Most individuals on welfare want the meaning and satisfaction of work but face numerous obstacles in their life circumstances—such as the lack of skills, child care or transportation—that make finding and holding down a job difficult. TANF never gave them the tools to get there.

Biden has the chance to make it right, as his Administration crafts legislation rebuilding America’s physical and social infrastructure. He should strike a new bargain with America’s poor—one that respects their dignity, is premised on their desire to work, and provide for their families and avoids the traps of pre- and post- Clinton era work requirements. He is arguably already on his way. The child credit included in the last coronavirus relief package will do more to end child poverty than TANF ever did. He’s also released $39 billion in stimulus funding for child care and has promised to do more.

An additional fix should be to end work requirements for individuals but put new mandates on the states to move more families into work and out of poverty. States shouldn’t get to take credit for people already working, and they shouldn’t be rewarded for pushing people out of assistance and into poverty, as they are now. Rather, what should matter are outcomes—such as declines in the share of families living in deep poverty and increases in people’s wages over time.

Those are the kinds of reforms that should have happened back in 1996. Let’s finish the job.

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Anne Kim

Anne Kim is a Washington Monthly contributing editor and the author of Abandoned: America’s Lost Youth and the Crisis of Disconnection. This story was produced with support from the Education Writers Association Reporting Fellowship program.