One of the few government strategies that has proven successful in reducing poverty is encouraging or demanding that adults on welfare work, even at low wage jobs, and then subsidizing their earnings. The welfare reform legislation of 1996 is widely viewed as the origin of this two-part strategy. The 1996 reforms and a strong economy produced big increases in employment by poorly educated single mothers.
However, the poor skills of these mothers, combined with the decades-long stagnation of wages at the bottom of the wage distribution, make it unlikely that most of these mothers will ever earn sufficient wages to avoid poverty, let alone join the middle class. Fortunately, both state and federal governments have come to the rescue by providing billions of dollars in wage supplements for these working mothers.
In our new book Creating an Opportunity Society, Isabel Sawhill and I call these wage supplements the work support system. Work supports include the Earned Income Tax Credit, the Child Tax Credit, food stamps, health insurance, housing, school lunch, and several additional programs. Low-income working families, with earnings of around $10,000 or $12,000 per year, can qualify for combined cash and in-kind income worth more than $30,000. The beauty of the combined earnings-work support strategy is that the public wants the unskilled to work, and in exchange appears willing to endorse the substantial work support payments now on offer to these mothers and their children. Equally important, both the work requirements and the work supports were mostly enacted on a bipartisan basis and continue to enjoy bipartisan support.
But a dark cloud is now appearing on the horizon. The explosion in mothers' employment lasted until the recession of 2000. By January of 2009, their employment had dropped by a whopping 10 percentage points from its 2000 high. Similarly, the total income of mothers in the heart of the low-wage income distribution for women had jumped by about 30 percent between the early 1990s and 2000 but then remained stuck for the next eight years. By 2008, their total income was actually lower than in 2000. With employment, income, and earnings stagnant or in decline for nearly a decade, and poverty now on the rise, it is time to worry.
Having worked on the welfare reform legislation and several of the expansions of work supports when I was a Hill staffer with the Ways and Means Committee, I vividly recall the optimism many of us felt about the strategy of requiring work and then supplementing low wages with work supports. But now we face a huge question: Will the jobs come back? In a future posting, I will discuss several ideas about how to fight this threat to the most successful anti-poverty policy the nation has yet devised.