Welfare Reform: Plenty of Work Left

Margy Waller
Margy Waller Visiting Fellow, Economic Studies and Metropolitan Policy, The Brookings Institution

November 2, 2004

Late last summer, Secretary of Health and Human Services Tommy Thompson celebrated the eighth anniversary of the historic welfare-to-work law by announcing a small welfare caseload decline in 2003: “American families are improving their lives by leaving public assistance and entering the workforce,” he said.

A mere three days later, the U.S. Census Bureau announced the 2003 poverty estimates. Poverty increased and unfortunately, children accounted for most of the overall increase and more than a third of all poor people.

This isn’t the way things should work.

When poverty is rising and a recession cuts employment, welfare is supposed to be a safety net that catches poor families. Making matters even worse than these reports suggest, the formula for drawing the poverty line is out of date.

Mollie Orshansky developed the poverty threshold using a 1955 survey of family expenditures. But a lot has changed since then. In 1950, barely more than 20 percent of mothers worked, while today more than 70 percent do.

For lots of working parents — especially single mothers — child care is an expensive necessity. If our poverty measure reflected the cost of child care, 1.9 million additional people would be poor.

And the poverty line doesn’t reflect increases in housing expenditures, or regional differences in costs, and many working-poor households now spend more than half their income on rent.

To be fair, it’s also true that some more recently created federal supports intended to reduce poverty and “make work pay” are not considered income when counting the number of poor people: the Earned Income Tax Credit and food stamps, for example.

Still, given what we know about the cost of making ends meet, the current definition of poverty — cash income of less than $14,680 for a family of three — underestimates the number of families who face hardships.

Some observers argue that it’s good news that the increase in poverty for this recession is about the same as for the last one in the early 1990s, when welfare still existed as a safety-net entitlement.

But what has changed is the proportion of the poor in deep poverty. Last year, it reached the highest point since the United States started keeping track.

With all this new information, has President Bush reconsidered his plan for reauthorizing the welfare law? Because whether or not current law passes the test for “success,” his proposal wouldn’t address the fact that more people are poor, and fewer are caught by the safety-net.

So far, the current administration and some members of Congress remain determined to change welfare by piling on new work mandates for parents and states to meet. These leaders continue to insist on their plan in the face of “disappointing” job numbers that continue to fall far short of administration predictions. The economy isn’t producing enough new jobs to keep up with growth in the workforce, let alone make up hundreds of thousands of lost jobs.

Their costly proposal would force states to cut work-supporting and poverty-reducing services like transportation, housing, education, and child care.

It doesn’t take hard work to conclude that this welfare policy is no swift boat to success, let alone a war on poverty.