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Welfare Rates Almost Unchanged During Recession

Welfare reform, 15 years old this week, was designed to get the structurally poor into jobs. What happens when there are lots more poor and lots fewer jobs?
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Not surprisingly, participation in government support programs like food stamps and unemployment insurance has soared in the United States during the recession. Those services kicked in, as the very concept of a social safety net implies, just when people have needed them the most.

But there is one odd exception to this trend: Caseloads for Temporary Assistance for Needy Families — the program created by the signing of welfare reform 15 years ago this week — have barely crept up nationwide since 2007. In 13 states, caseloads have dropped even as local unemployment as much as doubled.

During this bruising economy, that calls into question some core elements of the program.

"When TANF passed in the mid-'90s, it was a boom economy, and it was kind of the best time one could do that experiment of really moving to a work-based safety net for low-income mothers with children," said Pamela Loprest, director of the Income and Benefits Policy Center with the Urban Institute. "People could get jobs pretty easily, and the employment rate of even the less educated of eligible moms went up a lot."

THE IDEA LOBBYMiller-McCune's Washington correspondent Emily Badger follows the ideas informing, explaining and influencing government, from the local think tank circuit to academic research that shapes D.C. policy from afar.

Miller-McCune's Washington correspondent Emily Badger follows the ideas informing, explaining and influencing government, from the local think tank circuit to academic research that shapes D.C. policy from afar.

Now we're learning for the first time how welfare reform looks in a severe recession. And it turns out that a system dramatically reformed to emphasize employment doesn't support the poor well when there are no jobs to be had.

Before the passage of welfare reform in 1996, caseloads generally rose and fell alongside rates of unemployment. The connection between the two has been severed since then: a program that has been all about getting people into jobs now seems unresponsive to the kind of joblessness that suggests a role for government support programs in the first place.

"That really argues that something about the program itself isn't working properly for a recession," Loprest said. "It is a safety-net program; it should be a program that's there for eligible people when they're in need."

Caseloads had been falling dramatically since 1996. Some of this had to do with the program working — low-income mothers found jobs and moved off of government support. But some of the decline also had to do with eligibility requirements in some states that discouraged enrollment and disqualified participants who had the hardest time meeting job-search criteria.

Reform came with a change in culture, Loprest said, both on the part of state agencies that actively sought to limit enrollment and on the part of would-be participants, who shied from the stigma of public assistance and the declining value of its benefits. Assistance has remained flat since 1996, meaning it's now worth less in inflation-adjusted dollars.

In 1996, more than 80 percent of families eligible for the program enrolled in it. By 2005, that figure had fallen to 40 percent. In some states, the caseload decline during the recession has simply been an extension of that trend. The data have varied dramatically by state, as welfare reform's new block grant formula gave individual states much greater control over how they operate the program. In 2009, 80 percent of poor families in California participated. In Texas, 8 percent did.

"I don't think people predicted the incredible decline in caseload that happened after welfare reform. It just was much, much sharper than anyone had really predicted, and a lot of analysis went into trying to understand that," Loprest said. The strong economy contributed, but researchers also found something else: "You saw a lot of people leave who didn't go to work."

LaDonna Pavetti of the Center on Budget and Policy Priorities has charted the program's counterintuitive evolution in a different way. Participation has declined not only as unemployment has risen, but since as far back as 2000 as the number of families living in poverty has increased. The poverty rate among families is now higher than it was in 1996. Then, 68 out of every 100 poor families participated in the program. By 2009, that number was 27 in 100.

States now have the flexibility to direct the block grant funds away from cash assistance and toward other programs for low-income families like job training and child care (cash made up 73 percent of expenditures in 1997 but 39 percent in 2009). Loprest said she would have expected more of those resources to revert to cash assistance during the recession. But that hasn't been the case.

That would be one way for welfare to react to the needs of families in a changing economy. Another improvement, Loprest suggests, would be to tie the size of block grants to the rate of unemployment.

"I think some states and people just didn't really think about [that adjustment]. The focus in almost every state is so strongly on work, the message of work. It's hard to overemphasize how much that is the goal of most of these programs," Loprest said. The emphasis on finding work makes it hard to shift to supporting families when work isn't possible. "Programs didn't think about how to do that, how to switch. And partly because we had good economic times for so long while we were implementing this, they didn't have to think about it."

What we've learned during the recession, Loprest says, shouldn't change everything we thought we knew about welfare reform's successes over the previous decade. But in retrospect, she says, the program never worked very well for people who struggled to find or keep jobs because of obstacles like mental illness or family complications. And that was a preview of what was to come when much larger numbers of people couldn't find work because of the recession.

"Many people will agree the focus on work was very positive, that we needed to have a program that encouraged folks to work, that [showed] work was the real way these families were going to be able to integrate into society and take care of themselves in the long term," she said. "But we lost sight of this other goal — being the last-result income support program for those without money — and we couldn't figure out how to make them coexist."

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