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Welfare-to-Work and the Stimulus

I have been paying more attention to the American Recovery and Reinvestment Act of 2009 than to most legislation, largely because it is the focus of my latest book, Great Jobs in the President’s Stimulus Plan.

I have been paying more attention to the American Recovery and Reinvestment Act of 2009 than to most legislation, largely because it is the focus of my latest book, Great Jobs in the President’s Stimulus Plan. As the title indicates, the book is mainly about the occupations (and industries) that will get a boost from the stimulus package and are likely to offer more job openings or fewer layoffs than they might if left to the tender mercies of the business cycle.

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But the stimulus plan targets more than just specific industries; it is intended to cushion the effects of greatly increased unemployment. And this is where it intersects with welfare-to-work legislation.

You may have only a hazy memory of the welfare reform legislation passed under President Bill Clinton. (Unfortunately, with the amount of job loss happening across the country lately, more and more people are learning what welfare does and does not offer in their communities.) The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 replaced the previous welfare system with one that was intended to propel welfare recipients toward work. It provides Temporary Assistance to Needy Families (TANF) block grants to the states and lets the states mandate how they will use the funds, but the common requirement is that recipients will start working within two years of beginning to receive these funds and will have a lifetime limit of five years. Probably the biggest problem with this program is that even after people have made the transition from welfare to work, many of them are not earning a living wage.

I became aware of this problem when I read an upbeat research report written in 2004 on how TANF is implemented in California: “From Jobs to Careers: How California Community College Credentials Pay Off for Welfare Participants.” In California, the TANF program is called CalWORKS and allows participants to satisfy their work requirement by attending a California community college for as much as 24 months. The research report documents some very positive achievements of female participants in this program: “CalWORKs students were twice as likely to work year-round after attending community college than before. Among students not transferring to a four-year college, the more education a CalWORKs student obtained in community college, the greater her increase in earnings. Earnings increased substantially for CalWORKs students after college, even for those who entered community college without a high school diploma.”

Let’s look at the specific earnings figures reported. Prior to entering the program, students had median annual earnings of about $4,000 to $5,000. All CalWORKS participants increased their earnings, and those who acquired more education received bigger increases. Those who earned an associate degree increased their earnings 403% by the second year out of college (a change in median from $3,916 to $19,690). Those who earned a certificate saw a 239% increase, from $4,779 to $16,213.

These earnings figures are based on the years 1999 to 2000, at which time the federal poverty guidelines for a family of three were about $14,000. (That figure applies to the 48 adjacent states; my guess is that California costs of living call for a higher figure.) Although the medians for both associate-holders and certificate-holders exceeded this figure, and surely many of these graduates had fewer or no children or other earners in the household, that still leaves a substantial part of the income distribution that probably was earning below the poverty level despite the additional education.

Now, my purpose in writing this is not to criticize the CalWORKS program. Half a loaf is better than none, and the program deserves credit for improving the participants’ incomes, even if it did not propel many of them into the middle of the middle class. The question now is whether the TANF programs, of which CalWORKS is one, will get additional assistance from the Obama stimulus package so that they can help the many additional families who have lost or will lose jobs during this recession. The Senate bill allotted $2.3 billion to create a contingency fund through 2010 that states can draw on for TANF programs. This appears to have been cut down from what was originally proposed, which was estimated at $3 billion. Although the Senate and House have reportedly reached a deal on the legislation, as of this writing I have not yet been able to ascertain what level of TANF funding remains.