Statement of George Gonos, State University of New York at Potsdam, Potsdam, New York

Last year, the Merwin Rural Services Institute at the State University of New York at Potsdam released a research report entitled “The Welfare-to-Work transition in the North Country.” This report is the result of research carried out by myself and four student assistants. The findings that follow are excerpted from that report. I respectfully request that you include these comments in the official hearing record.

This report was supported by grants from The Merwin Rural Services Institute and The Walker Fellowship Program, and by a Research and Creative Endeavors grant from the Office of Research and Sponsored Programs, SUNY-Potsdam. None of the supporting organizations are responsible for the specific content of this report. The views expressed are those of the authors and should not be attributed to MRSI, The Walker Foundation, or the Office of Research and Sponsored Programs.

Findings (Excerpts)

Employment

For those working, the most common occupation in our sample, as for TANF leavers nationwide, is low-wage service work, in retail stores and nursing homes, and in food service, child care, and janitorial work. Local government is a frequent employer also, in schools, social service agencies, senior citizen homes, and health centers. Only 13% of our respondents reported doing construction, factory, agricultural work, or other “labor.” [Q.50, N=71]

Pay rates

More important than employment per se is the quality of jobs that welfare participants find. Most pay minimum or near-minimum wage and few offer opportunities for advancement.

• Of 28 respondents that were currently working and reported to us their hourly wage, 43% of these earn minimum wage ($5.15) or less.
• Another 50% of those currently working reported making between minimum wage and $7 per hour.
• Only two were earning over $7.00 per hour (both of these in Franklin). [Q.56, N=28]
• Nurses aides, an occupation many aim for, make $6.85 per hour.
• Counselors in St. Lawrence County estimated the “living wage” in this area to be $10 per hour, which few participants in the welfare-to-work transition now earn.

These findings are consistent with the national picture, which shows that the majority of TANF leavers earn a wage only slightly above the minimum. The median wage of employed leavers is $6.61. As compared to the North Country, however, a greater proportion of leavers nationally (about 25%) earn over $8.

Does employment help individuals financially? The majority (61%) of respondents who were currently working reported that there are times they don’t have enough money for necessities. This was only a little less frequently than those currently without a job, 70% of whom reported the same. [Q.39, N=45] Similarly, those currently working were only slightly less likely to use a food bank (57%, compared to 63% for those not working). [Q.41, N=54]

Job Benefits

When it comes to job-related benefits, the picture is not good. Of those currently working, only two (of 14 answering this question) reported receiving health benefits from their employer; and only one a pension or retirement plan. This closely reflects national trends. Only 17% in our sample reported having employer-paid health insurance on either their current or their last job. [Q.61, N=29] The most frequently reported job benefits were free or reduced cost meals [N=6] and store discounts [N=9].

Job Turnover

As discussed below, the structure of government subsidized job programs sometimes contributes to the problem of job turnover. Under program rules for “Job Creation” or OJT there is no obligation for employers to retain workers after government subsidies have run out, and most times they don’t.

Due to the transitory nature of jobs, a continuing job search is necessary even after obtaining employment. Proof of a job search is required for TANF recipients. But a job search is difficult to conduct in addition to other responsibilities, especially without transportation. Phone calls to employers are mostly unreturned. As one participant noted, increasing the work requirement to 40 hours will make the job search even more difficult.

Opportunities for advancement

Two-thirds of all those currently working—and half of those in the Franklin sample—felt they were “receiving real training or learning new skills” on the job. Yet, less than a third (30%) of these respondents believed that there was any chance for advancement or promotion at their job. [Q.62, N=33]

Having more education did not improve this picture. In fact, those having a high school degree or more were somewhat less likely to see any chance for advancement or promotion on their job. [Q.64, N=46, includes some respondents not currently working] Perhaps they view things more realistically.

“Dead-end” jobs and irregular employment create heavy demands on social service programs to help welfare leavers stay employed and find better jobs with higher wages than those they first enter. This may be seen as one of the main deficiencies of the “Work First” approach that moves individuals into employment of any kind with little prior training or longer term planning. The absence of career ladders in the available occupations limits the future possibility of leavers attaining self-sufficiency.

In the common types of employment available to welfare leavers there are no job ladders and few opportunities for individuals to advance beyond the entry-level jobs they have obtained. One man in our sample was performing maintenance and security work in a public school. “There was advancement to custodian but they are cutting these jobs out, so I guess there isn’t any advancement anymore,” he said. Individuals who are working are better off than when they were on welfare, but the long-term success of “Work First” remains uncertain for most.

There is concern among both researchers and participants about how welfare leavers will manage after their eligibility for transitional benefits runs out. More than one of our survey respondents stated the opinion that cash assistance is cut off too soon after an individual begins to work.

Subsidized Employment--Workfare, OJT and Job Creation

“Workfare” (Work Experience Program)

The Work Experience Program (WEP), known as “workfare,” assigns participants to work at a non-profit or government agency in exchange for welfare benefits and an opportunity to demonstrate a proper work ethic, acquire skills, and build a resume.

WEP employers in St. Lawrence County include local libraries, colleges, public and parochial schools, churches, and community and government agencies, including the Department of Social Services itself. For example, workfare participants performed maintenance at nursing homes, sorted clothes at the Salvation Army, cleaned sidewalks and streets, and helped with charity work for the American Red Cross, where the welfare recipient was told, “There’s no money for hiring.” A total of 56 different agencies participated during the year ending September 2002. This totaled 57,386 work hours (down from 69,360 the year before).

Calculated at minimum wage “paid” to workfare participants in TANF cash assistance this represents savings of $295,538 for participating agencies. But if the labor costs is based instead on a “living wage” of $10.50 per hour, workfare participants provided well over half a million dollars ($602,553) in uncompensated labor to county agencies in FY 2002.

There is much resentment among participants about having to work without a paycheck.

Some participants complain bitterly that they receive so little in cash.

“Job creation” is a federally subsidized program that pays an individual minimum wage ($5.15 per hour) to work for a local business. The individual is technically an employee of the county, which pays the wage, provides medical insurance through Medicaid, and carries workers’ compensation insurance.

In St. Lawrence and Franklin Counties, 23 employers utilized these workers in the year ending September 2002.  This represented 10,748 work hours, down from 15,519 the previous year. Among the profit and non-profit organizations acting as employers were Potsdam-Canton Hospital, Family Dollar, Merrimac, Inc., St. Vincent De Paul, and Village of Canton.

An administrator estimates that about one-quarter of participants in the Job Creation program are transferred to the employer’s payroll after 6 months. They may also be set up for another 6 months on the county payroll.

The OJT program provides wage subsidies to employers in the private sector. Federal funds diverted from welfare payments are paid to participating employers, who use the money to pay the participants’ wages. In this program the individual is an employee of the business for which he or she works, and is paid at the prevailing wage for the position filled.

The employer is reimbursed for “costs associated with training” defined as up to 50% of the employee’s wages for six months. In certain cases, when workers are considered “high risk,” DSS pays the full wage.

According to the program documentation:

“Training programs are designed to enable eligible individuals to learn a skill for a particular occupation…The goal of OJT is to develop a worker’s skills to the point where unsubsidized employment and job retention result.”

But the actual results may not live up to this description. To qualify for the program employers must have an actual job opportunity. No promise of a permanent position, however, is required. According to DSS staff and participants, some employers do take advantage of OJT.

In St. Lawrence County, 72 private employers utilized OJT in the year ending Sept. 2002, representing a total of 36,901 work hours, and $247,997 in subsidized wages. The employers included: Big Lots, Family Dollar, Community Nursing Home, Cornell Laundry, Gilden Activewear, Grant’s Plumbing and Heating, McDonald’s, ARC/Seaway Industries, Mohawk Indian Housing Corp, Penski Staffing, St. Regis Nursing Home, Stauffer’s Farm and Wal-Mart.

Wages for workers in the OJT program tend to be low:

• Of 72 employers, only 14 paid these workers $8.00 or more per hour.
• Only five of the employers (BOCES, Harmer Construction, Massena Memorial Hospital, Riches Auto, and Stauffer’s Farm) paid these workers $10 or more per hour.
• In the year ending September 2001, Wal-Mart employed 6 welfare recipients and collected $13,678 in wage subsidies, and probably also received tax credits (see below). The wages of these workers ranged from $5.75 to $6.25 per hour.

The Job Creation and WEP programs operate essentially as free “temp agencies” for employers. And the OJT program is a handsomely subsidized one. Though it is said to be over 50%, there are unfortunately no hard data on the proportion of OJT or Job Creation workers who achieve unsubsidized employment with the employers with which they are placed. Follow-up research is called for on this issue.

Counselors said that some employers do take advantage of these programs. For instance, after time has expired for a “workfare” employee, they will want to switch the work to the OJT program, or switch to OJT after Job Creation, in order to continue receiving subsidies. Thus, a large proportion of work provided to TANF-leavers in St. Lawrence County, apparently larger than many other districts in New York State, has been subsidized. This appears to be changing, however, as funds for the OJT and Job Creation programs have been cut back. It remains to be seen if employers will offer the same amount of jobs if they are not receiving public subsidies.

Tax credits

Apparently, only the largest employers (e.g., Wal-Mart, Dollar General) take advantage of tax credits. For smaller employers, the paper work is usually too overwhelming, with too little benefit.

Food

The low income of welfare-to-work families does affect their diet and their ability to eat as they believe they should. In response to the question, “In the last 30 days, did you ever eat less than you felt you should because there wasn’t enough money for food?” almost one-quarter (23%) of respondents answered yes. Those with less than a high-school education were about twice as likely to answer “yes” than those with a high-school degree or better. Women and men answered “yes” to this question in the same proportions. [Q. 42, N=56]

Respondents were also asked to indicate which of the following statements “best describes the food situation in your household.” Their responses are reported below [Q.43, N=57]:

(1)  We always have enough to eat and the kinds of food we want – 26 (45.6%)

(2)  We have enough to eat but not always the kinds of food we want – 23 (40.4%)

(3)  Sometimes we don’t have enough to eat – 7 (12.3%)

(4)  Often we don’t have enough to eat – 1 (1.8%) Again, education seems to be related.

While almost a quarter (24%) of those without a high school degree say they “sometimes” or “often” don’t have enough to eat, only 2% (one respondent) among the high school grads said this. [N=54]

Education and training

Nearly half (46%) of all respondents, and a majority of women (61%), said there were not enough opportunities for them to obtain job training or higher education. [Q53, N=59]

Which is more important to you right now, working or getting the training and education you need for a better job?” (Q.65) In response to this question, a majority chose “working.” The relative importance placed on education and training varied by sex, age, and county of residence:

• Women were more likely than men to say that education and training were more important. (Forty percent of women said education and training were more important compared to 28.5 % of men.) [N=56]
• Younger respondents (those under 30) were more likely to say that education and training were more important.  (Forty-two percent of those under 30 years old said education and training were more important compared with 30% of older respondents.) [N=56]
• Respondents in Franklin county were more likely than those in St. Lawrence to say that education and training were more important.  (Forty-four percent of Franklin county residents said education and training were more important compared to 31% of St. Lawrence residents.) [N=57]
• Those currently without a job were more likely (63%) to say training and education are more important. Perhaps work reinforces the idea that work is most important.

Overall, lack of education is more frequently reported than either lack of experience or lack of skills as the toughest barrier to overcome.  Those with less than a high school education are more likely to see lack of education as a barrier. [Q.69, N=69] To expand the opportunities for education and training, the 12-month limit on education and training would have to be extended. The state and federal governments would have to be more flexible with the “work first” approach.

Mental health

Mental health problems are the most frequently cited type of medical issues. Overall, 38% of respondents reported that they had been treated for mental health problems such as depression. [Q.46, N=74]

• Women (45%) were more likely to report having been treated for mental health problems than men (31.5%), and also slightly more likely to report that it affected their ability to get a job. [N=57]
• Those with less than a high school degree were more likely (52%) to report mental health issues than those with a high school degree or better (33%). [N=56]

Transportation and child care

Transportation and childcare are among the least available services in the North Country. Transportation and childcare were cited as the principal barriers to job retention by those with children, and the second most frequently cited obstacles identified by single individuals. Like many other rural areas, the North Country offers little or no public transportation.

Transportation

As other studies of the welfare-to-work transition in rural areas suggest, ownership of a reliable vehicle is crucial for individuals to ensure success. Still, less than half of those receiving assistance have a driver’s license, and many fewer than that own a car. The most common form of transportation available to our respondents was that provided by a friend or relative. [Q.19, N=77]

Transportation was the most frequently cited “barrier” to leaving welfare assistance our respondents reported. [Q.12] One-quarter (25%) of our respondents told us they cannot count on transportation when they need it [Q.21, N=67], and over one-third (36%) said they had missed work or classes because transportation was not available. [Q.23, N=70]

Women (30%) were somewhat more likely than men (19%) to report problems with transportation (“can’t count on it”) [Q.21, N=53], and to have missed work or classes due to transportation. [Q.23, N=55]

Our data show that those having a valid driver’s license are almost twice as likely to be currently working as those without one. [42% and 24%, respectively, N=73]

Childcare

The most common form of childcare for these young children is informal; that is, a friend, neighbor, relative, or older sister or brother. [Q.27, N=47] Only about 13% report using a formal day care provider. The relatively few formal childcare providers existing in the North Country generally do not provide service to welfare-to-work mothers.

Almost a third (31%) of our respondents said that childcare was not always available when they needed it. [Q.29, N=45] As a result, more than one-quarter (28%) have missed work or classes because they did not have childcare [Q.31, N=46] Like rural families elsewhere, North Country welfare-to-work families find it especially difficult to find infant care, or childcare for nighttime employment.

As mentioned above, however, no registered day care centers will take DSS clients. One reason, counselors say, is that childcare providers must wait 6-8 weeks after starting to receive payment. Each provider must fill out a lengthy application form that passes through many hands. But even though childcare providers must file “tons of paperwork” to get approved, they are still often unreliable.

Analysis and Recommendations

Following below are two sets of recommendations, the first staying more or less within the boundaries defined by the current approach to “welfare reform,” the second taking a wider approach to possible change. They are not inconsistent with each other.

Welfare program reforms

The following proposals specifically address the situation in the North Country, and lie within the parameters of the current welfare programs.

• EXPAND QUALITY CHILDCARE AND CHILD CAREJOBS: FORM AN EMPLOYMENT CONSORTIUM: Build a consortium of North Country employers, One Stop and social service administrators, community college and BOCES staff, and union representatives to identify labor market needs for which  welfare participants can be prepared through employer-specific or occupation-specific training programs. Expand the currently successful programs, e.g., for Certified Nurses Assistants, and use these examples as models. The consortium should focus special attention on strengthening and building job ladders in fields like nursing, information technology, and maintenance work. Further, it might consider creating within the One Stop Center a free public hiring hall or labor exchange for workers and employers to fill short term openings. 
• INCREASE SUPPORT FOR TRAINING AND EDUCATION: Lobby to allow welfare-to-work participants to “count” as “work hours” the time spent in approved education and training programs, without any restrictions. North Country participants are practically screaming that the emphasis on “work first” at low or no pay is punitive and unproductive. They are right. The mix between work and human capital development needs to be more balanced. Research indicates that the most successful transition programs combine the “human capital” approach with the “work first” orientation, providing a mix of skill-building services and employment. There is no reason why qualified recipients can not  work toward a two-year or four- year degree without time limitations.
• CREATE REAL PUBLIC SECTOR JOBS: The current “Job Creation” program is a misnomer. Along with the so-called OJT program, it is simply a subsidy for local employers (most often large employers) that typically offer welfare participants only short-term, low-paid work. The same resources can be used to create real public jobs serving our towns and counties that offer workers the realistic possibility of supporting their families, rather than just resume items and some short-term cash.
• SET UP A TRANSPORTATION DEPOT A specially assigned DSS staffperson can recruit community volunteers (through churches, etc.) to provide regular transportation to and from work for participants without carsand reimburse them for mileage. Again, linking community people with welfare participants helps reintegrate welfare-to-work participants into the community and provides moral support from community members.
• TRACK RESULTS OVER TIME: At least a sample of “leavers” (ex-participants) needs to be followed or tracked over a longer period of time, for two reasons. First, this would help determine what kind of post-employment supports and services are most needed to ensure success. Secondly, we need better data on the longer-term outcomes of the current welfare-to-work programs, since very little research of this scope has been conducted.
• ENHANCE TRANSITIONAL BENEFITS: All studies indicate that for welfare-to-work participants to be able to make a successful transition to employment, continuing support services, including childcare, Food Stamps, Medicaid, housing, even drug and alcohol counseling, must be made easier to access. Cash and other forms of assistance need to be maintained longer into the employment phase. Some analysts propose to “open up TANF” to provide supports such as child care, transportation, etc. to all qualified low-income families, regardless of whether they have ever applied for or received “welfare” assistance. This would eliminate the artificial distinction between the “welfare poor” and the “working poor” and recognize that the low-wage labor market is the actual source of problems for all.

The final bullet above, regarding the need for continuing subsidies for welfare recipients after they obtain jobs, brings out clearly the contradiction that the state welfare-to-work programs mandated by federal legislation (PRORA) are up against: namely, that current compensation rates at the lower or entry level of the labor market are nowhere near high enough to support an individual, no less a family. Even presuming that steady employment is found for the able-bodied welfare population, a substantial gap still exists between their earnings potential and the actual cost of living. Hence the need for continuing government subsidies (in the form of “transitional benefits,” e.g., Medicaid, Food Stamps, child care, housing, etc.) even after employment. If we are not simply going to reduce caseloads by abandoning families to poverty, the current approach requires a permanent government bureaucracy funded by taxpayers to keep working people (and their low-road employers) afloat. Even putting aside the prohibitive cost to taxpayers, this creates a high level of resentment, as expressed by participants throughout our survey, over forever needing “help,” and remaining a “second class citizen.”

This outcome clearly contradicts the goal of the program. As noted at the beginning of this report, the stated goal of welfare reform is self-sufficiency for recipients, yet jobs in the low wage labor market do not pay enough to sustain self-sufficiency. As a result, the “work first” policy may be moving people off welfare rolls, but not out of poverty. Thus, several of our interviewees (including both recipients and administrators) said they believed that welfare reform “as we know it” is simply increasing the number of “working poor” families in the North Country.

Labor market reforms

Begin with a realization that current national policy, expressed in PWRORA and many other initiatives, not only tolerates but also in some ways actively encourages low-wage work and the persistence of high poverty levels. Current policy generally serves private corporate interests by promoting capital accumulation via exploitation of a growing class of poor working families, in the U.S. and globally. Therefore, in order to “end welfare as we know it,” we must reform the labor market and change the wage structure. Rather than pushing individuals off assistance and into a low-wage labor market, policy must be directed toward pulling low-wage workers up into work that pays a living wage, taking advantage of the huge reservoir of natural talent and energy of people in the North Country and throughout the U.S.

To truly consummate the effort to bring an “end to welfare as we know it,” this report supports the implementation of policies to make work pay enough to render self-sufficiency possible through employment rather than through public transfer payments funded by taxpayers. A cumbersome patchwork of services, such as those that make up the current social service menu, can never substitute for a fair and equitable economy. We would contend that there is currently enough wealth produced by the U.S. economy to allow a “living wage” level of compensation for all; but its distribution is skewed. Among developed nations, the U.S. has the highest degree of wage inequality.

Certainly the problem of the population rendered “unemployable” by mental or physical disabilities will be raised. Yet, this population is in some part a result of current policy, which provides meager incentives or rewards for work, and consistently batters those at or near the bottom of the ladder. Indeed, certain research suggests that the main difference between successful welfare-to-work participants and those with insurmountable “barriers” is simply the lack of continuous employment .

Labor market reform, as opposed to welfare reform, would “raise the floor” create a more equitable wage structure. Here is a sampling of the policy measures it would entail:

• Substantially raise the minimum wage, to make it a living wage, and tying it to the cost of living.
• Provide universal health care, helping make it possible to leave welfare without assistance.
• Implement a truly progressive tax policy, replacing the current one that favors corporations and the rich. Today, those who live by a paycheck carry a disproportionate share of the tax burden.
• Design a national child care policy.
• Guarantee equal legal protection and wage parity for all workers, including part-time and contingent workers, and immigrants.
• Increase support for public higher education and job training. Millions of Americans are denied needed education because of its unaffordability.
• End the discrimination against non-metro areas in the process of economic development.
• Reform labor law to improve the environment for union organizing, and to prevent pervasive employer violations. Tens of millions of American workers who express the desire for union affiliation never get the chance to vote for it.
• Promote global “fair trade” agreements containing labor standards, a policy that would help improve conditions for working people worldwide, including the U.S.