Statement of Douglas E. Howard, Director, Michigan Family Independence Agency

Testimony Before the Subcommittee on Human Resources
of the House Committee on Ways and Means

Hearing on Welfare Reform and Work

March 15, 2001

In the mid-1990s, states began significant work-related reforms, a process accelerated in 1996 by the TANF federal block grant. The block grant - which required strong work requirements for those receiving aid - was a historic step in allowing states the flexibility needed to establish effective welfare policy. Coinciding with these changes was an unprecedented drop in the cash assistance caseload, which has declined nationally by some 50 percent from its peak level in March 1994. Nationally, the rolls have now declined for five consecutive years. In 1992 - well before the federal reforms - Governor Engler introduced significant work-related reforms. Since then, Michigan's cash assistance caseload has declined by nearly 70 percent, and the rolls have now declined for eight consecutive years.

Healthy debate has emerged concerning the causes of such large-scale caseload decline. Some argue that declines are driven by policy changes while others believe the strong economy of the 1990s is the major factor. But one thing is clear - the availability of jobs, combined with work requirements that reduce the economic incentives of being on welfare, have played an important role in moving recipients into the workforce.

As summarized by the Brookings Institute, studies of mothers who left cash assistance find that about 60 percent are employed and about 75 percent have been employed at some time since leaving cash assistance. After a decade of relative stability, the number of single mothers working rose by about 25 percent between 1993 and 1999. Even more impressive was a 50 percent increase in the number of never-married mothers who had a job. That these are the mothers who have had the biggest increase in employment in recent years suggests that even poorly educated mothers that used to stay on welfare for long periods are proving themselves capable of succeeding at work in the private sector, at least during a period of low unemployment.⁽¹⁾

A 1999 study by the Urban Institute found that work is the most common reason for leaving cash assistance. More than two-thirds (69 percent) reported leaving cash assistance because of increased earnings or hours on an ongoing job or because of a new job. The Urban Institute study also found that the types and quality of jobs held by former recipients are similar or better than those held by other low-income mothers (mothers with incomes less than 200 percent of the poverty rate).

More recent work on wage growth over time among less-skilled women suggests that experience in the labor market does increase earnings. In fact, wages of less-skilled women grow as fast with experience as do those of more educated women, but from a much lower starting point. In Michigan, we have had more than 266,000 families leave cash assistance due to earnings since 1992. We know that their wages have ranged from minimum wage to up to $25 per hour.

These data indicate an amazingly rapid shift in work behavior over a relatively short period of time. Overall, the data is generally consistent in finding that most families who have left welfare for work have more money than they had when they were on welfare.

Welfare Reform's Impact on Children

Simultaneous with these historic declines in cash assistance, both overall child poverty and black child poverty have declined substantially. In fact, declines in poverty among black children in 1997 and 1999 are the biggest single year declines on record and the 1999 level of black child poverty is the lowest ever. Similarly, the overall child poverty rate in 1999 is lower than in any year since 1979.⁽²⁾

Both the 1980s and 1990s saw substantial progress against poverty. However, the drop in poverty during the six years of the 1990s economic expansion is more than twice as great as the drop during the six years of 1980s expansion. The explanation of this remarkable difference cannot be greater job growth during the 1990s because the net increase in employment was around 20 million during both periods.⁽³⁾

Researchers Rebecca Blank and Ron Haskins believe there are families at the bottom (5 or 10 percent of the income distribution) that appear to be worse off without cash welfare. These mothers have numerous barriers to employment such as three or more young children to care for, learning disabilities, mild retardation or health or substance abuse problems.

A recent study by the Manpower Demonstration Research Corporation found that requiring single mothers to work as a condition of receiving cash assistance did not hurt their children. Rigorous evaluation of 11 welfare programs in six states provided "strikingly consistent evidence" of the benefits to children.

Looking at children of all ages, the Brookings Institute concluded from a variety of TANF-like experiments that were conducted under waivers prior to welfare reform that the effects on children were small. Child participation in organized activities, center-based child care, and health insurance programs generally increased. Academic achievement, behavior, overall health, and the home environment of the child, however, changed very little or not at all.

In the case of elementary-school children, the picture is fairly positive. There is strong evidence that welfare reform can be a potent force for enhancing achievement and positive behavior. When welfare reform packages do not appear to help younger children, there is little evidence of harm. The only bad news is that decreased supervision may increase adolescent risk behavior.⁽⁴⁾

As the majority of data suggests, a large portion of families who have left cash assistance for work have a distinct advantage over those who continue to collect welfare checks. This is reflected by the fact that as the nation's caseloads have sharply declined, more people - particularly single-parent families and black children - have advanced out of poverty.

Working Toward the Future

Even though everyone can work at some level, there are going to be people who need help. The American people want us to help the needy as long as they are doing something to help themselves. With the new policies and perspectives granted by Congress, states have successfully shifted away from a program that once paid people to stay home to one that provides incentives and supports for working. The statistics show we are on the right track. The myths about the impossibility of reducing dependence have been shattered. Yet, there is more work to be done.

Work requirements are proving to be extremely effective in reducing dependence and promoting self-sufficiency. There is now an opportunity to align other public assistance programs, including food stamps and public housing, to the principle of work.

States believe that next year one of the biggest opportunities during TANF reauthorization is the potential for alignment of programs, both in HHS and other federal agencies, that effect the TANF population. The most often mentioned program among my colleagues, from other state social services directors to front line workers, is the need to simplify and add flexibility to the Food Stamp Program administered by the US Department of Agriculture. That program is also due for reauthorization next year. This provides Congress with an excellent opportunity to apply some of the lessons learned over the last five years in TANF to households that receive food stamps. Work requirements in the food stamp program are much less rigorous than under TANF; assets that a family is encouraged to acquire under TANF, such as a vehicle, can make a low-income working family ineligible for food stamps once they leave cash assistance. Different reporting requirements and different standards for verification of income, shelter, utility and medical costs make it extremely difficult for customers and for staff to be certain benefit amounts are accurate. I urge you to take every opportunity to reduce bureaucratic burdens on low-income families and seniors, and on the states, by aligning program requirements or allowing additional flexibility within programs that serve low-income populations.

Today, most states are serving as many, if not more, families through an array of work supports such as childcare, transportation, and mentoring. Part of our future challenge is to reduce reliance on Non-TANF programs by increasing job retention and advancement for those who have left cash assistance.

But Government cannot and should not be expected to do this alone. Many of our best successes occurred because individuals displayed personal responsibility and communities have accepted ownership of problems and solutions. The flexibility under TANF has made this possible.

On the heels of these sweeping changes, the next round of national debate is now beginning. In 2002, Congress must decide the future direction of welfare reform. This is the time to increase state's flexibility, simplify and align federal requirements and provide an adequate funding level that will pledge continued success. Out progress in Michigan - and nationally - argues for a continuation of what has worked and new initiatives so that no families are left behind.

Congress deserves credit for contributing to the national success of welfare reform by giving states the flexibility and authority to advance the value and expectation of work. As Congress reflects on the success of welfare reform, I encourage you to continue to rely on the experience of Governor's and the states. The state experiences and challenges of the last five years can prove invaluable as Congress considers the role of work requirements in public assistance programs.

[The attachment is being retained in the Committee files.]

Michigan Family Independence Program
Monthly Family Benefits
Welfare versus Work
Family of Three in Detroit

*   Part time (30 hr/wk) at minimum wage ($5.15/hr)

** Full time (40 hr/wk) at minimum wage ($5.15/hr)

FAMILY INDEPENDENCE AGENCY
CASH ASSISTANCE (FIP) AND CHILD DAY CARE (CDC)
ANNUAL EXPENDITURES
FY 1994-FY 2002

1. Haskins, Ron, Isabel Sawhill, and Kent Weaver. 2001. "Welfare Reform: An Overview of Effects to Date," Brookings Institute Publications, Brief # 1.

2. Haskins, Ron. 2001. "The Second Most Important Issue: Effects of Welfare Reform on Family Income and Poverty," New World of Welfare Conference.

3. Haskins, Ron. 2001. "The Second Most Important Issue: Effects of Welfare Reform on Family Income and Poverty," New World of Welfare Conference.

4. Duncan, Greg J. and P. Lindsay Chase-Lansdale. 2000. "Welfare Reform and Child Well-being," Northwestern University.