Years of Welfare Reform:
By David Dodenhoff, PhD.
Table of Contents:
I. Executive Summary
The Wisconsin Works program (W-2) recently entered its 10th year of operation. In its early years, the program was praised for its revolutionary approach to welfare. In subsequent years, attention has turned toward the performance of the program on a day-to-day and year-to-year basis. In this process, excitement over W-2 has waned considerably, and criticism has mounted-often justifiably. The discussion that follows focuses on five critical fixes necessary to help the W-2 program address some of its most significant challenges.
Fix One: Clarify W-2's Purpose
Advocates for the poor in Wisconsin believe that the chief purpose of W-2 should be the elimination, or at least sharp reduction, of poverty among W-2 clients. Yet, decades' worth of research on antipoverty programs-ranging from the War on Poverty initiatives in the 1960s to the New Hope Project in Milwaukee in the 1990s-have shown this to be an unrealistic, unreachable goal. Even if W-2 cannot solve the problem of poverty, however, it should do more than place clients in the first available job-which is the program's current approach. This report makes the following recommendations:
Fix Two: Get Smarter About W-2 Education and Training
Wisconsin's Department of Workforce Development (DWD) strongly encourages training for one segment of the W-2 population-adult participants who lack a high school diploma or GED. In recent years, about three-quarters of this group has been assigned to basic education and training under W-2. Evaluation research has shown, however, that this approach is less effective at boosting earnings and employment than a strategy focused on up-front job placement.
Accordingly, this report recommends that:
Fix Three: Insist on Real Work for Everyone Who Can Work
Somewhere between one-third to two-fifths of adults on W-2 are not engaged in any form of work. Furthermore, even those who do work under W-2 are putting in a comparatively small number of hours (fewer than 20 per week, in most cases). Accordingly, this report makes two recommendations:
A variety of anecdotal evidence suggests that the state and W-2 agencies do a poor job of tracking client participation in program activities. Without effective tracking mechanisms, the central contract of W-2-work in exchange for benefits-becomes meaningless. Accordingly, this report makes the following recommendation:
Under W-2, private companies have run the program in certain parts of the state-most prominently, in the five administrative regions in Milwaukee. Unfortunately, through a combination of incompetence and malfeasance, the Milwaukee agencies have mismanaged program funds and have fallen short of the state's performance expectations. Accordingly, this report recommends that:
The Wisconsin Works program (W-2), the culmination of former Governor Tommy Thompson's decade-long welfare reform campaign, recently entered its 10th year of operation. In its early years, the program was justifiably praised for its revolutionary approach to welfare-in fact, for its attempt to abolish the concept of welfare altogether. In subsequent years, however, attention has turned away from the novel ideas embodied in W-2 and toward the performance of the program on a day-to-day and year-to-year basis. As a result, excitement about the program has waned considerably, and criticism has mounted-often justifiably. The discussion that follows focuses on five critical fixes necessary to help the W-2 program address some of its most significant challenges.
What do advocates for the poor want W-2 to accomplish?
The services W-2 provides to clients, and
the expectations it sets for them, should reflect the state's ultimate
goals for the program. If, for example, the goal of W-2 is to place
clients in the first available job, that suggests one set of services and
client expectations. If, on the other hand, the goal of the program is to
deliver clients from poverty, that suggests a different approach
altogether. Over the years, Wisconsin advocates for the poor have embraced
this latter goal:
"W-2 was a bad idea," said Kristin Settle, an analyst for the Institute for Wisconsin's Future, a Milwaukee policy and advocacy agency. "W-2 has not lived up to its primary objective of getting people out of poverty." 2
In theory, there are only three ways that a government program can "get people out of poverty." The first is relatively simple. Government can provide short-term financial support for generally competent, well-adjusted, readily employable individuals who have temporarily fallen upon hard times. W-2 already does this. It provides the short-term support needed to help the least disadvantaged get back on their feet and reestablish their self-sufficiency.
The second approach, for the more seriously disadvantaged, is to provide a direct cash payment or wage subsidy to them such that they achieve an income above the poverty line. Historically, the American public has rejected the direct payment approach. The public has, however, accepted the idea of wage subsidies-in the form of refundable tax credits-to help supplement a family's income from work. This approach, though, picks up where the W-2 program leaves off-that is, it applies only after the program has helped a person find a job.
That brings us to the third way a government program can, in theory, help lift families from poverty. That is by taking the poor, unemployed, or underemployed parent/head-of-household and shaping him or her into a job-seeker who is:
1. qualified for full-time, year-round work
paying $8 per hour or more;
This is what advocates for the poor mean when they talk about W-2 lifting people out of poverty.
Unfortunately, decades' worth of research on antipoverty programs-ranging from the War on Poverty initiatives in the 1960s to the New Hope Project in Milwaukee in the 1990s-have shown that even well-designed public policy and committed caseworkers cannot transform people in this way. They cannot serve as a rewind button or a magic wand. They cannot provide the education and work history that the client missed on the way to adulthood. They cannot deliver a spouse or partner who will contribute to the family's economic well-being and assist with parenting. They cannot wipe away the residue of low self-esteem, depression, substance abuse, domestic violence, health issues, an underdeveloped work ethic, or poor life skills.
What good public policy and conscientious caseworkers can do is improve participants' life chances at the margins. But they cannot and will not "deliver" the vast majority of clients from poverty. Accordingly, significant poverty reduction should not be a goal for the W-2 program.
What does the state want W-2 to accomplish?
The Department of Workforce Development has established a goal for the W-2 program that focuses on work rather than poverty: "The goal of Wisconsin Works (W-2) is to provide necessary and appropriate services to prepare individuals to work, and to obtain and maintain viable, self-sustaining employment, which will promote economic growth."3 Clearly, then, an essential part of W-2 is to prepare the unprepared to find and keep a job. Presumably, any job is better than no job, but the ideal job would be "viable" and "self-sustaining"-that is, would be lasting rather than temporary, and would allow the family to support itself without public assistance.
This basic framework, though, still leaves significant ambiguity. Should W-2 agencies place clients in the first available job, or should they encourage clients to hold out for a better job (with benefits, for example, and a higher starting wage)? Should they go one step further, and attempt to enhance clients' human capital so that they might be able to choose among better jobs?
In practice, the Department has made clear its preference that clients find work immediately, if possible:
The W-2 program makes one significant exception, though, for clients who enter the program lacking a high school diploma or GED, or who possess one of those credentials buts still lack basic skills. These individuals are referred to basic education programs and/or a diploma/GED track before being sent into the workforce. The state appears to want to ensure that all W-2 clients have the opportunity for at least some minimal educational preparation prior to looking for work.
In today's labor market, however, even a W-2 client who can earn a diploma or GED through the program is hardly guaranteed "viable, self-sustaining employment." The state appears to believe-correctly-that escaping poverty and dependency is a long-term process, not a fait accompli achieved with the first W-2 job placement. Furthermore, the state does not see W-2 on its own as a vehicle for ensuring client self-sufficiency:
Based on the foregoing, then, the state's overall goal for the W-2 program might be stated as follows:
Discussion and recommendations
If W-2 cannot be expected to serve as an anti-poverty program, as advocates would like, can it at least do more than provide a means for quick job placement after minimal preparation, which is the state's current expectation for the program? It can, and it should.
The state should revise its goal for W-2 to
the following: To help clients find sustainable, desirable employment
All W-2 participants, though, should be given the time and resources to find a relatively desirable job, rather than taking the first position for which they qualify. Consider the difference, for example, between a job paying $6.15 per hour and one paying $8.15 per hour-both within the range of what is readily available in the entry-level labor market. Over the course of a year's worth of full-time work, the difference in income from the two positions would be $4160. Or consider the difference between a $6.15 job at 40 hours per week versus 25 hours-nearly $5,000 .
Clearly, allowing clients to hold out for a good job-or at least a better job-can produce significant financial benefits. This strategy was followed by one of the most successful welfare-to-work programs ever operated-the Portland JOBS (Job Opportunities and Basic Skills) program. Portland JOBS encouraged clients to wait for jobs that were permanent rather than temporary, that offered a full-time work schedule, that had room for advancement, that paid higher-than-average wages, and/or that provided health benefits. Importantly, it also gave participants the time and flexibility to pursue such jobs. A client who located a half-time job at the minimum wage, for example, was told to keep looking, and continued to receive program benefits while he or she did so.6
If this same approach were applied to W-2, how much time should clients be given to find a desirable job?
All clients should be given a grace period for job search of up to 12 weeks.
Federal participation standards discourage more than 12 weeks' worth of job search per client per year. This is because: a) the new world of welfare emphasizes work, and job search is not work per se; and b) the federal government does not want recipients "parked" for month after month in unproductive job search activities. W-2 clients could, however, be given up to 12 weeks to search for a good job, and even pass on less desirable jobs without being penalized with a loss of benefits. This provision would be of primary benefit to the most job-ready W-2 clients-those with a high school diploma, a reasonably good work history, and a stable home life. These clients have the best chance of finding and keeping a better-than-average job, if given a chance. Giving them some extended time for job search makes sense, then, and still comports with the goal of helping participants find desirable, sustainable employment-quickly.
But what about W-2 clients who enter the program as much less attractive candidates for employment? Twelve weeks might not be enough time for them to find desirable work. For the most disadvantaged clients, 12 months might not be enough time. What to do with these less advantaged groups?
W-2 clients should have up to 18 months to prepare for private-sector employment, but should also be limited to 18 months' worth of program eligibility every 48 months.
In the interest of maximizing clients' chances of finding desirable, sustainable employment, W-2 agencies should be given up to 18 months to work with more disadvantaged clients without the expectation that these clients will accept the first available job. During this period the agency and the client can attempt to address specific educational or skill deficits, seek to get substance abuse issues under control, or try to find permanent solutions to long-standing issues with transportation, child care, living arrangements, debt management, and so on.
In exchange for dropping the insistence on up-front workforce attachment, however, the client would face a new time limit. Currently, W-2 clients are limited to 60 months' worth of program benefits over the course of a lifetime. The recommendation above would retain that 60-month lifetime limit, but would also create a limit of 18 months' worth of benefits during any four-year period. This is to ensure that W-2 agencies and clients use this time as judiciously as possible. It is unfair to both taxpayers and the working poor to excuse W-2 participants from an immediate work obligation, unless doing so holds out the hope of finding a better job with a greater chance of sustained employment, within an acceptably short time frame.
Conscientious caseworkers and clients would have to use the 18 months' worth of preparation wisely and productively, knowing that once those months are exhausted, the client could receive no benefits for two and a half years. There could, of course, be exceptions and exemptions for hardship cases. (These are already a feature of federal law and virtually every state's welfare program.) Furthermore, even a client who exhausted his or her 18 months' eligibility would not be abandoned by the state. Wisconsin has workforce development programs outside of W-2, a refundable tax credit for the working poor, and opportunities for health care, child care, and other work supports. All of these would be available to the former W-2 client.
What would not be available, however, is
the cash grant and supportive services specific to W-2. An individual
unable to parlay those into sustainable work after 18 months on W-2 is
unlikely to do so if given another 18 months (or more). The state and
private charities would have to find other ways of caring for families in
these unfortunate circumstances.
Education and training opportunities under W-2
Currently, despite its emphasis on work, W-2 allows for-and in some cases, effectively requires-clients to engage in education and training activities. The W-2 program manual specifies allowable education and training hours for participants in the two most common W-2 work tiers-W-2 Transitions, and Community Service Job (CSJ) placements.
In the former case, clients are allowed to participate in up to 12 hours per week of education and training activities. In the latter, they may be assigned up to 10 hours of education and training per week. The remainder of the CSJ assignment is supposed to consist of unpaid part-time work, typically with a community agency or government office. In reality, some of these work assignments include education and training time in addition to the 10 hours specifically provided for under program rules.7 Furthermore, the weekly limits on training for both Transitions and CSJ placements can be exceeded in the case of short-term, intensive training opportunities. A W-2 client could, for example, be assigned to, say, 20 hours per week of education and training, as long as: a) the duration of that training was less than one year, b) the total training time did not exceed 516 hours, and c) the client was also assigned to some non-zero number of work hours.8
Wisconsin's Department of Workforce Development (DWD) strongly encourages training for one segment of the W-2 population-adult participants who lack a high school diploma or GED. W-2 agencies' success in engaging this population in education and training is one of the performance measures to which contract renewal is tied. Specifically, agencies are expected to place at least 65 percent of their clients who lack a diploma or equivalency into one of the following educational components: Adult Basic Education, English as a Second Language (ESL), GED, high school equivalency, literacy skills, or regular high school.9 Furthermore, even clients who do possess a diploma or GED can be assigned to an introductory education or training component if they lack basic skills.10
How much education and training take place under W-2?
The Department of Workforce Development does not regularly publish data on the percentage of clients assigned to education and training activities and the number of hours' worth of such activities that they complete. Information is available, however, from a previous study by the Wisconsin Policy Research Institute (WPRI), analysis by the Wisconsin Legislative Audit Bureau (LAB), and DWD performance reports on W-2 agencies.
The WPRI study, Wisconsin Works: Only Work Should Pay, contained data on education and training activities among adult W-2 participants during the period running from the first quarter of 2002 through the third quarter of 2003. The following figures indicate the percentage of W-2 clients with some education and training hours during each of those four quarters.
For this one-year period, the data indicate that a majority-though a declining one-of W-2 clients participated in education and training activities.
The Legislative Audit Bureau also produced a limited analysis of training under W-2 in the years 2002 and 2003. Looking at the three most common types of education and training-Adult Basic Education (ABE), job skills training, and General Educational Development (GED)-the LAB found the following percentage of clients in each activity.
(These figures cannot be added to determine the percentage of the total client pool participating in education and training. This is because the same client could have participated in more than one activity.)
In the same publication, the Legislative Audit Bureau provided W-2 education and training data for the first six months of 2004. This analysis included a broader set of categories, however, than the LAB's examination of training data from 2002/2003. The results were as follows:
(Again, clients may have participated in more than one activity.)
Finally, in its contract performance reports, the Department of Workforce Development provides data on the education and training activities of a subset of W-2 clients-those who lack a diploma or high school equivalency. In recent years, the proportion of such clients has hovered around 50 percent.14 Among this half of the caseload, roughly three-quarters participated in Adult Basic Education, English as a Second Language (ESL), GED, high school equivalency, literacy skills, or regular high school in 2004 and 2005.15
Results of education and training under welfare
In the labor market as a whole, greater education and increased job skills tend to translate into greater earnings. In thinking about how to help welfare clients move toward self-sufficiency, therefore, advocates for the welfare poor often stress education and training. The typical argument goes something like this:
Thus, we are told that if we wish to improve the job prospects and earnings of welfare clients-indeed, if we wish to deliver them from poverty-we must place more emphasis on education and training.
Though this is an intuitively plausible argument, it has not held up well under close examination. A research project known as the National Evaluation of Welfare-to-Work Strategies (NEWWS) set out to determine which of two approaches to welfare reform-labor force attachment (LFA) or human capital development (HCD)-was more effective in improving client employment and earnings. The first of these approaches, LFA, seeks to move welfare participants into a job as quickly as possible. The second approach delays job search in favor of basic educational activities-Adult Basic Education, high school equivalency or GED completion, English as a Second Language, and remedial reading and math skills training-in the hope that this will pay off in terms of a better job with a higher wage.
In the NEWWS study, clients in three separate sites were assigned at random to either an LFA track or an HCD track. This was intended as a pure test of which approach was more effective. The results for the two approaches were very similar, but to the extent they differed, the clients who were assigned to a labor force attachment track enjoyed somewhat higher levels of employment and earnings in the first five years following program participation. That bears repeating: over five years, the group that participated in the education-and-training track fared slightly worse than the group that was assigned to a work-first track.19
The NEWWS also produced data on just the subset of welfare clients who entered the programs without a high school diploma or GED. This is the group targeted for education and training under W-2. It is also the group that one would expect to show the most benefit from a human capital development approach. The NEWWS study, however, found something different:
Again, even among the subset of clients that one would expect to benefit most from education and training, labor force attachment was more economically beneficial.
Though welfare advocates and program administrators might not like these findings, by now they are widely accepted.21 A few representative summaries of the literature, from researchers of diverse ideological leanings, illustrate the point:
Oddly, the state seems to recognize the inherent limits of education and training in a welfare context, and yet continues to promote this approach. In 2004 and 2005, according to its own performance standards, the Department of Workforce Development expected just 45 percent of W-2 clients enrolled in basic education to show literacy or numeracy gains.25 In fact, the results were much worse. In Milwaukee County, which is home to nearly 80 percent of W-2 clients, W-2 agencies reported literacy and numeracy gains ranging between 15 percent and 29 percent.26 In other words, 70 percent to 85 percent of clients enrolled in adult basic education programs in Milwaukee showed no measurable improvement in their basic skills. The data are only slightly more encouraging in terms of degree or certificate attainment. In Milwaukee, between 41 percent and 49 percent of clients who began an education or training program actually finished it.27 The majority, therefore, washed out at some point, wasting their own time and taxpayer dollars.
Welfare advocates would note that the foregoing discussion does not address more advanced kinds of training-vocational education and technical college courses, for example. Training of this kind, they would argue, can lead to meaningful earnings and employment gains. But this claim is grounded more in wishful thinking than real world experience. Vocational and technical education have not been popular components of welfare-to-work programs, and therefore have not been extensively evaluated for the welfare population. This is because:
Discussion and recommendations
Despite all of the foregoing, advocates continue to tout the transformational powers of human capital development programs for the welfare poor. Yet, education and training cannot deliver families from poverty. They cannot undo the effects of a lifetime of economic privation, limited education, single parenthood, spotty attachment to the workforce, and a host of other barriers and maladaptive behaviors that plague welfare families. They are not appropriate for individuals who wish to go straight to work, or who otherwise show little interest in or ability to take advantage of them. In any case, they are too expensive to make available to everyone. How and why they work (when they work) is not well understood. They are, therefore, hard to do well. They are even harder to do well on a tight budget, within the confines of welfare time limits and federal regulations, and without creating major inequities with respect to the working poor.
If advocates for increased education and training can see a way out of this morass, they have an obligation to speak up. Identifying fair, affordable, time- and cost-effective approaches to human capital development for large portions of the welfare population would be an immensely valuable contribution to the discussion surrounding W-2. But continuing to make the case for increased education and training under W-2, while ignoring the empirical record and political and economic realities that clearly undermine that case, is an exercise in willful ignorance or simple grandstanding.
This is not to say that education and training under W-2 should be scrapped. There are, in fact, certain training pathways that make sense, with limited application: "supported work" for the most disadvantaged W-2 clients; Adult Basic Education or bridge training followed by and linked directly to short-term vocational training; and on-the-job training in the form of a fully subsidized "trial job," with the participating employer committing to specific training objectives.28 Based on the discussion above, however, any sensible W-2 training policy should be operated in accord with the following recommendations:"Terminal" basic education and training under W-2 should cease immediately.
The policy of referring large numbers of clients to basic education and training activities before sending them out into the workforce makes little sense. The evaluation literature clearly demonstrates that basic education and training cost substantially more than a work-first approach, use up time on the welfare client's clock, and produce results that are no better than immediate labor force attachment. Given a choice, then, between immediate job placement versus basic education and training followed by job placement, the state and W-2 agencies should pursue the former approach.
"Non-terminal" basic education and training should still be permitted in certain cases. If a client can complete basic training activities, qualify for more advanced training as a result, and then complete that training, the value of the more basic activities will not be lost. Furthermore, even terminal basic education and training may be permissible in extraordinary circumstances: when, for example, a client is already very close to obtaining a GED upon enrolling in W-2, or when a local employer has committed to hiring clients who complete a specific basic education curriculum.
No education or training activity should be available through a W-2 agency unless local employers or employer associations have either participated in its creation or affirmed its value.
As noted above, basic education and training have shown disappointing results in the context of welfare reform. More advanced kinds of training are not well understood in the welfare context, and in any case are discouraged by federal law. Accordingly, not a penny of taxpayer money nor a day of W-2 client time should be spent on client education and training programs unless they have been vouched for by local employers. W-2 agencies should invite such employers (or employer organizations) to assist with training development, or at the very least undertake periodic, informal reviews of the agencies' (and their subcontractors') training offerings. If employers cannot affirm that a particular training activity will improve a client's employability in the local labor market, that activity should be terminated.
W-2 agencies should screen clients closely for success factors before referring them to education and training.
As noted above, for W-2 participants who lack a high school diploma, GED, and/or basic skills, many W-2 agencies-with the state's encouragement-have adopted a policy of near-universal referral to basic education and training. Furthermore, clients who enter the program with more refined skills and/or a diploma or equivalency can be referred to more advanced vocational training. Unfortunately, failure to complete assigned training activities is a large-scale, persistent problem in welfare-to-work programs.29 But when clients start a training program and do not complete it, they waste taxpayer money and precious time on their own welfare clock. Accordingly, rather than pursuing blanket education/training referrals for any particular category of W-2 clients, agencies need to screen for likely success factors.
The first cut on client screening will need to address motivational issues: a client's desire to participate in education and training, and his or her willingness to defer employment until the training activities are completed. Beyond this, case workers will need to make educated guesses, based on experience, about a client's chances for completing and benefiting from assigned activities. Research indicates, for example, that clients are more likely to finish basic education programs when they:
Whatever specific screening factors are applied, the objective ought to be to focus limited training resources on a relatively small minority of W-2 clients-those with the greatest chance of benefiting from them. One should note that this is precisely the opposite of what the advocate community wants, which is greatly expanded training resources available to all W-2 clients. But the most likely result of that would be a substantial waste of client time and taxpayer money.
The Department of Workforce Development should set time limits for
classroom-based education and training.
©2007 Wisconsin Policy Research Institute, Inc. P.O. Box 487 Thiensville, WI 53092