The twilight of liberal welfare reform

Public Interest, Spring, 2000 by Lawrence M. Mead

Further analysis revealed that clients already working full-time when the program began gained little. Even though these clients used the benefits the most, their employment or earnings did not clearly improve. Indeed, those that were working more than 40 hours a week reduced their hours. Average wages fell by 46 cents an hour. It appears that the full-time workers felt free to cut back working hours and take worse jobs, or not look for better ones, now that they had New Hope to cover health and child care. (A similar effect has been found from income-guarantee programs in the past.) While this may have helped clients spend more time with their families, it contradicted New Hope's aim of raising work levels among the poor. Rather than use a new opportunity to get ahead further, these workers took a step backward.

The significant employment and earnings gains were entirely concentrated among those clients who were working less than full-time when the program began. They gained 7 percentage points in employment rate and $1,389 in earnings over two years. Still, in their second year, only 27 percent of these workers managed to escape poverty on the basis of earnings and wage subsidies. And even these gains were closely tied to their use of community-service jobs (CSJs). Such jobs provided them with the employment and wages that they did not get from the private sector. There is no clear way to separate the contribution of the CSJs from the influence of other elements of New Hope. But if employment and earnings from the CSJs are excluded, the program had no positive effects in these areas at all, even for clients not working full-time when the program began.

The role of the community jobs was not, as the program presumed, to make work possible for people for whom jobs were otherwise unavailable. Indeed, 62 percent of clients who left a CSJ in one quarter had a regular job in the next. Rather, community positions apparently helped people make the transition from nonworking to regular employment. Although CSJs paid only the minimum wage plus government and New Hope wage subsidies, some clients became all too comfortable in them. New Hope limited individuals to two CSJ slots of six months each, and staff had to prod some occupants to move on to the private sector.

In only one area did New Hope have a dramatic and unexpected effect: Children from New Hope families did markedly better in school than children not in the program. These effects were large, and most of them were for boys. According to teachers, boys gained sharply in academic and classroom skills and their behavior markedly improved. New Hope boys also in larger numbers aspired to go to college. Why New Hope had these effects is not clear. But it is the first experimental evidence that putting poor parents to work might not just reduce welfare dependency but be connected to other, noneconomic benefits to families and neighborhoods.

Misplaced hope

One might argue that Milwaukee's very good economy undermined New Hope's economic effects. In a recession, with higher unemployment, the special benefits would have made more of a difference. Also, New Hope's very broad eligibility meant that many of its clients were already working. A program specifically meant for the nonworking, such as welfare mothers, might have had more of an impact.