Labor gains: what welfare reform could mean to your business

Entrepreneur, Jan, 1997 by Cynthia E. Griffin

The bill affects the Aid to Families With Dependent Children (AFDC) program (popularly known as welfare), the Supplementary Security Income program, and the national Food Stamp program. In simple terms, the new law changes the assumption that welfare is a guaranteed right. It limits the amount of time adults can collect welfare to five years in a lifetime, in most cases, and requires states to have 50 percent of their eligible welfare recipients working (whether those jobs are subsidized by the state or not) by 2002. (See "Changing The Rules" on page 154 for more details regarding the new legislation.)

But what does welfare reform mean to small business? Read on.

* EVERYBODY INTO THE LABOR POOL

For many small employers, welfare reform will mean a new source of employees. The prospect of millions of people moving into the work force could be a gold mine for certain industries, such as food service, that experience chronic worker shortages.

Recognizing that potential, in January 1995, the National Restaurant Association launched the Good Start Project, which got a pledge from more than 250 restaurant owners nationwide to work more closely with state and local officials to help hire, train and promote people receiving public assistance.

Paul Cunningham, president and owner of Schreiner's Restaurant Inc. in Fond du Lac, Wisconsin, and a board member of the state's restaurant association, which responded to the pledge request from the national association, has hands-on experience hiring AFDC recipients. In general, he has found they are eager to work.

"We're always looking for people who've got the personality and physical ability to keep up with us," says Cunningham. Located on a major highway and serving about 600,000 people each year, Schreiner's earns in excess of $3 million annually and employs about 150 people.

Cunningham, who for years has worked with government agencies to hire veterans, workers with disabilities and other hard-to-place employees, says hiring welfare recipients has eased the crunch of the labor shortage that plagues his industry. However, he notes, there are some special considerations when dealing with AFDC recipients. For example, some also need monetary assistance obtaining the necessary work clothes; Schreiner's managers have become adept at tactfully directing them to the appropriate agencies that provide assistance in this area.

The restaurateur also found that welfare recipients changed the character of his work force. "Typically, we start people at a training wage [of $4.50 to $4.75 an hour] washing dishes, and they're usually high school students," says Cunningham. The people from the welfare program, however, were a little older than Cunningham was accustomed to getting for entry-level positions.

This forced Cunningham and his managers to adjust - not lower - their expectations. "We were used to having a 30-year-old person with six years of experience," he says. "Now we've got 30-year-olds [with minimal experience]. This means we have to provide training."

Cunningham's experience is a graphic example of what potential employers and entrepreneurs are likely to encounter. Former welfare recipients often come with more baggage than the typical worker. Although some are college-educated, many have limited skills and education. Some have histories of domestic abuse and neglect and have ingrained habits of dependency that may not change with two weeks - or even two months - of intensive job preparation training.

Cunningham points out another requirement: the need to offer a fair wage. If your business pays less than people can make on welfare, he says, they won't be able to afford to work for you. Some states' welfare reform programs address this problem by allowing recipients to keep receiving at least some of their benefits during the transition to employment. However, one Ft. Wayne, Indiana, employer found it common for workers to leave one job to take another paying just 5 cents more per hour. In other words, money is a big motivator.

Another barrier rarely talked about but ever present is the fact that many of the single mothers on welfare suffer from low self-esteem because of past educational and life failures. (Eighty percent of AFDC recipients are single mothers in their 20s and 30s.) This problem has prompted officials in Culpeper, Virginia, to begin discussing something they believe is a logical and critical element of any welfare reform program - mentoring.

"We've gone to the United Way to set up a mentoring system, and we're going to the private sector looking for mentors to work one on one with people," explains Chip Coleman, director of social services for Culpeper County. Mentoring, which Coleman describes primarily as emotional support, is a concept that employers who hire welfare recipients should consider; it's something Cunningham and his staff have done informally for years.

* NEW OPPORTUNITIES

For some, welfare reform spells entrepreneurial opportunity. Just ask Shanta Reid, a 36-year-old Richmond, Virginia, single mother of three who knows what it's like to live with poverty.