Work alone is often not enough to lift people out of poverty

cafca | April 27, 2018 |

Yesterday's public release of the farm bill included a proprosal to toughen the work requirement for the Supplemental Nutrition Assistance Program (SNAP). Similarly, the Trump administration's excecutive order released Tuesday calls for expanding work requirements for recipients of federal aid programs and encouraging more participation in workforce development training programs.

These efforts are intended to move people out of poverty and into financial security. But the evidence shows that work requirements will do little to support this goal and that current funding for the nation’s primary workforce development programs falls short of the need.

 

Work alone is often not enough to move out of poverty. Many Americans work full time but remain in poverty and often need federal assistance to cover their families’ basic needs. The latest numbers from the Bureau of Labor Statistics show that, in 2015, 8.6 million Americans qualified as “working poor” or spent at least 27 weeks in the labor force but had income below the federal poverty level.

 

Workforce development is critical to helping the working poor become financially secure

Workforce development programs are effective antipoverty tools when they create avenues for low-income people to gain skills and find secure, better-paying jobs.

 

The most effective training programs are those that are closely connected to the workplace and for jobs that are in demand in the labor market, such as health care and technology. The farm bill proposes new funds for employment and training under SNAP, and also proposes that states provide employment and training to anyone subject to a work requirement who is not able to meet the requirement on their own.  However, it seems unlikely that the proposed funding can support the kinds of workforce development we know is essential to improving employment opportunities for those who need them.

 

The last two budget proposals from the Trump White House would substantially cut funding for the main workforce development programs under the Workforce Innovation and Opportunity Act, not increase the federal investment as the executive order implies. 

The administration would retain funding for apprenticeship training, which is one effective strategy, although it represents only a very small share of all training. But the White House’s fiscal year 2018 budget proposal called for about a 40 percent cut in funding for all workforce development and employment services programs, which would have kept 7 to 8 million fewer people from getting help. Congress did not accept the cuts for fiscal year 2018 and instead reduced funding by only about 5 percent. 

 

The White House has proposed the same 40 percent funding cut for fiscal year 2019. The proposed cuts are not just for programs serving low-income people; programs for people who lost their jobs permanently when businesses moved or closed would be cut as well. Without more federal funding, it will be difficult or impossible to increase the number of people who can participate in effective workforce development programs or get help finding a job.

Work requirements for programs like SNAP are not new. Welfare reforms introduced in 1996 expanded work requirements for families and children on welfare (now called Temporary Assistance for Needy Families or TANF). The main result was that caseloads dropped dramatically (by over 80 percent) over the next five years. Some who left cycled back on and off of welfare, as many have always done when they go in and out of jobs, mainly in the low-wage labor market. 

 

Some could not find a job even though they tried. Some voluntarily left welfare rather than comply with the new rules and requirements, and some went to work full or part time.  On average, those who left the welfare rolls after 1996 remained poor, joining the ranks of the working poor, with an average hourly wage of about $8 five years later.

Today, many poor people on TANF and other assistance programs, such as Medicaid and SNAP, also work at least some of the time or want to work.  About 80 percent of working-age adults on Medicaid are already in working families, and about three-quarters of SNAP recipients work.  

 

As has been the case with welfare reforms in the past, we can expect that expanding and enforcing work requirements may reduce the number of people getting benefits. For example, some may not be able to find a job or may have health problems that make it hard for them work. Some will voluntarily leave because of the added requirements, and some eligible people may be deterred from applying in the first place. 

 

Because many beneficiaries already work, it is unlikely that expanding work requirements would reduce poverty, which is the primary stated goal of the new executive order. We can also expect that increasing the enforcement of work requirements will raise the bureaucratic costs of administering the program—to assess carefully whether someone can work, monitor and count their activities and hours, and (in some places) create work slots for people who cannot find a job.

 

Meeting the objectives of the executive order—moving people out of poverty—requires a clear understanding of the situation faced by people living in poverty and the working poor. Training low-income and low-skilled people for jobs that are in demand can help some increase their employment, wages, and income, but only if federal funding for workforce development programs increases substantially.