The Future of Children, Princeton - Brookings: Providing research and analysis to promote effective policies and programs for children.

Strategies to help welfare recipients acquire jobs and strategies designed to help them keep jobs must address many of the same issues. From the political right and left, at the federal and state levels, policymakers have variously supported efforts to promote employment and combat dependency by (1) making work pay more through the Earned Income Tax Credit (EITC), the minimum wage, and "disregards" of earnings in AFDC benefit computations; (2) investing in job skills through education and training; (3) stimulating work through requirements or limits on the period of income support; and (4) helping newly employed recipients deal with the costs and pressures of work through access to medical coverage and child care subsidies, counseling, and occasional financial help in crises. Some aspects of these approaches are incorporated in the federal welfare reform legislation passed in 1996 and in states' approaches to implementing it, but many of the issues raised by welfare policy up to 1996 will still be relevant in the future.

The effectiveness of approaches like these in promoting employment is discussed in the article by Nightingale and Holcomb in this journal issue. Here, it is worth calling attention to four aspects of federal welfare policy as of 1995–96 that make it difficult for welfare recipients to stay employed once they find a job: (1) the abrupt termination of AFDC benefits for newly employed recipients, (2) the difficulty of obtaining transitional child care or Medicaid benefits in some states, (3) the limited case management services available to the newly employed who leave welfare, and (4) the incentive to return to welfare if a job is lost. In many ways, the system is designed to help people leave welfare, but not to sustain them in employment.

The modest earnings of newly employed recipients often make them ineligible for AFDC benefits, although going to work brings new expenses that are often hard to anticipate, and staying employed requires reserve resources to use in coping with crises that can interfere with job stability. Under federal AFDC policy as of 1995–96, newly employed welfare recipients have difficulty accumulating a cushion of savings to deal with expenses such as clothes needed for a job, car insurance and repairs, and emergency child care when a regular subsidized or no-cost arrangement fails. At the low wages most welfare recipients can command, saving is often impossible.

When calculating eligibility for AFDC benefits for those who work, states have "disregarded" $90 per month in standard work expenses, and an additional amount ($30 plus one-third of remaining earnings) during the first four months of employment. After four months, however, the AFDC benefit has been reduced by the amount of earnings, almost dollar for dollar. In low-benefit states, almost any job a welfare recipient takes will end her AFDC benefits immediately, giving her no time at all to build the financial reserve she will need to keep working. A recently employed Texas woman described this concern succinctly: "The way I look at it, when you try to get a job they want to whack you off everything just like that. They don't give you no chance to make a step to get ahead to get on your feet."³¹

The Family Support Act of 1988 required states to provide "transitional" Medicaid coverage and child care subsidies to welfare recipients for 12 months after leaving AFDC because of earnings. However, experience shows that establishing and maintaining eligibility for these transitional benefits can be difficult.²¹ First, a newly employed welfare recipient receives these benefits only if the eligibility worker records employment as the reason for AFDC termination. Recipients do not always clearly state that they are employed when they ask that their case be closed, and overworked agency staff may be disinclined to record the data to show that employment earnings reduce benefits to zero. Second, recipients who do not make ongoing reports of their earnings (wanting to end their obligations to the welfare agency) lose their eligibility for transitional benefits. Third, even those who received child care and Medicaid benefits while on AFDC must apply separately for transitional benefits, returning unfamiliar forms to unfamiliar agency units. Fourth, state agencies finance part of transitional benefits; faced with severe budgetary constraints, some states have not publicized the availability or promoted the use of these benefits.^32,33 Thus, although these benefits have been instituted by policy, in practice many individuals who would be eligible for them have failed to receive them.

Through the Job Opportunities and Basic Skills Training Program (JOBS), states have been able to use federal funds to provide case management (ongoing monitoring of participant progress, counseling, financial planning, and assistance locating needed resources) and related services for 90 days after an AFDC recipient finds a job and leaves welfare. But these services are limited. Large caseloads lead JOBS staff to focus on job placement activities for newly enrolled participants,³⁴ and generally case managers contact former recipients only to confirm continued employment each month to meet federal reporting requirements. States could help pay for initial employment expenses (such as tools, car repairs, or work clothing or uniforms), but these payments have been limited in amount, timing, or both. For example, as of 1996, Illinois provides up to $400 in initial employment expense payments, but only for needs that emerge within the first 30 days on the job. In Riverside, California, newly employed participants can receive only a single work expense payment in the first week of employment, and Texas limits its single payment to $65. Emergency expenses that crop up beyond these time or dollar limits must be borne entirely by the former recipient.

When a former welfare recipient loses employment and wants help finding another job, policies amount to an incentive to return to welfare. She has had to reapply for AFDC to gain renewed access to JOBS case management or job search services. In most states, former recipients may face delays after reenrolling in AFDC before being referred for employment-related services. A few states require AFDC applicants to look for work immediately, and there a former recipient who loses a job may be placed quickly in a supervised job search activity, but she will probably deal with new agency staff, not a familiar case manager. These procedures are clearly inefficient in minimizing returns to welfare and reducing AFDC costs. They reflect the assumption that recipients can leave welfare simply through preemployment services and a single job placement, when in fact leaving welfare is a long, unpredictable, back-and-forth process marked by job loss and other setbacks.^15,35 Too often, getting help in finding another job requires returning to welfare—an outcome no one would call a success.