Entitlement Programs and the handicaps that go along with having them - Essay Example

En ment Progrms nd the hndicps tht go long with hving them [Nme of the School] [Nme of the Introduction For more thnhlf century, the federl government provided csh ssistnce to low-income fmilies with children through FDC1. ll fmilies tht met eligibility requirements were entitled to finncil ssistnce. Critics of this entitlement progrm chrged tht it destroyed the incentive to work, discourged mrrige, nd promoted non-mritl childbering nd long-term dependence on government ssistnce. lthough some of these criticisms were exggerted, by the erly 1990s, public disenchntment with FDC reched such high levels tht the progrm ws no longer sustinble. Under wivers to federl progrm rules, sttes begn imposing new requirements on recipients of socil help. In 1996, Congress nd President Clinton scrpped the old federl entitlement progrm nd replced it with the TNF block grnt. With this lndmrk end to entitlement cme lifetime limit on the receipt of welfre benefits. Further, recipients fce incresingly strict requirements, such s mndted prticiption in work ctivities, s condition of receiving id. Noncomplince with these requirements cn led to severe finncil penlties, including termintion of ssistnce (Robert, Lee 2002). ll these chnges mde welfre less ttrctive to would-be recipients. Other policy chnges incresed the reltive ttrctiveness of work compred to welfre. Mny sttes llowed fmilies with jobs to keep more of their ernings, mking it esier to combine work nd welfre. dditionl funds were mde vilble to reduce the cost of child cre. nd the EITC progrm expnded considerbly, creting credit of up to $4,140 for fmily with two children in 2002. These chnges occurred in the mid to lte 1990s, period mrked by sustined economic growth. Both poverty nd unemployment fell to their lowest levels in three decdes. ginst this bckdrop, millions of fmilies left welfre. Studies of the fmilies tht left welfre in this post-entitlement er document the experiences of welfre levers. Fmilies tht left welfre hve joined the rnks of the working poor-while they re generlly better off thn they were on welfre, they still fce substntil hrdships. Nevertheless, these welfre levers re the success story of welfre reform (Robert, Lee 2002). In the following pper I will be discussing the socil problem presented by the pssge in bove. The entitlement progrms such s welfre, creted to serve the best interests of the society nd the government, finlly turned out to be negtive fctor tht grdully ruined the fir distribution of work nd took wy the motivtion to work hrd nd py txes from citizens of the US. Reserch nd discussion of the problem cross the ntion, studies consistently show tht three out of five welfre levers work upon exit. Further, four out of five work t some time during the first yer fter leving welfre, lthough only two out of five work consistently. nd, when levers do work, they usully work full time nd ern $7 to $8 n hour-well bove the federl minimum wge. Their nnul incomes hover round the poverty line nd substntil portion (25 to 50 percent) experience mteril hrdships like food or housing insecurity (Scott, Neumrk 2003). The substntil shre of levers who work is often considered to be sign of welfre reform's success nd rightfully so, but it is not n unqulified success. Fmilies leving welfre for work re climbing the economic ldder, but their struggles still merit the ttention of policymkers. Indeed, working levers need help to sty t work nd mke ends meet. Further, not ll levers exited welfre for work-they re diverse group. Some nonworking levers return to welfre quickly; bout one in five levers return within one yer of exit. Some levers choose not to work becuse they hve working spouse/prtner or friend or other fmily member who supports them. lso, some hve trnsitioned from welfre to disbility progrm such s SSI2, which usully provides higher level of ssistnce thn TNF3 does to those who cnnot work. Finlly, 10 to 12 percent of fmilies tht leve welfre hve no ernings nd receive no trnsfer pyment-indeed, they hve no visible mens of support (Scott, Neumrk 2003). Some my hve left welfre involuntrily due to snction or time limit, nd they tend to fce significnt brriers to work nd experience substntil mteril hrdship. Sources of Income Becuse the mjority of levers re working, it is not surprising to find tht ernings from work is the most common source of income for lever fmilies. However, mny lever fmilies re lso receiving income from other sources, including ernings from other fmily members, child support, government disbility benefits, food stmps, nd help from fmily nd friends. The mjority of lever fmilies hve some relince on ernings s form of income. Sixty to 70 percent hve income from their own ernings (Scott, Neumrk 2003). In ddition, mny lever fmilies hve ernings from other fmily members. Five studies report the percent of lever fmilies tht hve ernings from ny fmily member, with reports rnging from 64 percent in the District of Columbi to 80 percent in Missouri (Scott, Neumrk 2003). Child support is nother source of income for lever fmilies, since ll of these fmilies hve children nd mny of them re single-prent fmilies. In six out of the eight studies with informtion on receipt of child support, more thn 20 percent of levers report this source of income. In Msschusetts, however, nerly hlf of ll levers (46 percent) sy they hve some income from n bsent prent. Government benefits from disbility progrms nd food stmps re lso source of income for number of lever fmilies. From 4 to 20 percent of lever fmilies receive SSI for people with disbilities nd between 4 nd 8 percent of lever fmilies receive Socil Security benefits. Government food stmp benefits re source of income for third or more lever fmilies. Receipt rnges from 33 percent in Illinois to 74 percent in Georgi. This vrition reflects differences in income levels, nd therefore eligibility for food stmps, mong lever fmilies. It lso reflects differences in progrm outrech to lever fmilies bout their continued eligibility for these benefits (Scott, Neumrk 2003). Finlly, fmily nd friends re source of income support. There is gret del of vrition in the percentge of lever fmilies receiving this type of help cross studies, rnging from 11 percent in the District of Columbi to 59 percent in Georgi. Interestingly, 4 percent of fmilies in South Crolin report income from fmily nd friends s their primry source of support (Scott, Neumrk 2003). The extent to which fmilies receive these different sources of income does not provide full picture of their relince on ech source. While reltively few fmilies receive SSI income, it my be lrge percentge of those fmilies' income. Not only do the mjority of lever fmilies hve income from ernings, levers' ernings re, on verge, the mjor source of income for ll lever fmilies in these sttes. Between 42 nd 47 percent of fmily income comes from the ernings of levers. The ernings of other fmily members re lso substntil source of income, ccounting for n dditionl 27 to 38 percent of income. Income from child support plys smller role, with 3 to 6 percent of income coming from this source. This is in prt becuse fewer fmilies receive this source of support. mong fmilies tht receive child support, the percent of their income coming from this source is substntilly higher, 28 percent in rizon nd 29 percent in Wshington (Scott, Neumrk 2003). Income by Employment Sttus Becuse ernings re the most importnt source of income for former recipients, we would expect incomes to be higher for workers thn non-workers. This holds true in the studies for which we hve informtion on income by work sttus: rizon, the District of Columbi, New York, nd Wshington (Tble 1). The tble shows men nd medin incomes for those who re employed nd those who re not employed t the time of the survey interview. We lso show the incomes of fmilies where the lever hs not worked t ll since exiting TNF. In these studies, working levers hve monthly incomes fr bove the incomes of those who re not currently working. In the District of Columbi nd Wshington, medin monthly income of currently employed levers is more thn double tht of levers who re not currently employed. New York reports tht 63 percent of currently employed levers' incomes re bove the poverty level, compred with only 15 percent of fmilies tht re not currently working. These differences in income re huge. Tble 1: Monthly Income of Welfre Levers, by Employment Sttus ($) Stte/study ll levers Employment sttus Currently employed Not currently employed Never worked since exit rizon Men 1,361 1,727 892 - Medin 1,195 1,400 720 - District of Columbi Men 1,091 1,353 675 647 Medin 800 1,102 500 547 New York Men 1,601 1,965 985 954 Medin 1,343 1,376 743 600 Wshington Men 1,227 1,462 870 884 Medin 1,000 1,200 576 601 SOURCE: Hotz, Scholz, 2006. In ddition, some studies provide informtion seprtely on the incomes of levers who never worked since leving TNF (Tble1). Interestingly, the dt show reltively smll differences in the verge incomes of those fmilies where the lever never worked since exit nd those who re not currently employed. On the one hnd, fmilies where the lever hs never worked do not seem to hve n lternte source of income tht is pushing their incomes bove those of the not currently employed. On the other hnd, they re not in worse strights monetrily thn those with some pst work experience, t lest in the current month. Given the importnce of ernings in lifting lever fmily incomes, if these fmilies re not ble to ccess work in the future, they my hve bleker long-term picture thn those not currently employed whose pst work experience provides some prospect for future work. ccess to Medicl Cre Some lever fmilies fce the hrdship of being unble to fford or ccess helth cre services. The extent of this problem vries cross res. In Illinois nd Cuyhog County, third or more fmilies report not getting medicl ttention when needed, while 10 percent of fmilies in Georgi nd South Crolin hd this problem. Tble 2: Lever Fmilies' Experience of Problems with ccess to Housing Problem Percent reporting problem Z DC IL I M SC W Without plce to live t lest once 1 7 13 Used homeless shelter 3 3 3 2 2 1 Did not hve own plce to live 8 Moved in with fmily/friends 22 11 14 10 SOURCE: Hotz, Scholz, 2006. Tble 3: Lever Fmilies' Experience of Difficulty Pying Utilities Problem Percent reporting problem Z DC G IL I M SC W Cuyhog County Behind on utility pyments 29 22 48 Utilities turned off/went without 12 14 26 Het 5 8 9 Electricity 6 12 7 11 12 19 Wter 3 7 SOURCE: Hotz, Scholz, 2006. The solutions to the socil problem The solution to the problem tht I think will be effective to both prties - the government nd the fmilies who re leving works nd re turning to unstble incomes is to help fmilies move from welfre to work is the vilbility of jobs tht cn be filled by welfre recipients. On verge, dult welfre recipients hve no eduction beyond high school nd hve limited work experience. s such, the jobs for which they qulify hve lower skill requirements nd commensurtely low py. Nevertheless, without such employment opportunities, fmilies on welfre would be unble to move into the job mrket. n obvious precursor for employment opportunities for less-skilled workers is vibrnt economy. In ddition, we need to keep mking work py for those who do enter the low-wge lbor mrket. Existing progrms nd benefits such s Food Stmps, Medicid, nd the EITC ll work to bolster the economic sttus of low-erning workers. The hrdships confronting working levers could be reduced if more viled themselves of these supports. Incresing tke-up of these progrms through incresing wreness nd mking ccess esier is importnt. Some sttes hve conducted outrech cmpigns nd simplified ppliction nd recertifiction procedures for Food Stmps nd Medicid to this end, nd there re some erly indictions tht prticiption is improving (Loprest 2003). Improving ccess should improve tke-up nd will likely reduce the mteril hrdships working levers experience. Mny working levers never pply for trnsitionl Medicid coverge even though they re not offered or cnnot fford employer-sponsored helth insurnce. Extending Medicid coverge s mtter of course for three months fter TNF exit would give former recipients time to pply for nd enroll in trnsitionl Medicid. lck of helth insurnce reduces the mount nd qulity of helth cre one receives nd cn led working levers to return to the welfre rolls. nd mny levers report they re not working for helth resons. Consequently, it is importnt tht fmilies tke dvntge of the public insurnce options vilble to them. Moving from welfre to work is esier if people re much better off working thn on welfre. To encourge welfre recipients to strt working, mny sttes disregrd substntil portion of ernings when determining benefits, t lest for the first few months of working. One problem with this method is tht when fmily combines welfre nd work, their lifetime limit clock keeps ticking. Sttes nd the federl government should consider "stop the clock" policies tht do not count months in which fmily works nd receives welfre ginst their lifetime limit. Finlly, the tx code provides one of the biggest rewrds of working for low-income fmilies with children: the EITC. Indeed, single mother of two children erning between $10,350 nd $13,550 yer qulifies for the entire credit of $4,140 in 2002. This effectively increses the fmily income by 30 to 40 percent. Sttes cn reinforce the work incentive effects of the federl EITC by providing stte EITCs. Even when the economy is on solid footing, there my be derth of entry-level jobs. Consequently, government cn encourge privte sector employers to crete entry-level jobs through progrm of trgeted subsidies. For exmple, employers in high unemployment res who increse the number of workers they employ could receive subsidies for limited time. While the evidence on the efficcy of pst trgeted-subsidy efforts hs been mixed, this policy option cnnot be overlooked (Brtik 2001). Other wys to improve the mteril well-being of working levers re incresing the minimum wge or implementing "living wge" progrms. modest increse in the minimum wge is likely to hve limited effectiveness for this popultion, since most working levers lredy ern more thn the minimum wge. Elevting the minimum wge by 60 or 70 percent is likely to hve nontrivil disemployment effects. Living wge progrms usully pply to medium nd lrge firms tht do business with locl governments, lthough some cities hve pssed broder coverge. s condition of receiving government contrcts, employers re required to py their employees living wge, which is usully much higher thn the minimum wge. Evidence shows tht living wges hve led to increses in the ernings of low-wge workers generlly but lso to loss of low-wge jobs in these res. On net, these policies cn led to decreses in poverty (dms nd Neumrk 2003). finl importnt benefit for working fmilies is the vilbility of dequte, ffordble child cre. lthough some working levers hve school-ge children or hve friends or reltives who will wtch their children while they re t work, some levers need to use pid child cre providers; without child cre, they simply cnnot work. Consequently, it is importnt to ensure tht both dequte funding is vilble to help working levers nd other low-income workers py for child cre nd tht there re n dequte number of child cre providers to meet the demnd. So fr, lthough child cre funds incresed substntilly with welfre reform, evidence is uncler on whether current funding meets the need. In ddition to these income nd benefit supports, former welfre recipients cn benefit from other service supports s well. For exmple, some welfre offices hve progrms to provide post-employment supports nd retention services for former recipients. These progrms cn include job mentors t the workplce, to help nvigte the ins nd outs of new job, nd provision of emergency ssistnce, such s funds for cr repir. Provision of this ssistnce cn forestll job loss nd returns to welfre. Other progrms focus on dvncement for those in lowwge entry-level jobs. While little is known bout which services re most effective, the dministrtion for Children nd Fmilies of the USDHHS is sponsoring n ongoing evlution of number of these progrms, clled the Employment Retention nd dvncement evlution (nderson nd Mrtinson 2003). Even with post-employment services, however, some working levers will lose their jobs. Rther thn returning to welfre while seeking employment nd burning up months ginst their lifetime limit, it my be pproprite to steer unemployed levers into the UI system. Becuse of ernings nd hours requirements, mny working levers will not qulify for UI benefits when they lose their jobs. By grnting specil sttus to working welfre levers within stte UI systems, levers cn receive short-term finncil ssistnce while they look for new jobs without hving to return to welfre. Development of the problem in the future The 1996 PRWOR4 ws titnic chnge in U.S. welfre policy. Its effects cnnot be determined by exmining only the first five yers of implementtion. The true long-run outcomes for recipients, former recipients, nd potentil recipients will be plyed out over much longer time spn. In fct, two importnt fctors tht re not reflected in the outcomes reserched to dte need to be considered: the effects of declining economy nd the impct of five-yer limits on benefits. The booming economy nd low unemployment rtes of the mid to lte 1990s certinly influenced the success of welfre-to-work policies nd the impct of welfre chnges on the lives of recipients. Since economic growth hs stlled nd unemployment rtes begn rising in 2001, the chllenge of moving fmilies from welfre to work is more dunting. The economic downturn undoubtedly will mke it more difficult for recipients to find jobs nd could dely some fmilies' exits from welfre. Welfre cselods during fiscl yer 2002 incresed for hlf of sttes. When cselods increse, direct pyments to recipients increse, leving less block grnt money for services nd innovtive work progrms, prticulrly those tht serve the hrd to employ. Becuse mny sttes re struggling with lrge budget deficits, stte-funded services for recipients re open to cuts (Finegold et l. 2003). In ddition, the results reported in this book by nd lrge do not include the effects of the federl five-yer limit on benefits. In mny sttes, fmilies first hit this benefit limit in 2002. How this will impct the composition nd economic well-being of welfre levers remins to be seen. In the pst mny fmilies left welfre before five yers, but mny returned, continuing to use up their limited benefits. The true effects on fmilies of hving no more lifetime eligibility remin to be seen. In the future, it is importnt tht these ctivities continue nd re built on, especilly in this new er of stte flexibility to tilor welfre progrms. But, s revenues dip nd sttes scrutinize where to mke budget cuts, these ctivities re in jeoprdy. This stte-level problem suggests continuing role for the federl government in funding this kind of cpcity building t the stte level. The USDHHS5 hs plyed key role in this development since 1996 nd continues to do so through current funding of locl studies on welfre recipients. In ddition, broder efforts to continue reserch on how levers re fring should be undertken. While much bsic informtion cn be grnered from linked dministrtive dt, survey dt cn provide much fuller picture of the sttus of welfre levers. Syntheses of individul plce-bsed surveys of welfre levers re useful, but becuse of issues of cross-site comprbility, they provide, t best, ptchwork understnding of how welfre levers re doing. Similrly, ntionl studies using current dt re limited becuse generl-use dt sets do not hve sufficiently lrge number of fmilies leving welfre t the sme time to llow for comprehensive nlyses. Consequently, it would be useful to hve ntionl survey of welfre levers with smples drwn from stte dministrtive dt. Detiled uniform dt on ntionl smple of levers-especilly if those dt re longitudinl, cpturing levers t, for exmple, 6, 18, nd 36 months fter exit-would be n importnt resource for reserch. Such dt would provide comprehensive picture of welfre levers cross the ntion nd llow reserchers to exmine how locl policies, prctices, nd circumstnces ffect the sttus of these fmilies. Some view socil welfre policy of the 1990s s grnd socil experiment. lthough lever studies re not n evlution of this experiment, they do provide vluble informtion on the outcomes of fmilies ffected by this policy chnge. The lever studies show tht if the ultimte gol of welfre policy is to crete system tht provides temporry ssistnce to fmilies on their wy to self-sufficiency, we re moving forwrd but hve long wy to go. Bibliogrphy: 1. Loprest, Pmel J. 2003. "Use of Government Benefits Increses mong Fmilies Leving Welfre." Snpshots of meric's Fmilies III No. 6. Wshington, DC: The Urbn Institute. 2. Brtik, Timothy J. 2001. Jobs for the Poor: Cn Lbor Demnd Policies Help Wshington, DC: The Urbn Institute. 3. dms, Scott, nd Dvid Neumrk. 2003. "Living Wge Effects: New nd Improved Evidence." NBER working pper no. 9702. Cmbridge, M: Ntionl Bureu of Economic Reserch. 4. nderson, Jcquelyn, nd Krin Mrtinson. 2003. Service Delivery nd Institutionl Linkges: Erly Implementtion Experiences of Employment Retention nd dvncement Progrms. New York: MDRC. 5. Finegold, Kenneth, Stephnie Schrdin, Eline Mg, Rebecc Steinbch, Dvid Merrimn, nd ln Weil. 2003. "Socil Progrm Spending nd Stte Fiscl Crises." ssessing the New Federlism occsionl pper no. 70. Wshington, DC: The Urbn Institute. 6. Goerge, Robert, nd Bong Joo Lee. 2002. "Mtching nd Clening dministrtive Dt." In Studies of Welfre Popultions: Dt Collection nd Reserch Issues, Michele Ver Ploeg, Robert . Moffitt, nd Constnce F. Citro, eds. Wshington, DC: Ntionl cdemies Press, pp. 197-219. 7. Hotz, V. Joseph, nd John Krl Scholz. 2006. "Mesuring Employment nd Income for Low-Income Popultions with dministrtive nd Survey Dt." In Studies of Welfre Popultions: Dt Collection nd Reserch Issues, Michele Ver Ploeg, Robert . Moffitt, nd Constnce F. Citro, eds. Wshington, DC: Ntionl cdemies Press, pp. 275-315. Read More