As Economy Slows, Gains of Welfare Reform Tested

ST. PETERS, Mo. —  In the great migration from welfare to the workplace, Pat Jennings followed all the rules.

More than three years ago, she gave up her monthly aid check for a low-level spot at a mail-order pharmacy. The pay was not much, but she enjoyed the dignity of supporting her three children and herself. She began to dream of greater things.

Then, in late August, the same booming job market that had offered Jennings and millions of others new chances to move up in the world dealt her a startling blow: She was laid off.

“I couldn’t tell you why exactly they did it,” said Jennings, 39, who since has found part-time work. “They just did it.”

As the U.S. economy balances on the knife’s edge of recession, former welfare beneficiaries--often the most recent hires--face the danger of layoffs but with a very different safety net than in the past.

Newly imposed time limits could restrict welfare for many former recipients. Others will not qualify for unemployment insurance because of their often brief and irregular job stints.

And some policy experts doubt that many states, which enjoyed constant federal welfare grants even as their public assistance rolls were shrinking, are prepared for the rising costs that could come with a prolonged economic downturn.

Experiment Facing Tough Test

Indeed, the nation’s five-year experiment in welfare reform may be in store for its toughest test as millions of former recipients confront an economy of vanishing jobs.

“These are marginal workers,” said Randall W. Eberts, executive director of the Upjohn Institute for Employment Research in Kalamazoo, Mich. “They have experienced--and maybe still do--barriers to employment. They’re often on the lowest rung of the career ladder and probably the first ones to go when the economy gets soft.”

Experts also are questioning whether states can afford a sharp boost in payments to the poor. The 1996 welfare legislation created a $1.9-billion rainy day fund to bail out states in hard times. But the law also made it difficult for states to get the money.

In his budget submission Monday, President Bush proposed eliminating the backup fund, paving the way for a new national debate when Congress reconsiders welfare reform next year. Already, concerns about the slowdown are helping shape the brewing debate concerning welfare policy.

“States could quickly use up whatever surpluses they have--and at that point there’s difficulty,” cautions Wendell Primus, director of income security at the Center on Budget and Policy Priorities, a liberal think tank in Washington.

In Missouri and a handful of other states, welfare rolls began to creep upward last summer after years of spectacular decline, according to the latest federal data.

“Some months it goes up and some months it goes down,” said Janel Luck, a deputy director in Missouri’s Division of Family Services, of her state’s welfare caseload. “I would characterize it as stabilizing.”

In rapidly growing St. Charles County, where new homes and shopping malls sprout up next to fields of corn and soybeans, boom times meant an explosion in jobs and a demand for all kinds of workers.

Welfare rolls plunged 62% from 1993 to this year, reflecting the nationwide push to tighten aid requirements and steer people into the work force. Former recipients took jobs at hospitals, high-tech firms, insurance companies, restaurants and casinos that flocked to the fertile terrain along the Mississippi and Missouri rivers, just minutes from St. Louis.

Trip to Job Fair Paid Off

Theresa Ducharme is one of the success stories. In 1999, she left a failed marriage in Colorado, where she had served in the Air Force and tried her hand at a cosmetics franchise, to return to Missouri with her two daughters. Once there, however, she ended up on food stamps and public aid, a stint of dependency that lasted about six months.

“I did a lot of job searching. I had to look at who I was and what I was trying to do and how I would present myself,” Ducharme said.

At a county job fair, she met representatives from WorldCom, the giant telecommunications firm that was expanding in the county. She was hired for an office job that involves tracking the progress of orders. Soon afterward, St. Charles County Department of Workforce Development officials named her “alumnus of the year” of their career training center.

That was a year ago. Today, the county’s jobless rate of about 3% remains lower than the U.S. average. But it has recently been creeping upward, and job opportunities may be starting to slip. Within the last several months, firms in such industries as machinery, telecommunications, insurance and marketing all have announced layoffs.

One of them was WorldCom, which plans as many as 6,000 layoffs throughout the United States, including hundreds at its St. Charles facility.

Ducharme, 44, now waits to find out whether her name will appear on a list of layoff victims.

“I’ve got two girls that like to eat on a regular basis,” she said. “I’m not sure what I’m going to do if I’m one of those who has to go. I can’t say it doesn’t make me nervous--because it does.”

She added, however, that she has survived tough times before and will do so again if she has to: “We’ll go through it. We’ll get through it.”

But getting through it today may prove a somewhat more challenging experience for struggling workers than in the recent past.

“We’re getting fewer job leads,” said Marvin G. Freeman, executive director of the county’s Department of Workforce Development. “At one time, WorldCom had 1,200 job leads. There are no job leads from WorldCom now.”

Such anecdotes are cropping up in many places throughout the country.

The ominous economic climate “is hitting home,” said Larry G. Buboltz, director of CEP Inc., a nonprofit group that provides training services in a 19-county section of northwestern Minnesota.

Just in the last few days, Buboltz said, he has learned of two women who had graduated from welfare to jobs but had been laid off and had returned to public assistance.

How such people respond to financial setbacks could say a lot about the success of welfare reform, which so far has exceeded the expectations of many. Clearly, some former recipients are responding with gritty determination.

Women such as Ducharme and Jennings, who hold high school diplomas and whose spells of assistance lasted months rather than years, seem like easy cases.

Two months after being laid off, Jennings landed a part-time job with the state helping link uninsured women with screening services for breast and cervical cancer. To help make ends meet, she also cleans someone’s home twice a month.

A single mother, her attitude toward welfare reflects the mixed feelings of much of the public: “If you’re really stranded like I was, well OK,” said Jennings, a tall, slender woman, recalling how the health problems of her infants had created overwhelming financial difficulties for her in the past. “But it’s an easy out if you don’t want to get up at 6 in the morning and put your feet out and go to work.”

Harder times also are focusing attention on welfare time limits--the typical five-year cap on benefits that was among the more disputed provisions of the 1996 welfare overhaul. Those limits on eligibility for welfare benefits are gradually kicking in throughout the country. (California’s time limits, among the nation’s last, are scheduled to take effect in 2003.)

Many beneficiaries do not receive welfare long enough to bump up against the time limits. But some experts question whether a steep economic downturn would create unexpected hardships, potentially tossing ill-qualified workers into a hostile labor market. As of late February, 3,023 Missouri families were on course to hit their five-year lifetime limit in July 2002. (The law allows states to exempt from the cutoff as many as 20% of recipients who have hit the limit.)

Welfare’s Tie to Economy Questioned

Yet the link between welfare and the economy may be less direct than it appears.

In the past, many recipients were so removed from the world of work that the economy’s ups and downs were only marginally connected to changes in the welfare rolls. Indeed, the U.S. welfare population jumped 12% in the 1980s, despite brisk job growth for much of that decade.

“If all of this decline [in welfare rolls] in the 1990s is caused by the economy, what happened in the 1980s?” asks Ron Haskins, a senior fellow at the centrist Brookings Institution think tank, who wrote much of the 1996 overhaul of welfare policy.

By Haskins’ estimate, there may be 1.5 million to 1.8 million working adults who once received welfare, although the precise number remains murky.

How will they respond to hard economic times? Rebecca M. Blank, a poverty expert, believes that the welfare rolls could balloon in a serious downturn.

According to her research, before welfare reform, a 1-percentage-point rise in the unemployment rate pushed up the welfare rolls for married recipients by 15% to 20%. Now, in the era of welfare reform, single mothers who have gotten jobs should be expected to return to welfare, just as many low-income married couples with fragile ties to the labor market did in the past.

“They’re tied into the labor market,” said Blank, dean of the Gerald R. Ford School of Public Policy at the University of Michigan. “They get jobs when they can, but when they can’t they come back and knock on the door of public assistance.”

But that clearly is not the goal of Jennings. She has tried to plan for a rainy day, taking night classes at a community college. She recently passed a state test that qualifies her to be a “caseworker,” helping other people who are struggling with hard times. The job would be full time, would solve her financial woes and, on top of all that, allow her to aid others.

But the state, which has been struggling with its own fiscal problems, has frozen such job openings.

“It’s a major concern of mine,” she said recently. Then, her soft voice rising a bit, she added with sudden vehemence: “I want to feel secure. And with the economy like this, do you feel secure?”