The Job Gap: The Welfare Reform Act Promises Jobs That Just Aren't There
When Clinton signed the momentous welfare reform law last August, state governments' 50 budget finance directors were meeting for their annual conference in Charleston, S.C.The new law was a hot topic of conversation at the convention, which featured a keynote address by Jeremy Rifkin, the economist and futurist thinker who had just published The End of Work, a book documenting the era-ending restructurings already wrenching the current labor market and world economy. Rifkin and the budget directors quickly got to the new law's key elementÑjobs, something states are expected to provide lots of in order to get about two million parents and children off welfare rolls by the year 2000. Welfare recipients are expected to find private-sector jobs in the business world or be forced to accept unpaid "workfare" positions in exchange for government checks under a timetable of mandates handed down by the new law."The state budget directors were all looking around at me, saying, 'What jobs?'" said Rifkin.Thus had the most financially astute leaders in state government got to the real dilemma posed by the new welfare reform act.Into The Gap Emerging studies issued by think tanks and advocacy groups call it the job gap in the reports that document the shortage of positions for the growing number of job seekers and former welfare recipients seeking work. Irrespective of the shortage problem are many other daunting obstacles to overcome: a lack of adequate skills among many welfare recipients for many available jobs in an increasingly technical workplace; a shortage of money for adequate skills training; a geographical mismatch between new high-tech job growth in suburban and rural areas and the concentration of welfare recipients in large metropolitan areas; the loss of jobs from U.S. corporations moving operations overseas under the provisions of NAFTA; and the lack of affordable child care for the many single mothers expected to undertake employment for the first time.Clinton administration officials counter studies that predict a job shortage by noting that 11 million new jobs have been created in the economy since the president took office, and economic forecasters expect continued economic growth and low unemployment in the future. Additionally, the new law included an extra $3 billion in grants and $600 million in tax credits to help more troubled communities find work for those hardest to employ, said Michael Kharfen, spokesman for the U.S. Department of Health and Human Services. The president has also challenged corporate America to do its part by hiring welfare beneficiaries.Federal Reserve Chairman Alan Greenspan has expressed concern regarding the potential impact of welfare reform on the economy. Unemployment benefit levels are at record lows, even though the real unemployment rate is about 13 percent when counting people who have used up benefits and given up the job search and workers in temporary part-time positions hoping for full-time hours down the road. Greenspan has implied that, in essence, too many people are working because wage inflation is heating up as dwindling job-seekers face fewer prospects. Greenspan responded with a boost in interest rates and set the stock market gyrating.But organized labor has a growing concern of its own concerning dropping wages due to reform: There's growing evidence that welfare recipients seeking low-wage jobs will just drive down earnings for other poor and middle-class workers and eliminate union positions as well. Labor is mobilizing for the battle.A report issued by the Economic Policy Institute in Washington, D.C., estimated that 1 million new welfare recipients moving into the job market will reduce the wages of 31 million low-wage workers nationally (the bottom 30 percent of workers) by 11.9 percent. Wages for low-wage workers in states with relatively large welfare rolls would drop by even more with the influx of new workers.What will give when thousands of new job seekers cut from welfare rolls can't find work, or at best, can't find jobs that make ends meet?"The dirty little secret that no one wants to talk about is we're going to have millions of people on the street, families on the street," spouts Rifkin, a highly respected economist whose advice is frequently sought by top corporate leaders. Rifkin and others think the effects of the law in the long run could cost society even more than the apparent upfront savings generated in the short term. Without jobs, many welfare recipients could easily turn to crime just to survive, forcing communities to spend even more on police, prisons and medical costs. The potential for more poverty, hunger, homelessness and major social instability is real, Rifkin claims.Business leaders themselves have challenged Clinton to face the enormity of the issue. He responded in early April with a token promise of 10,000 jobs for recipients in government agencies.The law's intent helps with the deficit and cuts the federal budget by billions by giving states fixed block grants to cover welfare costs in place of the 60-year-old automatic federal welfare entitlement for the needy, the so-called "safety net" of the New Deal. The legislation allows states much more flexibility in designing programs and determining who's eligible for benefits, but it imposes a five-year lifetime limit on welfare benefits. It also threatens states with penalties of millions of dollars if timetables are not met on moving recipients into some kind of work.The New 'Deal'Welfare reform backers such as California Gov. Pete Wilson have announced plans in response to the new law that adopt the traditional conservative solution of offering some tax breaks and loan guarantees to get private-sector firms hiring recipients off rolls. But most figure such an approach will put a dent in the problem at best. The federal welfare law itself provides virtually no money for such incentives.But states have some money now to play around with because the initial block grant amounts are based on the amount of funds government gave the states for welfare two years agoÑand welfare rolls have declined since then in most states because of the growing economy. However, some states are looking at the initial surplus as a windfall and using it for other purposes. There's nothing in the law that prevents states from doing it. For example, the state of Connecticut took its surplus and used it to enact an across-the-board income tax cut, said Cliff Johnson, a welfare reform expert at the Center on Budget and Policy Priorities, a Washington, D.C., think tank.States are eyeing other ways to bypass the mandates of the new law, too. California Governor Pete Wilson, stuck with the single highest welfare caseload nationally (2.74 million cases), is reportedly eyeing a loophole in the law that could provide California with relief, an idea that may spread to other states. One provision of the law reportedly lets states off the hook on work requirements for single mothers who went on welfare rolls after facing domestic violence. Some studies claim that as many as 60 percent of women on welfare have experienced such violence, data that may allow California and other states to bypass part of the law's effects through the so-called domestic violence exemption.It's a telling anecdote that suggests the possibility that even political demagogues such as Wilson who have repeatedly advocated so-called reform by bashing "welfare queens" may be quietly acknowledging the mammoth difficulties involved in moving such people into meaningful employment.A look at studies on welfare reform emerging around the country helps explain why. One recent report that looked at just 14 or so counties in Western New York State came up with gap of about 57,000 jobs after combining the number of positions available with current job-seekers in the market and the number of welfare recipients expected to move into the job market, said Jim Morrisey, executive director the Western New York Law Center."Statewide, you're looking at a job gap of about 1 million jobs," he added. "Nobody knows where these jobs are going to come from."Another study, conducted by the Office of Social Policy Research at Northern Illinois University, looked at the impact of welfare reform on the realities of the job market in the Chicago area. The study concluded that there were at least six workers in need of entry-level job for every opening in the city. Plus, there were seven job-seekers for every entry-level job paying enough to bring a family up to the poverty level.Aid to Families with Dependent Children recipients in the Milwaukee, Wisc.-area also are facing bleak prospects in that job market, according to a study issued by the Employment and Training Institute at the University of Wisconsin-Milwaukee.A job gap study completed by the Minnesota Jobs Now Coalition in St. Paul concluded that there were 31 job-seekers in Minnesota for every opening requiring a year or less of training, said Kris Jacobs, executive director of the Jobs Now Coalition. The two-year-old study is now being emulated by 16 other states who want to get a better handle on the labor market situation in their regions. The Minnesota study concluded that single mothers on welfare with one school-age child and one preschooler would need to make at least $20,000 a year if they were to achieve self-sufficiency after going off welfare.The Minnesota study also documented the "geographical mismatch" problem that's emerging as a significant barrier to employment in many regions of the country. Between two-thirds and three-fourths of those needing jobs in that state are located in the central cities of St. Paul and Minneapolis. Yet only 4 percent of the state's most recently measured job growth occurred in those areas. Most new jobs are being created by companies locating on freeways in new suburban industrial parks."The great cultural myth that the market will provide, and that if you work hard you will get ahead, dominates people's belief that all we need to influence is the behavior of the supply side of the labor market," said Jacobs. The coalition's data points out that there is what she called "a huge livable-wage jobs gap trend continuing, and no amount of motivation and rectitude on the part of the would-be worker is going to get them to self-sufficiency.""The numbers don't add up," Jacobs added. "You can't work enough hours and still maintain a household."Get A Job!Even if the transportation problem could be solved and workers somehow moved to job-growth regions, there's still the other mismatch problemÑlack of skills for increasingly sophisticated high-tech jobs that are being created. "I think the private-sector response has been pretty telling," said Johnson of the Center on Budget and Policy Priorities. United Parcel Service, Marriott Corp. and a number of other large companies have vowed to try to hire welfare recipients, but results so far indicate minimal success because of the skill disparities. Marriott reported spending $5,000 per welfare recipient to get them to self sufficiency, according to Jacobs in Minnesota. But her coalition figures you typically need at least $8,000 per recipient for a chance at success. The most successful programs are spending as much as $20,000 per person.CEOs "are saying, 'Look, if you want us to hire welfare recipients in any numbers, you have to deal with the skills issue,' " said Johnson. "'If you don't, we probably won't be able to hire them.' " Such a call was issued by Robert Jones, a former labor department official in the Bush administration who now heads up the National Alliance for Business.Another major stumbling block is the need for child care for AFDC mothers who will be forced to go to work. In many regions of the country, mothers face waiting lists of years for the most affordable child-care options.Many states are providing help in this area through subsidies and vouchers, but the amount of money getting dedicated to the problem appears to only scratch the surface. For example, in California, Gov. Wilson has proposed funding to cover at least 9,000 slots for daycare, said Jacqui Bell, a California-based welfare reform consultant for the League of Women Voters and the Unitarian Universalist Service Committee. That would cover only the need in the state capital of Sacramento alone, not even considering the huge welfare levels in San Diego, Los Angeles and San Francisco Bay Area.Much of the burden for implementation falls on local jurisdictionsÑcities and counties. Many experts see New York City as an advanced snapshot of what may be in store for the rest of the country. Under Mayor Rudolph Guiliani, the city has adopted an aggressive workfare program similar to what's mandated for the rest of the country in the new federal law. The program makes workers accept part-time jobs in exchange for benefits, an arrangement that is barely equivalent to minimum-wage pay. The program has pushed 130,000 into workfare since it was started in February 1995.But Liz Krueger, associate director of Community Food Resource Center, an advocacy group for New York City welfare recipients, claims the mayor's program has tried to meet much of its goals by simply trying to kick as many people off welfare as possible and by making it extremely difficult for even eligible applicants to apply and win approval. The city's application rejection rate has risen from 26 percent of applicants to a staggering 60 percent. At the same time, the number of soup kitchens and other service organizations that feed and help the poor and homeless has skyrocketed to 920 programs, up from 750 programs at the time the mayor took office.Additionally, advocacy groups and organized labor claim workfare programs such as the one in New York City are often face discriminatory practices because workfare participants don't receive the same protections of unemployment insurance afforded regular wage earners. But there's some signs that states are moving to appease labor and ensure such protections. New Jersey, the first state to approve a plan for the new law, included such protections. Minnesota is planning the same in a proposed program working its way through the Minnesota Legislature.Experts say chances are high that states will fail to meet tough federal workfare quotas in the next few years. If that happens, federal lawmakers may have to wink and look the other way or revisit the law. No matter what happens, the debate over revolutionary forces at work in the labor market nationally and globally will be brought to the forefront."The welfare reform is going to focus attention on this historic shift in the nature of work," predicted Rifkin, who thinks lawmakers and communities should focus on adopting a shorter work week and creating new jobs in the nonprofit sector of society. "It's going to force the issue," he said.