News & Politics

Welfare: The New Corporate Playground

Corporate social services providers, which claimed they could replace state-run welfare programs, have fattened corporate profits but left the needy out in the cold.
Welfare reform was a hot topic five years ago. Congress passed the Personal Responsibility and Work Opportunity Act, opening welfare's door to privatization. Governors flouted welfare-to-work programs and states bragged of decreasing unemployment rolls.

Also active in welfare reform were corporations. They welcomed the opportunity to receive government money and, through decreased bureaucracy and increased efficiency, promised to create social services that would help former welfare recipients get their lives in order.

Little is known about how well those corporate promises panned out, largely because there was no monitoring system written into the 1996 welfare act. However, a recent study from the Applied Research Center, "Prospecting Among the Poor," reports that while corporate bankrolls may have profited, those living in poverty often did not.

"Prospecting Among the Poor" tracks how four recipients of government funding -- Maximus, Lockheed-Marin America Works, Curtis & Associates -- faired in the provision of social services. And the results are troubling. The report found the four often engaged in egregious use of public funds and discriminated against workers. Most notably, the corporations hired unqualified social workers with little experience and created bureaucracies that made it easier to drop unprofitable welfare clients.

At Curtis Associates, for example, clients were asked to fill out 18 forms unaided and those unable to figure out all the answers were denied benefits. Draconian attendance policies resulted in workers being fired for attending to family emergencies.

The ARS report also documents that many welfare clients with pressing mental and substance-abuse problems were skipped over rather than helped out. Those who did get help were often pushed into low-paying, dead-end jobs with annual salaries of $15,000 to $18,000. Women, in particular, were often placed in the most menial jobs with the least possibility of advancement. A discrimination suit against Maximus' handling of its female clientele is pending.

How these companies acquired state contracts also has come under fire, the report shows. Maximus' early bidding in New York and Lockheed-Marin's lobbying and campaign contributions in Texas have led to accusations of bribery and cronyism.

Maximus, one of the earliest, largest and most profitable corporate distributors of social services, claimed to be the leader in criminal non-support cases, when in fact its lawyers had not seen a single case. America Works received $1 million from New York State for placing people who never found permanent employment or never worked at all.

Another loophole in the privatization system is that there are no state or national clearinghouses to document grievances. Thus, when one company is discontinued for misusing government funds or mishandling cases, there is little to stop it from picking up contracts elsewhere. Corporations like Maximus, whose contract was terminated in one Colorado county, had no problem establishing another $4 million contract in the same state later that year.

Inherent in the privatization trend is the assumption that these organizations are supposedly leaner and more effective. It's why privatization was heralded in the first place. This, too, is an illusion, according to the report. Budgets at Maximus and Lockheed-Marin often doubled and tripled once they assumed control of social services, and this despite the fact they had fewer clients than when it was state-run.

Perhaps worst of all is the simple fact that the poor are being overlooked for profits. Checks were sent late, benefits for which clients were eligible were not disclosed and some cases were not managed at all. According to ARS Senior Research Associate Bill Berkowitz, "With the welfare clock ticking away, not having your case worked in a timely manner becomes critical -- bringing recipients that much closer to being dumped without a safety net."

View the entire report at
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