When Work Is Not Enough: State and Federal Policies to Support Needy Workers

Chapter 1. Redistribution through Work

Millions of American workers live between dependency and selfsufficiency . Despite significant effort, they cannot earn enough to support themselves and their families. Policymakers have not ignored the plight of those workers who must struggle to make ends meet. A number of recent federal policy changes have multiplied and enhanced the opportunities for needy workers to combine earned income with means-tested tax and transfer benefits. State-level policy choices vary, but many state governments have also created or expanded programs to assist needy workers. These programs are referred to collectively as the work support system.1 The work support system serves three overlapping target groups: low-wage workers, low-income workers, and people making the transition from welfare to work. It has two related objectives: to discourage welfare dependency and to help needy workers escape poverty and achieve self-sufficiency.With those purposes in mind, we define the work support system as follows: a collection of policies and programs that redistribute income by providing material assistance (in the form of cash or in-kind benefits) to low-wage workers, low-income working families, and families making the transition from welfare to work. On the basis of this definition, we analyze the following work support policies and programs (we explain program selection in detail in chapter 2): state and federal minimum wage rates; state and federal earned income tax credit (EITC) programs and the child tax credit; medical assistance programs, including transitional medical assistance (TMA), Medicaid, and 1 1 Redistribution through Work 1. Sawhill and Haskins (2002a, 2002b); Sawhill and others (2002); Zedlewski (2002); Greenstein and Guyer (2001); Haskins (2001); Sawhill and Thomas (2001). 01-8191-1 Ch01 11/2/05 4:12 PM Page 1 state Children’s Health Insurance Programs (CHIP); food programs, including food stamps and free or reduced-price school meals; Temporary Assistance for Needy Families (TANF) earned income disregards; child care grants; and rental assistance. This book describes and evaluates the work support system in theory and in practice.Although the system is quite significant in terms of theory because it challenges and reforms many of the ideas that have influenced U.S. social policy, in practice the system is performing far below its potential.We describe work support programs and estimate the benefits that selected programs provide in the fifty states and the District of Columbia. We evaluate the system’s performance at the national and state levels and discuss its potential and limitations as a means to alleviate poverty and realize self-sufficiency among needy working families. (We typically use the terms“needy workers”or“needy working families” to refer to the combination of the work support system’s three target groups.) Our research addresses the following questions: —What is the work support system and how has it changed over time? —Who is eligible, under what circumstances, to receive work support benefits ? —How do benefits vary from state to state? How do benefits vary with work effort, family composition, and contact with the welfare system? —Do work support benefits, in conjunction with earned income, provide an adequate living for needy workers and their families? —Is the work support system a complementary set of policies and programs that meets the needs of struggling workers? Or is it merely a disjointed collection of programs that fails to provide adequate income support for many needy workers and their families? Redistribution through Work The work support system was shaped by the influential social policy trends of the 1990s. The“devolution revolution”empowered states to make significant policy choices, especially in the areas of cash welfare payments, child care grants, and medical assistance programs.2 As a result, significant variation exists in the nature and generosity of work support programs from one state to another. The development of the work support system also reflects the “personal responsibility”movement.3 Policymakers used program benefits as 2 Redistribution through Work 2. Winston (2002); Meyers, Gornick, and Peck (2001). 3. Mead (1986, 1997); Handler (1995); Melnick (1994). 01-8191-1 Ch01 11/2/05 4:12 PM Page 2 leverage to encourage people to behave responsibly. Although personal responsibility was demanded in many areas, such as education, child support , and teenage pregnancy, the notion was expressed most often as an expectation that able-bodied people must work. By linking the receipt of means-tested benefits to earned income, policymakers intended to encourage and reward work. However, they also (perhaps unintentionally...