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Welfare Without Work (President's Budget)
Family of Three
Poverty Guideline for Family of Three = $11,890
Alabama
Pennsylvania.
California
$1,968
3,395
$4,836
2,534
$7,488
1,739
5,363
7,370
9,227
AFDC
Food Stamps
Total
• Benefits vary widely across States.
• AFDC and Food Stamp benefits total well below poverty in all States.
-_.
�---------------------T~U--------------------
Full-time Minimum Wage Work - No Welfare
Poverty Guideline for Family of Three = $11,890
Current Law
President's Budget
$8,500
Total
$8,500
(650)
1,998
0,080)
8,768
0,080)
10,052
Working with Child Care Expenses
Child care
Total
(2,089)
6,679
(2,089)
7,963
Working with No Child Care Expenses
Earnings
Taxes
EITe
War k expenses
(650)
3,282
Alabama
Pennsylvania
California
$5,363
$7,370
$9,227
Not Working
AFDC and Food Stamps
• Under current law, someone going to work who wants to avoid
means-tested benefits, is often far worse off than under welfare,
especially if they have child care costs.
• The President's budget significantly improves the situation, but
if a family has child care and does not collect government
benefits, they are still worse off than on welfare in high benefit
States.
-_.
�Table II a - - - , : - - - - - - - -
Full-time Work With Welfare (President's Budget)
Poverty Guideline for Family of Three
= $11/890
Alabama
Working with No Child Care Expenses
Earnings
Taxes
Work Expenses
EITe
AFDC
Food Stamps
Total
Working with Child Care Expenses
Chlld Care
Total
Not Working
AFDC and Food Stamps
Pennsylvania
California
$8,500
$8,500
(845)
(1,080)
3,282
0
1,945
11,802
(6SO)
(1.080)
3,282
0
1,945
11,997
U,709
(2,089)
$10,340
(2,089)
(2,089)
$10/535
$12,709
$5,363
$7,370
$9,227
$8,SOO
(650)
(1,080)
3,282
1,016
1,640
• Under new budget, if someone collects all possible government
benefits, she is a least somewhat better off working full-time.
But often the effective wage rate is only about $l50 per hour.
• To get ahead financially, full-time workers must collect benefits
from up to 4 different support systems. In reality, only 45% of
working poor families even collect Food Stamps.
• In high benefit States, even a full-time worker could still
qualify for AFDC
• Most of the gain to working is traceable to the EITC which
currently almost always arrives at the end of the year.
--
�- - - - - - - - - - ' - - Table Wb - - - - - - - - -
Half-time Work With Welfare (President's Budget>
Poverty Guideline for Family of Three = $11,890
Alabama
Working with No Child Care Expenses
Earnings
Taxes
Work Expenses
EITC
AFDC
Food Stamps
Total
Pennsylvania
California
$4,25()
$4,25()
$4,250
(325)
(540)
(367)
(540)
1,686
0.
2,965
7,994
(540)
1,686
1,666
2,465
9,202.
(325)
1,686
5,266
1,385
11,722
Working with Child Care Expenses
Child Care
Total
(1,044)
(1,044)
$7,262
$9,2.02
$11,722
Not Working
AFDC and Food Stamps
$5,363
$7,370
$9,227
(J ,044)
• Even half-time work pays somewhat, but only if the person collects
EITC, AFDC, and Food Stamps, and has low child care costs.
• Half-time work leaves people well below poverty in States paying
median AFDC benefits (such as Pennsylvania)
• The effective rate of pay is less than $2 per hour.
• Nearly the entire gain comes from EITC which is paid at the end
of the year.
--
�Table IV
Work Experience of Mothers 16 Years and Over
With Children Under 18 by Marital Status: 1991
Married
Spouse Present
Unmarried
No Spouse Present
Employed
Full-Time/Full-Year
35.3%
37.3%
Full-Time/Part-Year
13.1%
15.8%
. 24.8%
15.7%
26.8%
31.2%
100.0%
100.00'.
Part-Time
Not Employed
Total
Note: Full-Year is 50-52 weel<s
SOURCE: 51J.fH.U of wOOr Statittkt,
"Marita! .find FunUy ChuacterJitla of the Ll.bot
Pot~
from the March 1992 Currel'll Population Survf"Y:
T.bl~
28
• Only 35% of married mothers work full-time, full-year.
• Part time work is far less common among single parents,
probably because part-time work rarely pays better than welfare.
---
�Table V
Strategies to Make Work Pay Without AFDC but
Including Food Stamps
Poverty Guideline for Family of Three = $11,890
Half-Time
Full-Time
$4,250
$8,500
Earnings less expenses
3,710
7,420
President's budget
including EITC and Food Stamps (PB)
7,304
10,535
FB + Minimum wage = $4.75 (MW)
7,845
11,219
PB + Child care subsidized (CC)
8,036
11,997
FB + $3,000 in child support
9,584
12,815
FB + CC + CS
10,316
14,277
PB + CC + CS + MW
10,856
14,961
Earnings at minimum wage
• All three additional policies individually can help make work pay.
• Individually, only child support is significant in making part-time
work feasible.
• A combination of all three really makes work pay.
�(:J;1.A-F')
slt;lq~
MAKING WORK PJlX
\tJ'{l..-
f"
\-'>e.A-\1k
~k
Introduction
A key element, and the starting point; of the president's agenda
for welfare restructuring is to make work pay for low income
individuals.
While the efforts to build into welfare a greater
emphasis on education l employment and training are important and
in the right direction, they cannot succeed without more
fundamental change in the financia1 incentives of welfare and
work.
Although there is more to welfare reform then financial
incentives, understanding the current incentives has to be the
starting point in any restructuring.
In order to clarify the current incentives and future directions
this paper explores a variety of comparisons between working at
the minimum wage and not working.
Necessarily, these examples
are both simplified and not universal.
However, they make it
clear that for many individuals on welfare, work simply doesn't
pay.
To standardize the comparisons, we use an example of a parent
with two children, ages three and thirteen, on welfare.
We
examine their disposable income if they remain on welfare and the
parent doesn't work compared to their disposable income one year
after taking a minimum wage job at full-time or half-time.
We
�assume that if the parent works, she incurs child care costs for
the three year old, but not for the thirteen year old.
Because
welfare benefits vary dramatically by state, we use examples of
low, medium and high benefit states.
Finally, we compare the
family's disposable income to the current poverty guideline for a
family of three (11,890).
This is a useful guide, but is not
strictly correct since the poverty guideline is intended to
reflect gross cash income.
Work Without Welfare
We begin by comparing a family that remains on welfare without
working to a family that tries to get by with a minimum wage job
and no means-tested support through the welfare system.
This
relieves the family of the hassle of having to deal with the
welfare bureaucracy on an ongoing basis.
We do assume, however,
that the family does gat the Earned Income Tax Credit (EITC),
since that benefit is available through the tax system and is
received by a very high proportion of eligible individuals.
Table 1 shows the results.
with non-work the family receives
between 5,339 and 9,203 in AFDe and Food stamps (FS) and is
categorically eligible for Medicaid.
With full-time work the
family is at a little more than 55 percent of poverty.
Only the
family in Alabama is better off working and its net increase on
an hourly basis is about 67 cents per hour.
In addition, almost
�3
30 percent of the family's income would come from the
EiTC~
which, although it is available on an advanced basis, is received
by ovsr 99 percent of recipients at the end of the tax year.
SUbstantial expansion of the EITC has occurred over the past
several years.
(To illustrate current law, we have shown the
fully expanded EITe which in reality won't become effective until
1994.
The actual 1993 EITC would be
; the 1988 EITC would
be _ _ _ _ .)
At half-time work the family's income is $3,403 annually, less
than thirty percent of the poverty level.
Unless the family had
some other regular source of income, this level of work would
simply not be sustainable.
work with Welfare
Many families working at the minimum wage continue to be eligible
for means-tested supports, and in this section we explore how
participation in these programs can augment a working family's
income~
It is important to realize, however, that for a number
of reasons participation rates in these programs is relatively
low.
ThUS, only about 55 percent of working poor families
receive Food stamps and many of the medicaid options are utilized
primarily by those with very high expenses.
these low rates are several.
entitlements.
The reasons for
First, many are not individual
Second, knowledge of the existence of the programs
�4
is low.
And, finally, many individuals are motivated to go to
work primarily to escape the complex and conflicting rules, the
stigma, and the hassle of the welfare system.
Table 2 presents the results of full-time and half-time minimum
wage work on the assumption that families continue to receive
AFOC and FS benefits for which they are eligible.
The family
remains on FS in all states and eligible for AFDC in California.
The income available to the family in Alabama and Pennsylvania is
less than so percent of the poverty level, and in California it
approaches the poverty line.
The hourly return to work is almost
two dollars per hour in Alabama ranging down to about $1.10 in
California~
Half-time, minimum wage work leaves all families substantially
below poverty with income ranging from $6,800 in Alabama to
$10,600 in California and still receiving AFDC and FS in
Pennsylvania and california.
The hourly return to work would be
about $1.50 in all states.
There are other benafits which tha family may receive which would
improve their financial situation.
The biggest benefit 1s
In Pennsylvania or California, whether a family is
housing.
working or not, counting the value of housing subsidies moves the
family's disposable income well-above the poverty guideline.
addition
j
In
the youngest child would be eligible for medicaid, and
�5
if the family were lucky, they might be assisted with child care
expenses~
~ork
With Welfare--Post Current Clinton Proposals
There are a number of elements that the President has already
submitted which would substantially change the current situation.
These items are:
1)
universal health care coverage;
2)
greatly expanded EITC,
J)
improved FS benefits.
In this section we explore quantitatively the effects of the
latter two changes.
clearly, eliminating the fear of 10s5 of
stable and ongoing health oare coverage would also eliminate a
major disincentive to leavinq welfare.
The proposed EITC would have a very large impact, effectively
converting a $4.50 per hour job into a $6.30 per hour job.
However~
although there are substantial improvements in income
levels, only in California, where the family continues to be
eligible far AFDC, does its disposable income exceed poverty.
Furthermore the return to work ranges from about $1.75 per hour
�6
in California to about $2.75 in Alabama.
If the family were
fortunate to have subsidized child care or housing, family income
would exceed the poverty guideline in all
states~
It is important to note, however, that these examples involve
full year, full-time work, and we really need to address whether
that's what we want to expect of single parents, especially those
with younq children.
If we examine the work of wives, despite
the increase of mothers in the work force, we see that the norm
is not full-time, full year work.
Examining the half-time figures reveals a less rosy picture.
Only in California does the family approach poverty level income,
and in Alabama and Pennsylvania, it is well below
we are to have
reasona~le
that~
Thus, if
expectations for children in families
where we cannot always expect full-time work 1 we need to be
thinking about other sources of income.
The most promising
source is income from the other parent.
WOIk With welfare and Child Support--post current Clinton
Proposals
In this section we assume that the family receives $250 every
month in child
support~
Under current law when a family is on
AFDC, except for the first $50 per month in current support,
child support payments,reimburse the government for ArOe costs.
�7
Child support received is currently counted fully aqainst FS, but
the Administration has proposed to disregard the first $50 as in
AFDC, and that is what WQ have assumed in the examples5
(I'm not sure what story to tell here, since, except for
california, the family is still way below poverty.
Furthermore,
since the family remains eligible for AFDC in FA & CA, it only
benefits to the tune of $600/year.
Even oovering child care will
leave the family at a bit less than 11K in Alabama and
Pennsylvania.]
�Comparison 1: Work Withoul Welfar. VS. Non-work
Incomo/Expenu:es
Earnings.
Full nme Work
FS
Work Expenses
8,500
(650)
1,998
0
0
(1.080)
Child Ca,e
(2.Q~9)
FICA
SITe
AFOC
Not
6,$78
HalfTime Work
4.250
(325)
1,063
0
0
(540)
It,044)
3.403
Non-work
Penngylv$nla
Alabama
0
0
0
0
3.371
0
0
4,836
2.510
0
0
1,968
C@!ltornia
0
0
0
7,488
1,715
0
Q
Q
l!
5.339
7.346
9.203
6::
�Cbmporison 2: Work with Welfare VO. Non-work
HSu- Work
FUIIl"lme WO[!:S
IDcom !l1EXP(H)QU
Alabama
Earnings
6,500
FICA
Penneytvanla
(OSO)
1,998
EITe
AFOC
Oollfornlo
8,500
(85.)
1,998
2,548
~
1,61 e
0,080)
(1.080)
(1 ••S0)
(g.089)
9,226
Wotk Expenses
Child Ca.a
l&.QJ!ID
(3.2§i)
Ne.
3264
12.490
Add Housing
Tota!
•
Pen!:!sylvan!a
•
•
&.600
(050)
1,998
0
2:.548
F$
Alabama
0
1,968
3,371
0
2
9,226
11,400
5,339
5.736
14,962
Lilli
16,544
4.834
10,172
Alabama
!.!,\eome/Expensu
Earnings
FICA
4,250
EITC
1,0.63
AFOC
Ne.
0
3,255
(540)
(1,044)
6,657
Add HOl,Jsing
(325)
CAlifornia
4,250
Al,bama
4,250
(325)
1,063
~
(325)
1.063
' Cii:"'lW
0
0
0
Total
dO"".
1,520
(540)
(1.04')
11.234
!W.U
Lll1
4,834
11.120
Child Care
2.441
(540)
(1.04')
8,555
1,968
3,371
0
0
6.339
~
FS
Work Expenses
OM
Pennsylvania
14,676
18,615
Iii 1: TC ~"" i<>
... w";.;dM.,,
10,172
~
'
i-Uu ~k ~:'+-, ~'7 ",,,,,:~;oIies -:
•
0
0
4,838
2,510
0
Q
7,346
~
13.792
~~!'l-W:2'~
elnosylvan!a
Half I!mQ WO[l!:
C~l!fotnla
•
•
0
7.488
1.715
0
2
9,203
¢:
7.990.
'7.192
4:
California
0
0
0
4,836
0
7,488
2,510
1.715
0
0
'0
0
0
0
7.346
9,.20.3
8.445
1,99Q
13,792
17,1-92
{:
�Cbmp'8ri:_on 3: Work with Welfaro va. Non-work (President's Budget)
Non-Work
Full Time WSHIs
fn~2mttE)(pen!Ul$
Earnings
FICA
EtTC
AFOC
FS
Pennsylv60ia
AlabAma
9,000
(689)
3,282
0
2,572
9,000
(689)
3,282
0
2,572
Work Expott$I)O
(1.0eO)
(1.0eO)
Child Car.
(2.oBsn
10,997
1?,089'
10,997
No'
Add HousIng
Total
Call forni,
9.000
{BB9}
3,282
Alabama
Pennsylvant"
0
0
0
0
0
0
2.605
1,790
(1.080)
0
1,9$8
0
4,&38
7.488
3,515
2.654
1,85&
0
0
0
(~,OB~J
l1.
l1.
l1.
5.483
7.490
••347
12,820
Earnings
FICA
EITC
AFDC
FS
Work Expensefl;
Child Care
Not
Add H(H..!tt,lng
Total
0
ll..1.1.!
~
L..1.!.§.
5,136
Yll.
LJll!lt
14.111
16,583
19,965
10,619
13.936
17,336
Ijalt Time ~£H!:!;
!.!IJ?,ti m elE)! p.nsa4
California
Pennsy.\Vanla
Alabama
4.250
(344)
1 ;185
0
3,339
(540)
(1,044)
7,445
~
9,940
4,260
(344)
1.785
2.460
2.600
(540)
11...044}
9,167
.4.956
14,123
l:h!o-Wo[k
CaliforniA
4.250
(344)
1,785
8.060
1,520
Alabama
eenneyl....anl.
a
•
0
1,968
3.515
Callfornl!
a
a
4.838
2,654
7,488
1,859
0
0
•
0
•
Q
(540)
0
,1,(44)
11,687
l1.
l1.
l1.
5,483
7.490
9.347
5,138
Yll.
Z.990
17,336
Lll.l
19,068
10,619
13,936
E-
�O'om'i>~;!aon 4; Work wIth W.lfefe
\f8:.
Non.-work (Pruldent'. Budge') end lncludlng Child Support
Fv.1I TImt;
l:jcome/Expenses
Alab~
Earnings
~grk
AFDC
ChUd Support
~S
3,282
WQrk Expaos9t1
(1,080)
Child Cere
N••
12,0139)
13,277
Add Housing
ToUt!
15,491
~
LncqJoe/E)(ponU9
AI.@_bama
Earnings
ElTe
AFOC
ChUd Support
FS
Work Expanees
Child Care
N.,
Add ousing
H
0
3,000
2.619
(540)
(1.044)
9,725
0
0
0
0
•
4,836
.00
0
•
°
7.488
60.
3,648
0
3,000
3,385
0
3,648
!l.
!l.
!l.
6.385
9.084
11,736
4,524
10,909
un
15,349
7,810
1&,546
0
E-
Non-Work
Alab«mB
P!nnlYlvanl,
Callfornh:\
0
0
0
0
0
0
3,000
3,385
0
0
0
0
7,488
$00
3,646
0
4,250
(344)
1,785
2,460
4.250
(344)
1,785
6,060
800
2.600
(540)
11.
!l.
!l.
9,167
800
1,520
(540)
111 044 )
12.287
8,386
9.084
11,136
5,941
15,708
ZJI.Q.1
19,480
4.52:910,909
un
L.~ll
15.349
19,546
~O44)
•
~~ q[}O
''1
Callfom!e
0
0
p~'Q~
C-6n~"",..
"-"<>1.1<.;,"'[ cI"''':'''I0
6,965
20,385
4,686
• Half TTmv Work
f'; n nsylv.@nla C~!1fornia
3,487
13,212
To1al
°
3,000
1,852
(1,080)
(2. 08 9)
13,277
17.963
4,250
(344)
1,785
FICA
9.000
(
)
3.282
2.605
••0
1,790
(1,060)
!g,08§D
13,420
(5••)
Pennsvlvanla
l\labarna
...
9,000
3 ..282
0
3.000
1,852
FICA
EiTC
O@Ufomla
PennsylVania
9,000
(689)
Non-Wo!:~
1,00<1 "1-",,,['5, ~'J i>.tJ.u.;otU,., c-d
cLlJ Ci\IJ ~1o.,J
4,838
aoo
3,646
0
E'
�OPfION:
PART TIME WORK
There has been discusslon of finding a way to provide income support to people working pan time
outside of the. AFDC system. Here's an option for discussion purposes of bow such a program could
work:
Divide AFDC into two programs; Transitional Support and Work Support.
Transitional Support would be the time limited AFDC program. JOBS participation would be
mandatory for receipt of TS. although deferrals and e:w:tensions would be available as discussed.
Work Support would be a much simpler income supplement program:
To be eligible, applicant would lIave to be working 20 lIours a week [Less in low benefit
Stales].
WS rules <ouid be simplified muelllUrther titan TS - namely, It might sense to adopt Food
Stamp filing .nlt aad rules for WS, >ad determine WS as a percenlage of Food S_ps.
Asset rules for Work Support wouJd be more liberal, and any asset accumulation
demonstrations would only be open to those on Work Support.
States could have the option of setting up Ole Work Support program as a state EITC (as more
states"are doing - Cuomo just proposed one for NY) provided advanced payment was made
available regularly >ad simply.
Work Suppon would not be time Limited,
This proposal could:
make life easier for the working poor by simplifYing their interaction with assistance
progrruns
separate two dlstinct missions - transitional support for non~work:ers and income support for
poor workers - currently captured in one program - into two distinct programs
permit AFDC workers to be trained to link clients with Child Support, EITC, Child care, etc,
- the role we had once conceptualized for the Work SuppOrt Agency
CON: Little more than a cosmetic name change.
PRO: Even a cosmetic distinction may be important ~ otherwise AFDC will be moving in two
directions: contracting because of time limbs while expanding as an income supplement.
•
CON: Complexity; Counter to reinventing government to create two programs where one exists,
PRO: Clarity; One two year program for those who aren't working but want to; Another simpler,
more supportive program for those who work.
�
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Bruce Reed - Welfare Reform Series
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Domestic Policy Council
Bruce Reed
Welfare Reform Series
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<a href="http://clinton.presidentiallibraries.us/items/show/36314" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/description/612964" target="_blank">National Archives Catalog Description</a>
Description
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The Bruce Reed Welfare Reform Series includes material pertaining to legislative strategy, analysis of state plans, child support, speeches, rollout of the Working Group's proposal, and various drafts of welfare reform bills authored by the Working Group, Congress, and public/private organizations. President Clinton established an interagency group, the White House Working Group on Welfare Reform, Family Support, and Independence (1993-1994), in order to carry out his campaign promise “to end welfare as we know it.” The Working Group was co-chaired by Bruce Reed.
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Clinton Presidential Records: White House Staff and Office Files
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629 folders in 69 boxes
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Creator
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Domestic Policy Council
Bruce Reed
Welfare Reform Series
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 47
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/Reed-Welfare-finding-aid.pdf" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/description/612964" target="_blank">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Publisher
An entity responsible for making the resource available
Clinton Presidential Library & Museum
Medium
The material or physical carrier of the resource.
Reproduction-Reference
Date Created
Date of creation of the resource.
5/3/2011
Source
A related resource from which the described resource is derived
612964-work-part-time.pdf
612964