Welfare Reform and Kentucky Women

Welfare reform represents one of the most significant redefinitions of the relationship between citizens and government in the last half century. The social safety net that had supported thousands of women and their children has been fundamentally altered. The authors consider the consequences of welfare reform for Kentucky women and their families as well as policy initiatives state government has adopted to assist Kentuckians in this transition. The chapter first examines the context of dependence on the social safety net in Kentucky based on women’s overall economic status and place of residence, considers key changes in the welfare system and assumptions underlying those changes, and evaluates the implications. The chapter concludes with policy recommendations to mitigate problems and maximize opportunities in welfare reform.

Kentucky Women’s Economic Status

At one time, a woman’s economic status was defined by that of her father or her husband. Women spent few, if any, years outside the parental or marital home. But since mid-century, significant changes in marriage and divorce patterns have made it more and more likely that a woman either makes substantive contributions to the household income or provides the primary source of income for her and her children. A growing proportion of women never marry, and those who do marry do so later in life and are more likely to get a divorce. Women have entered the labor force in increasing numbers;(1) in 1990, 51.2 percent of Kentucky women age 16 and older were in the labor force compared with 35.9 percent in 1970.(2) In 1992, women owned an estimated 31.4 percent of all businesses in Kentucky.(3)

Today, it is more likely than ever before that women will have primary responsibility for their economic status and that of their children. Nearly one in four Kentucky children live with a single parent, and nearly one in seven children live in households with no adult (21+ years of age) male present. Single-mother families account for 15 out of every 100 Kentucky families, and over half of them have children under 18.(4) When a divorce occurs in families with children, women are most likely to become the custodial parent. Yet only 4 in 10 of Kentucky’s children of divorce receive child support, compounding the likelihood that the mother becomes the primary if not the sole source of economic support for the family.

Given the increasing likelihood that a woman must bear primary financial responsibility for herself and her children, her prospects for employment and earnings have become central to the well-being of women and children. In 1990, half of Kentucky women age 16 and older (51.2 percent) and 7 out of 10 men (70.8 percent) were in the labor force; women represented 40 percent of all workers in Kentucky. While most Kentuckians work full time (35+ hours), year round (50-52 weeks), men are more likely than women to be full-time, year-round workers.(5) Thus, the earning power of employed women in the Commonwealth is substantially less than that of men. In 1990, average hourly earnings of all women employed in Kentucky was $8.25 compared with $12.80 for men. This earnings gap exists regardless of the worker’s education or type of employment. For example, hourly earnings of women who worked as textile cutting machine operators in 1990 was $6.13 compared with $10.18 for men. Even occupations that have traditionally been filled by women have an earnings gap. For example, female secretaries earned $7.69 an hour on average in 1990, while male secretaries earned $12.31 an hour; and female registered nurses earned $13.04 an hour while men in the same job earned $15.27 an hour.(6)

The confluence of these circumstances—the increased likelihood of being a sole provider and working part time and earning less than a man—has had significant consequences for women’s economic status, in particular the likelihood that they will live in poverty. Evidence of the diminished economic status of women includes:

• While one quarter of all Kentucky families in 1990 had annual incomes under $15,000, more than one half of female-headed households fell below that level.(7)

• The median income of Kentucky families headed by women with children under the age of 18 in 1990 was $8,731 or only one fourth the income of married couple families with children under the age of 18.(8)

• Kentucky families headed by single mothers in 1990 were three times more likely than all families to be in poverty and more than three times as likely as married couple families. Two thirds of single-mother families with children under the age of six are in poverty.(9)

• One in ten single mothers who work in year-round, full-time jobs live in poverty, and nearly one third of single mothers who are high school graduates live in poverty.

Differences in employment and earnings opportunities between rural and urban places further compound earnings inequalities for women and have important consequences for the likelihood that rural women and their families will be in poverty. Rural women consistently face greater limitations than their urban sisters. Reflecting rural economies’ larger share of low-wage industries, a higher proportion of rural workers earn between $4.25 and $5.14 an hour than do urban workers. The majority of rural minimum wage workers are adult (age 20 and older) single women who work full-time, 20 to 35 hours a week. Overall, rural earnings are lower than urban. Finally, rural unemployment rates tend to be higher than urban rates, and rural workers are more likely than urban workers to seek work in a job market characterized by part-time and seasonal employment.(10)

Poverty rates are also substantially higher in rural than urban areas. Six out of ten poor Kentuckians live in rural areas. Sixty Kentucky counties had 1993 poverty rates of 20 percent or more (the state average is 19.3 percent), and all but one of these counties (Carter) are rural. Twenty-four of these counties have poverty rates of 30 percent or more, and all of these are rural.(11) The poverty rate for rural (nonmetropolitan) families headed by a single mother with children under the age of six is 73.2 percent compared to 63.1 percent for this type of family in urban (metropolitan) places. The poverty rate for rural families headed by a single mother with children under the age of 18 is 58.1 percent compared to 46.1 percent for this type of family in urban places.(12)

As women have lower earnings potential than men, especially in rural areas, and are more likely to be sole providers for their dependent children, they and their children face higher rates of poverty and are more likely to rely on public assistance. February 19, 1998, data from the Kentucky Transitional Assistance Program or K-TAP, Kentucky’s central program under welfare reform, illustrate this point.(13)

• 87.9 percent of all adult recipients are women.

• 69.4 percent of all recipients are children under the age of 18.

• 73.6 percent of all recipient cases are single-parent families.

The economic status of Kentucky women, particularly the likelihood that they live in poverty, means that welfare reform looms large in their future. This is the case not only for women currently on public assistance but also for those who may come to need this assistance. The following section examines key aspects of the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), and how they have altered the social safety net.

Assessing Welfare Reform

In 1996, President Clinton signed the welfare reform legislation passed by Congress that effectively redefined the U.S. social safety net. Figure 1 provides highlights of the major changes wrought by this legislation. Among these changes, some key provisions will have significant consequences for Kentucky women and their dependent children. In particular, the requirements for work or work-related activities as a condition for continued eligibility for assistance, sanctioning recipients for failure to meet program work and other requirements, and the 60-month lifetime limit on eligibility for assistance will determine the future economic status for many Kentucky women.

Figure 1: Key Provisions of National Welfare Reform Legislation

Whether Kentucky women who need to turn to public assistance will be able to make a successful transition from welfare to work and achieve economic independence depends on the validity of four assumptions about the nature of the labor market that have strongly influenced the expectations for employment and economic independence on the part of recipients:

1. All adult welfare recipients have the skills and experience to enter the labor force.

2. There are enough jobs to absorb the influx of welfare recipients and, if not enough jobs are currently available, a sufficient number of new jobs will be created by a growing economy within the 60-month lifetime limit for welfare recipients.

3. The jobs available to welfare recipients will pay enough to prohibit their needing further public assistance.

4. Absent sufficient earnings, the private sector (in particular charitable organizations, family, and friends) will bridge the gap between earnings and financial needs.

An assessment of these assumptions provides some insights into the implications of welfare reform for Kentucky women. Since residence has an important influence on work opportunities and wages, this assessment examines rural and urban differences in Kentucky women’s economic situation.

Assumption Number 1

All adult welfare recipients have the skills and experience to enter the labor force. Work readiness reflects an individual’s education as well as his or her work experience. While women are more likely than men to have a high school degree, men historically have been more likely to go on to college and complete a bachelor’s degree. In addition, education is inversely related to the likelihood of living in poverty—nationally, the less education, the greater the likelihood of poverty.(14) In Kentucky, however, even those with a high school degree or more face a substantial risk of living in poverty. In 1990, one in twenty married-couple families headed by a person with at least a high school degree lived in poverty, and three in ten families headed by a single mother with at least a high school degree were in poverty.(15) Consequently, many welfare recipients lack the educational resources and work experience to make them attractive to potential employers. Among K-TAP recipients, 45.3 percent do not have a high school degree or its equivalent, and 54.4 percent have at least a high school degree but not a college degree.(16) While more formal education is a protection against the risk of poverty, it is more effective for men than for women, and more effective for whites than for nonwhites.

Work readiness is also about prior work experience, and once again women tend to be less likely to have this resource. In 1990, for example, 65.0 percent of women age 16 and older were employed 35 hours a week for 50 weeks a year, compared with 72.6 percent of men. For some women, early child bearing has limited their time in the labor force, while others have had work experience but in jobs that offer few opportunities for skill development and advancement. Among K-TAP recipients, urban dwellers are more likely than rural ones either to be employed or have a work history (75.0 percent vs. 73.5 percent).(17) In Kentucky, opportunities to find a job are often as much a reflection of the number and types of employment opportunities in a community as they are of an individual’s desire or intention to work.

Despite these limitations in work readiness, the requirements for work participation and time limits on training mean welfare reform does not encourage recipients to invest in anything other than short-term training. For example, only education directly related to employment counts as meeting the work requirements. This only includes "vocational education training; job skills training directly related to employment; education directly related to employment, in the case of a recipient who has not received a high school diploma or a certificate of high school equivalency; or satisfactory attendance at secondary school or in a course of study leading to a certificate of general equivalence."(18) Recipients of Temporary Assistance to Needy Families (TANF) seeking further education beyond that directly related to immediate employment, must meet the work participation requirements of 20 hours/week in addition to going to school.(19) Moreover, as included in Section 271.33, "Vocational educational training may only count for a total of 12 months for any individual," and "In counting individuals for each participation rate, not more than 30 percent of individuals engaged in work may be included because they are participating [in vocational educational training]."

Yet the evidence of the economic benefits of continued education is unequivocal. A 1994 Census report illustrates this point.

• In 1992, a worker with only a high school degree earned nearly $6,000 more than one without a high school degree ($18,737 vs. $12,809).

• A college graduate earned $14,000 more than a high school graduate ($32,629 vs. $18,737).

And the income returns from education are increasing. For example, while 1992 high school graduates earned 2.5 times more than their 1975 counterparts, 1992 college graduates earned three times more than their 1975 counterparts.

The work requirements of welfare reform will make it even more difficult for rural women who begin with an educational disadvantage to gain the schooling essential for finding a job that pays enough to meet their cost of living. For example, workers in rural areas must travel greater distances over more varied types of terrain to reach educational and work opportunities as well as child care. While in some cases, TANF participants may indeed be able to secure employment at the same site as the educational institution, many will not. Consequently, in rural areas, increased travel times in addition to the work requirements could discourage recipients from seeking further schooling. Thus, TANF participants in rural areas will not be able to get the educational services and training that could keep them from needing public assistance. Anecdotal evidence suggests this is already occurring, as community colleges across Kentucky report adult women dropping out of school.(20) The limited opportunities for training or education provided for in the welfare reform legislation almost inevitably confine women to low- or minimum-wage jobs with incomes at or below the poverty threshold, and ensure they will need continued assistance.

Assumption Number 2

There are enough jobs to absorb the influx of welfare recipients, and if enough jobs are not currently available, a sufficient number of new jobs will be created by a growing economy within the 60-month lifetime limit for welfare recipients. Nationally, unemployment rates are at or near the lowest levels in years. In many urban areas, the want ads are extensive, and employers desperately search for workers. Unfortunately, the same cannot be said for many rural communities, especially in the South. Low state unemployment levels mask tremendous regional differences. There are spatial inequalities in the distribution of job opportunities that place rural communities and the welfare recipients who live in them at a disadvantage in meeting federal mandates. In addition to spatial differences in employment opportunities, the Joint Center for Poverty Research(21) notes significant differences in unemployment among differently skilled workers. Less skilled workers always have much higher rates of unemployment than the aggregate rate.

This is especially true for women, who find a much less diverse labor market awaiting them—less diversity in types of jobs and employing firms—and the characteristics of the rural labor market exacerbate these differences.

• In 1990, seven of ten women workers in Kentucky found employment in four types of occupations (professional specialties, 15.3 percent; administrative support, 25.3 percent; "other" service workers, 17.2 percent; and sales, 12.8 percent). Kentucky had the highest percentage of women employed in service occupations in the South and the lowest proportion of women employed as machine operators.(22)

• Three industrial sectors—retail trade (20.8 percent), health services (14.8 percent), and educational services (13.2 percent)—employed nearly one half of all women workers in Kentucky.(23)

The concentration of women workers in a limited number of types of occupations and employing industries is consequential for their potential earnings. In general, the occupations and industries that have a large proportion of women workers tend to have lower wages, a higher proportion of part-time workers, and fewer benefits than do those occupations and industries that employ larger proportions of men.

Assumption Number 3

The jobs available to welfare recipients will pay enough to prohibit their needing further public assistance. This assumption is perhaps the linchpin of welfare reform. Moving from welfare to work can only succeed if the work pays enough to end a recipient’s dependence on welfare. For many Kentucky women, this means they must find employment that pays them enough to meet the cost of living for themselves and their dependent children. The wage necessary to enable a household to meet its minimum monthly expenses is a "livable wage." Thus, to determine the prospects for women currently receiving welfare to be able to obtain employment that pays enough to eliminate their need to rely on public assistance, we must first determine what level of income would be required for an employed mother with two children to meet her monthly bills in rural and urban Kentucky without relying on government assistance.

Table 1: Minimum Monthly Costs for a Single Mother with Two Dependents

What is a monthly cost of living? Typically this includes the costs for housing and utilities, food, child care, transportation, and basic household and personal care items, but omits costs for things such as entertainment, birthday or other gifts, toys, tobacco products, or alcohol. While a monthly cost of living is often calculated for large urban areas, estimates for rural places are far less common. Instead, it is assumed that there are few significant differences in the monthly cost of living between urban and rural areas or that rural costs are lower than in urban areas.

Local costs of living, however, vary by geographic area. For example, the cost of food is generally higher in rural areas. This higher cost is due to increased transportation costs and the inability of smaller rural retailers to gain cost advantages from high-volume wholesale purchases.(24) Transportation costs are also not directly comparable between urban and rural areas. In urban areas, public transportation is available not only for getting to work, but also for doing grocery shopping and other trips. By contrast, public transportation is a rarity in rural areas (see, for example, Federal Transportation Administration, 1994). The only way for an individual to get around is by personal transportation, either owning a vehicle or sharing a ride with someone who does.

Two approaches have been used to determine the monthly cost of living. Kentucky Youth Advocates has developed a monthly cost of living estimate for Louisville(25) which can be considered representative of urban areas in Kentucky. To determine the monthly cost of living in rural Kentucky, estimates were developed by the Rural Sociology Program, University of Kentucky(26) for seven rural counties. Three of the counties are located in eastern Kentucky, two are in the central region, and one is in the far western part of the state. Of the seven, four counties are in the Appalachian region, and two are adjacent to a metropolitan area.

What are the minimum monthly expenses for an employed single mother with two children, age four and six? While the methodologies varied, Table 1 compares the urban and rural monthly costs of living for a mother with two dependent children. These estimates indicate that to live independently, a single mother with two children would need to earn between $10.61 and $12.45 an hour to pay her basic monthly bills as well as to pay OASDI (at 6.2 percent) and Medicare (at 1.45 percent) taxes, which are deducted regardless of income level.

Implications of the Monthly Cost-of-Living Budget in Rural Kentucky

The current welfare reform assumes independence from assistance within a maximum of 60 months. Employment, it is asserted, will result in self-sufficiency. But how likely is it that a woman in Kentucky will earn the wages necessary to meet these minimum monthly expenses? Most recipients of assistance have limited education, training, or work experience. To meet the new work requirements, many current recipients will rely upon minimum wage jobs with limited opportunities to increase their education or training.

Figure 2: Minimum Wage, Poverty, and the Cost of Living for a Family of Three in Rural Kentucky

As illustrated in Figure 2, however, the earnings from a minimum wage job are not sufficient to bring a family of three above the poverty threshold or to meet the minimum monthly cost of living. In other words, the minimum wage is not a "livable wage." In the 1960s, working at the minimum wage resulted in an annual income slightly above the poverty line.(27) Today, however, a job at the current minimum wage of $5.15 for an average of 2,000 hours during the year (a full-time job) yields pretax earnings of just $10,300, which fall below the U.S. Department of Health and Human Services 1997 poverty guidelines for a family of two ($10,610), substantially below those for a family of three ($13,330), and well below those for a family of four ($16,050).(28) In short, the minimum wage is no longer a living wage—that is, it is not adequate to meet a family’s monthly costs of living.

Assumption Number 4

Absent sufficient earnings, the private or nonprofit sector, in particular charitable organizations, family, and friends, will bridge the gap between earnings and financial needs. During the debate over welfare reform and after its passage, when concerns were raised about what would happen to welfare recipients displaced from the social safety net, much was said about the need for the private sector—churches, voluntary associations, friends, and family—to step in to close the gap. How likely is it that the private sector will have the capacity to bridge the gap between wages and the monthly budget needs of women?

Nicholas Lemann, notes in a Newsweek editorial: "It is a very seductive argument: Let charities step in and take over where big government has failed. . . .[But] even the mammoth Ford Foundation with just under $7 billion in assets, couldn’t possibly afford to provide day care to all the children whose mothers’ benefits will be terminated under the new welfare law."(31) Already news stories are appearing that suggest food pantries and other charitable organizations are reaching their limits due to rising demands for their services. Most of these have focused on urban charitable organizations, perhaps because these are most accessible to the media. But is there any doubt that the far smaller number of rural voluntary agencies are in the same situation, especially given the lower wage rates in rural communities?

A recent report(32) illustrates the challenges faced by those providing and those seeking food assistance. Through a network of 186 certified affiliate food banks, Second Harvest provides food assistance to nearly 50,000 local charitable organizations and nearly 26 million people. The study found more than half (54.0 percent) of the families with children receiving emergency food assistance were single-parent families. Moreover, more than a third (38.6 percent) of all households seeking food assistance had at least one member who was working, and nearly half of these worked full-time. One third of the adult clients had a high school diploma, and 40 percent had not completed high school. Interestingly, 41 percent of the clients received food stamps, but nearly 8 in 10 stated that their food stamps do not last through the end of the month. The network of affiliated food banks reported being stretched to meet the demand: 17 percent stated their program’s stability was threatened because of a lack of resources, and 6.5 percent reported having to turn away clients seeking emergency food assistance.

The belief that friends and family will be able to fill the gap is based on the informal helping relationships that emerge within kinship and friendship networks. This "informal economy" is economic activity that occurs "off line," or not within the regulated and taxed economy. McInnis-Dittrich, for example, found in her small sample in Kentucky that all of the women she interviewed relied on the informal economy.(33) Sources of income from the informal economy included housework for others, consignment quilting, gardening, child or elder care, and yard sales. However, it is difficult to assess the extent or overall contributions such participation yields. Income thus generated is small and most often used to simply meet immediate bills. Finally, with the support of family and friends comes the obligation to return the favor. This often nullifies the net contribution such help brings.

Welfare reform has been built upon the presumption that moving adults into employment will eliminate the need for government assistance. Yet this assumption is valid only if the labor market provides job opportunities with wages sufficient to meet monthly costs of living. This research indicates that, in Kentucky, single mothers will face great challenges in meeting their families’ minimum needs, even if employed full time. If individuals are employed full time but still do not earn enough to meet their families’ monthly costs of living, how do they close the gap between earnings and monthly costs, especially after exhausting their 60-month lifetime limit of assistance? Kentucky women will face great challenges in making the employment and personal transitions required under welfare reform, but there are opportunities for the state to assist in this transition.

State Policy Responses to Welfare Reform

Five challenges associated with welfare reform require policy or regulatory action at the state level if welfare reform is to accomplish its primary goal—self-sufficiency for families and individuals currently on public assistance. In this section, we briefly describe each challenge and the recommended actions needed to address these challenges.

Training and Education

A key focus of the implementation of welfare reform in Kentucky must be to provide the job training, education, and work skills enhancement that welfare recipients need to obtain and retain jobs. Nationally, the poverty rate for those without a high school degree doubled to 31 percent since 1974. It is even higher in Kentucky, and the educational attainment of Kentucky’s rural population is lower than for its urban population. If long-term self-reliance is the purpose of welfare reform, state policies and regulations must support continued education and training for all Kentuckians.

Recommendations:

• It is less expensive for recipients and the state if the transition from welfare to work occurs only once. A program focus on adequate training in life skills and work skills should receive higher priority than simply reducing the number of recipients in the state.

• More flexibility is needed in defining eligible activities under the work requirement so that recipients who are pursuing college or vocational degrees can invest time in furthering their education and training. For example, Kentucky could include work-study internships or field placements required for postsecondary degree programs as part of the 20-hour-a-week work requirement for welfare recipients.

• Particular attention should be given to training women for nontraditional, higher paying jobs, such as those in the skilled trades, to assist them in getting jobs that pay enough to meet their monthly needs.

Transportation and Accessibility

Access is a critical component of work readiness. The ability of applicants and potential employers to contact each other facilitates the job search process. For many jobs, the employer must be able to contact employees for staffing and operational purposes. Furthermore, reliable and flexible transportation is key to employment success. Unfortunately, many Kentuckians lack telephones and private transportation and rely on neighbors and friends for both. An estimated 10 percent of all households in Kentucky do not have a telephone. This figure rises to 20 percent in 19 counties. Eleven percent of all households do not have access to a motor vehicle in Kentucky. This rises to 20 percent in 67 counties. Yet, in 13 counties, 15 percent or more of employed persons have an average travel time to work of 60 minutes or more. Public transportation in rural communities, where it exists, typically means a private taxi service with one or two taxis. In rural counties, distance, road conditions, and lack of public transportation present significant employment barriers for those who do not have a private vehicle.

Recommendations:

• Kentucky should establish a targeted allocation to assist rural communities in developing transportation alternatives for those transitioning from welfare to work.

• Kentucky, in cooperation with telephone companies, should aggressively promote participation in the Lifeline program among K-TAP recipients and low-income households.

Child Care

Access to safe and affordable child care remains a key challenge for those making the transition from welfare to work. A significant proportion of welfare recipients are single mothers, and a significant proportion of the rural poor are married couples with children. It is estimated that for every adult on welfare, two children will require appropriate child care. Appropriate child care includes day care for infants and young children; evening care for children whose parents work second and third shift; after-school, holiday, and summer vacation care for school-age children; and care for sick children.

National studies suggest that, on average, poor families pay 18 cents of every income dollar for child care, more than twice the amount paid by nonpoor families (7 cents/income dollar). Rural and low-income areas have a critical shortage of certified and regulated child care slots, and when available, the cost often represents a significant portion of parental income. A 1990 study found that rural Kentucky families used informal child care at rates nearly double that of urban families. National studies indicate that rural children are more likely to receive care from three or more sources each week, indicating that rural families must use multiple sources to meet their child care needs.

Finally, rural parents and child care providers face challenges not often found in urban places, such as undependable transportation, unreliable snow removal, and toll telephone calls. In addition, rural child care providers face geographic isolation, limited resources for assistance or training, low fees due to underemployment and seasonal unemployment of working parents, and meeting the costs of child care regulations based on urban models.

Under Kentucky law, up to three children can be cared for in unregulated homes. Caring for four to six children requires certification through six hours of training annually. Caring for more than six children requires a license and meeting facility standards. Child care certification, licensing, and regulatory requirements often have an urban bias. For example, professional qualifications required for providers may be difficult to meet in rural areas where fewer credentialed persons live. Eligibility guidelines may be difficult to meet because income verification procedures and confidentiality issues are sensitive given the small population size and overlapping interpersonal networks. Funding formulas for federal programs typically focus on population size and density, penalizing rural child care providers because they operate in small communities.

Recommendations:

• As adults make the transition from welfare to work, the need to ensure adequate funds for child care increases. Since problems with securing reliable child care prevent many newly employed welfare recipients from seeking employment or causes them to lose jobs, a significant commitment of state resources to child care would increase the probability of a successful transition.

• Through grants and other incentives, Kentucky should encourage the establishment of off-hour and weekend child care to assist parents who have second or third shift or weekend employment.

• Given the higher cost of accessing child care that rural parents face, Kentucky should encourage and assist in the establishment of on-site child care services at rural work sites and rural postsecondary facilities.

• Child care certification and licensing guidelines and regulatory requirements must be reviewed to eliminate urban bias. For example, alternative approaches to child care worker training programs might be offered so rural child care providers do not bear an unequal burden of meeting requirements. Or, subsidy funding formulas could be adjusted in recognition of the higher costs for delivering services associated with operating child care facilities in urban communities.

Economic Development

State economic development policies structure the labor market welfare recipients will enter. Development efforts must focus on creating new full-time jobs in local labor markets to absorb the currently unemployed and welfare entrants without displacing nonwelfare workers. Furthermore, development efforts must give attention to the quality of new jobs—adding many new jobs at minimum wage may provide employment for welfare recipients, but it does not address the more persistent and more consequential problem of poverty. For example, under KREDA (Kentucky Rural Economic Development Act), approximately 51 companies created more than 22,000 new jobs between 1990 and 1997. But only 16 of these companies had average wages of $10 an hour or more, and the majority of new jobs created paid less than $7 an hour.

Nationally and in Kentucky, rural labor markets have limited capacity to absorb large numbers of new workers into entry-level jobs whose requirements are commensurate with the education and work experience of many welfare recipients. Moreover, many of Kentucky’s rural counties have high welfare dependency, high unemployment, and high poverty rates. This means welfare recipients will have to compete with unemployed and underemployed workers not on welfare for available jobs.

Recommendations:

• Given that a substantial proportion of all new jobs are generated by existing businesses, economic development efforts should focus on supporting and providing incentives for the retention and expansion of existing businesses.

• Economic development efforts must focus on diversifying employment opportunities to provide a range of employment at different skills, experience, and wage levels. This is particularly important in rural areas.

• The Division of Employment Services must track the characteristics of the newly unemployed to ensure that efforts to place welfare recipients into jobs do not have the unintended consequence of displacing currently employed, low-skill workers, especially in rural labor markets.

• Consideration should be given to structuring economic development incentives to reward firms that pay "livable wages" and provide health benefits and to adopting state "livable wage" legislation.

• Kentucky should initiate planning now on how to assist families that need crisis or short-term assistance with state maintenance-of-effort dollars, so as not to force these families into triggering the 60-month federal lifetime limit.

Rural/Urban Differences

State and federal welfare policies must become sensitive to the significant differences between rural and urban areas. Rural communities are not just small cities. Significant structural, economic, social, and geographic differences exist between rural and urban areas. The rural disadvantage is about both community capacity and the effect of program requirements in rural communities. These differences often translate into barriers that block otherwise willing individuals from becoming employed. These differences magnify the effects of limitations in work readiness and the segregation of women and men into different job markets. This reality is illustrated by the following:

Since 1969, 30 rural Kentucky counties have been classified as persistent poverty counties, that is, the proportion of households with incomes below poverty is greater than the national average and has been for more than two decades. These counties may be called "places" in poverty since the interaction of individual and community characteristics affects peoples’ chances of being poor. In these counties, it often matters little what an individual’s skills are because no jobs are available or no jobs exist for persons with particular skills. Rural communities have fewer private and voluntary resources to supplement public support programs, and access to public and private educational, employment, and health services is more limited than in urban areas.

Recommendations:

• Kentucky must require all evaluations of K-TAP to include place (rural/urban) and regional assessments. K-TAP and other policies must be carefully analyzed and their effects tracked to assure that rural residents are not disadvantaged simply because they live in rural communities.

• Given the significant labor market differences between rural and urban places in Kentucky, welfare reform regulations should protect recipients from sanctions that penalize them for structural situations beyond their control (e.g., high unemployment, lack of access to employment, lack of a livable wage).

Conclusions

Welfare reform in Kentucky is about the economic future of women and their dependent children. Demographic and social trends over the last three decades have shown an increase in the number of women who are responsible for providing the primary support for themselves and their dependent children. But the structure of the labor market limits women’s opportunities to find high-wage employment that would enable them to meet their monthly living costs without continuing to rely on public assistance. Furthermore, the validity of assumptions underlying welfare reform—everyone can work, enough jobs are available for everyone, work will eliminate the need for assistance, and if it does not, nongovernmental sources will fill the gap—are suspect. Rural women face even greater challenges due to spatial limitations on employment and income. Policy and regulatory initiatives can be pursued by state government to mitigate the difficult challenges Kentucky women face as they make the transition from welfare to work and to ensure that welfare reform achieves its goal of economic self-sufficiency.

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Renwick, Trudi J., and Barbara R. Bergmann. "A Budget-Based Definition of Poverty with an Application to Single-Parent Families." Journal of Human Resources 28.1 (1993): 1-24.

Tanner, Michael, Stephen Moore, and David Hartman. The Work Versus Welfare Trade-Off: An Analysis of the Total Level of Welfare Benefits by State. Cato Policy Analysis No. 240, 1995.

Vontagle, Alan. "1996 Family Living Expenditures of Iowa Farm Families." University Extension Publication Fm-1790. Ames, IA: Iowa State University, 1997.

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Footnotes

1. Howard V. Hayghe, "Developments in Women’s Labor Force Participation," Monthly Labor Review Sept. 1997: 41-46. Return to text.

2. U.S. Bureau of the Census, Census of Population 1990 Social and Economic Characteristics, Kentucky (Washington, DC: Economics and Statistics Administration, U.S. Department of Commerce, 1993). Return to text.

3. U.S. Bureau of the Census, 1990. Return to text.

4. U.S. Bureau of the Census, 1990. Return to text.

5. U.S. Bureau of the Census, 1990. Return to text.

6. U.S. Bureau of the Census, 1990. Return to text.

7. U.S. Bureau of the Census, 1990. Return to text.

8. U.S. Bureau of the Census, 1990. Return to text.

9. U.S. Bureau of the Census, 1990. Return to text.

10. Peggy Cook and Elizabeth Dagata, "Welfare Reform Legislation Poses Opportunities and Challenges for Rural America," Rural Conditions and Trends 8:1 (1997): 32-41. Return to text.

11. Kentucky Population Research, Kentucky State Data Center, online (http://www.louisville.edu/cbpa/kpr) Internet (1998). Return to text.

12. U.S. Bureau of the Census, 1990. Return to text.

13. Cabinet for Families and Children, Statewide Data Book (Frankfort, KY: Author, 1997). Return to text.

14. U.S. Bureau of the Census, "More Education Means Higher Career Earnings," Statistical Brief (SB/94-17) Aug. 1994 and "Education: the Ticket to Higher Earnings," Statistical Brief (SB/93-7) April 1993. Return to text.

15. U.S. Bureau of the Census, 1990. Return to text.

16. Cabinet for Families & Children. Return to text.

17. Cabinet for Families & Children. Return to text.

18. Department of Health and Human Services, "Notice of Proposed Rule Making: Temporary Assistance for Needy Families," Department of Health and Human Services, Administration for Children and Families, Washington, DC. Return to text.

19. U.S. Dept. Health & Human Services. Return to text.

20. "Cost of Abandoning Welfare for Work Can Be a Better Life," Lexington Herald-Leader 25 June 1998. Return to text.

21. Rebecca Blank, "Good Jobs, Good Training and Effective Families: What More Do We Need?" Joint Center for Poverty Research, Policy Briefing, Washington, DC, online, Center home page (http://www.jcpr.org.whatjobs.html), Internet, 26 Aug. 1998. Return to text.

22. U.S. Bureau of the Census, 1990. Return to text.

23. U.S. Bureau of the Census, 1990. Return to text.

24. Phil Kaufman and Steven M. Lutz, "Competing Forces Affect Food Prices for Low-Income Households," Food Review May-Aug.: 8-12. Return to text.

25. The Kentucky Youth Advocates basic needs budget for a family of three living in Louisville/Jefferson County, Kentucky, assumes that a single mother has two children, one child under the age of four, and one child over the age of six. The scenario assumes that the employer did not provide health care coverage and that the family buys monthly health insurance coverage. This scenario also assumes that the mother does not have an automobile or telephone. The net hourly wage of $12.45 is the amount necessary after federal, state, and local taxes are withheld. Housing costs are from the Housing Authority of Louisville for a two-bedroom apartment. Utility costs represent the Housing Authority of Louisville’s estimate of monthly utility costs. Food costs are from the U.S. Department of Agriculture guideline for a family of three. Child care cost estimates for a child under the age of 4 come from the Community Coordinated Child Care calculation that the average child care cost in Louisville for a child who is preschool age is $75 per week. The cost estimate for a child over the age of six is the actual cost of YMCA/Jefferson County Public Schools after school care program. Clothing costs are an estimate from the American Red Cross ACCEPT program. Public transportation costs are based on the actual TARC rate during working hours (peak time) which is $1 and assumes 50 trips a month. Personal care items costs were estimated by Kentucky Youth Advocates as follows: Laundry (6 loads per week x .75 per wash, six loads per week x .75 per dry $9 per week x 4.3 weeks per month=$39); haircuts (one visit per month per person x $8 = $24); postage (12 stamps per month x .32 cents = $4); bank fees at $10 per month; and toiletries (soaps, detergents, paper products, and personal care items = $23) Health care is the cost of a standard family health insurance policy from Humana Health Care Plans. Return to text.

26. The UK study of rural cost of living is based on a sample of seven rural counties for which local data were obtained on the costs associated with items such as housing, utilities, child care, gasoline, and car insurance. In a very few instances where local data were not available, reasonable estimates or, more commonly, individual data from the 1994-1995 Consumer Expenditure Survey for the Southern region, minimum wage-income group were used. The scenario assumes a single mother has two children, one under the age of four and one over the age of six. This scenario assumes that the family does not have an out-of-pocket cost for monthly health insurance premiums. The net hourly wage of $10.65 is the amount necessary before federal and state income taxes and local occupational taxes are withheld. Housing costs were calculated using the "fair market value" cost used in the calculation of rent subsidies for Section 8 housing. It includes both the median contract gross rent in the county as well as a utility allowance, which ranges from $92 to $108 for these counties. Information was provided by local Housing Authority, local HUD office, or local Social Services Office. Using this method, rent estimates varied from $325 to $400 a month in each of the seven sample counties, resulting in an average rent cost of $358.29 a month. It should be noted that a recent report indicated that "two of every five rural welfare households pay more for their housing than the federal standard 30 percent of income . . . fully 16 percent of rural welfare household’s homes are shared by two or more families" (Housing Assistance Council, 1997). Utilities and phone service costs were gathered for each county for a "standard housing unit and household composition" (i.e., 1,000 kwh of electricity for a 900 sq. ft. dwelling unit and 4,000 gallons of water for a family of three). Note that this estimated level of electricity and water usage is very low and would require considerable effort at minimizing use to achieve. In the "fair market value" rent estimate, a utility allowance was included. But given the characteristics of rural housing and variations in types of heating sources and levels of use, an over-allowance of $30 per month for utilities was added to the monthly cost-of-living estimates. The cost information was provided by local electric and water companies as well as local Chambers of Commerce. To estimate the cost of phone service, the cost of only the most basic package for local telephone service was used. This did not include access to or use of long distance calling. The information was provided by the local Chamber of Commerce. Transportation costs for operation of a private automobile are included since access to reliable transportation is essential for successful entry into the job market and retention of employment. Information from the National Personal Transportation Survey (NPTS) as well as local gasoline prices and auto insurance estimates based on our hypothetical case were obtained (Department of Transportation, 1997). According to the NPTS, the average model year of a vehicle in the United States is 1987, and, on average, 11,826 miles are driven each year. The NPTS also estimates that trips to and from work constitute only the third most reported use of a car. Estimates for the monthly cost of gasoline were calculated using local gas prices and the average annual miles per year. Since no reliable local estimates were available to estimate car care expenses, we used the monthly average from the 1994-95 consumer expenditure survey for the South for the minimum-wage income group. While anecdotally the incidence of car insurance among low-income groups tends to be lower than that for other groups, this model assumes complete self-sufficiency, without being illegal. Therefore, the cost of minimal auto insurance had to be included in the estimates. Based on the average vehicle age from the NPTS, estimated travel to work based on the 1990 Census of Population and Housing, auto insurance estimates were obtained from a national insurance company. Since those with insurance are not required to carry coverage for uninsured or underinsured drivers in Kentucky, and since costs varied depending on whether the individual lived inside or outside of town, the average cost across these variables was calculated. Using this method, the costs for car insurance across the seven sample counties ranged from $55 to $84 a month. Combined with gasoline and repair and maintenance costs, this resulted in an estimated combined cost of $174.33 per month for transportation. Food estimates of monthly food costs are based on the USDA Food and Consumer Service’s "Cost of Food at Home Estimated for Food Plans at Four Cost Levels, September 1997, U.S. Average." Based on these data, monthly food costs were estimated for a 22-year-old mother of two children, 4 and 6 years old, adjusted by 5 percent for family size as indicated, and further adjusted by 4 percent for higher costs in rural areas (Kaufman and Lutz, 1997). Following this procedure, the estimated average monthly food costs were calculated to be $363.64 for our hypothetical mother of two children. Child care: Since studies suggest that parents using informal arrangements often have difficulty maintaining reliable care, our estimate of monthly costs presumes a formal child-care arrangement. We use actual cost figures reported by child-care providers listed in the local telephone books or estimates provided by either a County Extension Office or a Chamber of Commerce. Across the seven sample counties, child care for younger children was consistently higher than that for older children. For a four-year-old, costs ranged from $200 to $260 a month. For a six-year-old child, costs varied more, ranging from a low of $60 to a high of $150 a month. In other words, on average, child care for two children of these ages equaled $335.71 a month or 20.4 percent of monthly expenses. Health Care: While health care costs are generally not incurred regularly each month, an allotment for this expense was included in our monthly budget. To estimate the average monthly cost of health care, the average monthly expenditure from the 1994-95 Consumer Expenditure Survey, Southern Region, minimum wage income group was used. Within the health care category, only those expenditures for medical services, supplies, and pharmaceuticals were included. Since households with low incomes often do not have health insurance and insurance is not required to obtain health care services, we did not include these costs in our model. Following this procedure, on average, households spend $59.08 a month on health care. Household, Personal Care Items, and Clothing: A set of essential purchases or services for family and household operation was included in the model. For example, laundry costs at a coin-operated facility would include five washer and dryer loads per week. Other items included paper products, household cleaning supplies, and personal care items. To estimate the cost of clothing and footwear, the average monthly expenditures from the 1994-95 Consumer Expenditure Survey, Southern Region, minimum wage-income group were used. Using this method, a single estimate for this category of expenditures of $196.83 per month was used. Return to text.

27. Leslie A. Whitener and Timothy S. Parker, "Minimum Wage Increase Could Raise Many Rural Workers’ Wages," Rural Development Perspectives 11:3 (1996): 23-30. Return to text.

28. Whitener and Parker. Return to text.

29. Joint Center for Poverty Research, news release, 26 Aug. 1998. Return to text.

30. Kentucky Cabinet for Economic Development, Kentucky Deskbook of Economic Statistics (Frankfort: Author, 1996). Return to text.

31. Nicholas Lemann, "The Limits of Charity," Newsweek 27 April 1997: 37. Return to text.

32. Second Harvest National Research Study, Hunger 1997: The Faces and Facts (Chicago, IL: Second Harvest National Food Bank Network, 1997). Return to text.

33. Kathleen McInnis-Dittrich, "Women of the Shadows: Appalachian Women’s Participation in the Informal Economy," Affilia 10:4 (1995): 398-412. Return to text.