By Lori Garkovich, Gary Hansen and Patricia Dyk
From Foresight, Vol. 4, No. 2
published 1997
After years of debate Congress has passed legislation to "end welfare as we know it." We have begun a vast social experiment of unknown consequences that will affect the lives of thousands of poor Kentuckians. Much of the debate leading to passage of welfare reform revolved around a series of assumptions about the poor and those who have depended upon the safety net of public assistance. Here, we explore some of these myths as they apply to poor Kentuckians, describe key components of new welfare law, and consider some of the challenges it poses for the Commonwealth.
Myth 1: The poor are adults who don't want to work. One in five of those in poverty in Kentucky are under the age of 18 and another one in four are 65 or older. Thus, nearly half (45 percent) of the poor in Kentucky are children or older adults. Moreover, women are more likely than men to be poor (21 percent vs. 17 percent), and a significant number of these women have children under the age of 18.
Myth 2: Single mothers and their children represent the majority of the poor. Just over one half of single-mother families with children under the age of 18 live in poverty, compared to two out of ten married-couple families with children. But over half of all poor families with children under the age of 18 are married-couple families, and more than half of Kentucky's poor children live in married-couple families. While single-mother families are more likely to be poor, the majority of poor families are married-couple families.
Myth 3: Poverty is an urban problem. While we tend to think of poverty as an urban social problem, it is not. Nearly six out of ten poor Kentuckians live in rural areas, and living in a rural area actually places one at greater risk of being poor. More than one in five rural residents are poor compared to fewer than one in six urban residents (22 percent vs. 16 percent). True, Kentuckians who live in urban centers are more likely to live in poverty than those who live in the suburbs (19 percent vs. 15 percent). But four in ten of Kentucky's children who live in poverty live in rural communities, and 6 out of 10 of poor adults with children live in rural Kentucky.
Table 1: U.S. Poverty Thresholds for 1994
Myth 4: The elderly make up a significant portion of the poor. In the early 1960s, the elderly were at a higher risk of being poor than children. The specter of a growing population of poor elderly led to passage of Medicare and cost-of-living Social Security increases linked to inflation.
In Kentucky the elderly poverty rate (20.6 percent) is lower than the rate for children (24.8 percent), but older Kentuckians face nearly twice the risk of living in poverty as their national counterparts (11.7 percent). The higher rate of poverty for elderly Kentuckians is the outcome of a lifetime of higher unemployment, lower wage rates, and fewer opportunities to build private pensions in preparation for retirement. As a result, a greater share of the income of elderly Kentuckians comes from Social Security than nationally.
Myth 5: The poor have not completed high school. The economic penalty for not completing high school has increased steadily since the 1970s. Nationally, the poverty rate for those without a high school degree has doubled to 31 percent since 1974, and it is even higher in Kentucky.
However, even among those with a high school degree or more in Kentucky, substantial risk of slipping into poverty exists. One in twenty married-couple families headed by a person with at least a high school degree lives in poverty, and three in ten families headed by a single mother with at least a high school degree are in poverty. More formal education is a protection against the risk of poverty, but it is more effective for men than for women, and it does not guarantee a family will not slip into poverty.
Myth 6: If you work you will not be poor. One in ten of the families headed by a person who worked the previous year were in poverty in 1990. Indeed, more than four in ten Kentucky adults with children who are in poverty reported some income from wage and salary earnings, and three out of four young (head of household age 30 or younger) poor families had at least one member in the labor force. Further, seven out of ten young single fathers and more than four in ten of young single mothers work and are poor.
In 1973, 24 percent of all American workers earned wages below poverty level. In 1995, 30 percent were working poor. Indeed, in 36 Kentucky counties, the mean wage or salary per job in the county in 1993 was less than the poverty threshold ($15,141) for a family of four.
Myth 7: The poor prefer to receive welfare because it is easier than working. A key assumption guiding recent discussions on welfare reform is that the welfare system provides such an easy living that it has sapped the desire to work among the poor. This assumption really has two parts: first, that most of the poor receive some type of public assistance and second, that public support is bountiful.
Although many people see poverty and welfare assistance as being the same, they are not. In fact, three of four poor Kentucky adults with children receive no public assistance. Further, fewer than six out of ten (58 percent) families reporting public assistance income also report family incomes below the poverty level; the remaining families have incomes above the official poverty line. Welfare eligibility is based on an individual's or family's income, but the income threshold is not always tied to the poverty level. Among 70 federal programs designed to assist low-income persons in the early 1990s, only 8 limited eligibility to those with incomes below the poverty level (O'Hare, 1996:32).
For families who do receive public assistance, what has been the nature of the safety net? The average Kentucky payment per family eligible for Basic AFDC (Aid to Families with Dependent Children) was $226.67 per month, $2,720 a year, or an average of $95.86 per month per recipient. AFDC is the only welfare program which provides cash payments. Nationally, only four in ten persons in poverty receive cash welfare payments, which do not bring families out of poverty. Indeed, poor Kentucky families have incomes, on average, $5,200 below the poverty threshold.
Some argue that access to food stamps and public housing represent other significant forms of public assistance. But the reality is that food stamp coverage is limited and the waiting list for public housing, when it exists in a community, runs as long as four years.
Myth 8: The purpose of welfare is to move families and individuals out of poverty. Most welfare programs (e.g., AFDC, Food Stamps, Medicaid, SSI, housing subsidies) were designed to sustain people who are in poverty, rather than help them move out of poverty. Programs designed to increase a poor person's educational attainment or work skills represent about ten cents of every dollar spent on means-tested welfare benefits. The reality is that welfare was not intended to "solve" the problem of poverty, merely to maintain eligible persons until their economic circumstances improved. "{Nationally} means-tested government cash benefits lifted about 3 million people out of poverty in 1994, lowering the poverty rate by one percentage point over what it would have been" (O'Hare, 1996:35).
Driving much of the debate about welfare reform has been a confusion over the difference between who receives assistance from the major welfare programs and who lives in poverty. Nationally, about one quarter of the poor do not participate in any major welfare program, and nearly 60 percent of those who do receive welfare benefits are not officially designated as poor (O'Hare, 1996:32). Moreover, since most welfare provides support for children, persons living in families are much more likely to receive public assistance than persons living alone or in a nonfamily household.
The debate on welfare reform focused on three interlocking goals: (1) cutting federal welfare spending, (2) restricting eligibility for means-tested programs, and (3) shifting control of most welfare programs to state governments. Federal welfare spending will be reduced by restricting eligibility for many programs and replacing open-ended entitlement with "capped" block grants. The following are some of the key changes in "welfare as we know it" that resulted from the 1996 reform effort.
AFDC (Aid to Families with Dependent Children) is replaced with a block grant of limited funding. With block grants capped, basic funding cannot be increased, even if the size of the population needing assistance increases due to recession. The new law does establish a $2 billion contingency fund states can seek in periods of high unemployment or increased demand for food stamps. However, these monies would have covered only one third of the additional AFDC costs arising from the recession of the early 1990s.
Single-parent recipients of AFDC must be involved in at least 20 hours of work per week within two years of receiving assistance, and married couples must participate in the work programs. Families on welfare that need child care to participate in work have no guarantee of assistance. New funds have been allocated to child care, but now three programs are collapsed into a single block grant of $22 billion over seven years. While this sounds like a substantial increase in child care funding, the Office of Management and Budget estimates that if all states meet the requirements for one half of all single-parent and 90 percent of all two-parent families working by the year 2000, an additional $2.4 billion will be needed for child care assistance.
Unmarried teen parents under the age of 18 whose youngest child is at least 12 weeks old must attend school and must live with a parent or in an adult-supervised setting. States will receive incentive payments for reducing the unmarried teen childbearing rate. Unmarried teen parents will no longer be eligible for assistance if they live independently. If a family situation places a teen mother at risk, states are required to define and identify appropriate "adult supervised settings" for placement.
Federal funds can only be used to provide a total of 5 years (60 months) of welfare assistance in a lifetime to a family. States may choose to provide additional assistance, but only from state funds. States may also grant hardship exemptions for families, up to 20 percent of their average monthly caseload. No provisions were made for assistance to children whose families reach their 5-year limit. Required computerized record keeping will ensure enforcement of the time limit provision. Implicit in this provision is the belief that all families will be able to obtain permanent employment that will provide sufficient income and benefits to ensure that they can meet all their family needs. It is assumed that no circumstances will justify receipt of federal assistance beyond 60 months.
Able-bodied childless adults age 18 to 54 will be eligible to receive food stamps for a total of three months in any three-year period unless they are working 20 hours per week. If such individuals lose their job, an additional three months of food stamps will be allowed once in a three-year period.
Families with children who spend more than half their income for housing will no longer be able to consider excess housing costs in calculating the amount of food stamps for which they are eligible. Nearly $28 billion is cut from the Food Stamp program over six years, representing the single biggest savings to the federal government from welfare reform. States may request waivers for this provision for persons in high unemployment counties. Kentucky has requested such a waiver for 15 counties and has a request pending for another 95 counties. Estimates are that between 3,000 to 11,000 Kentuckians may lose access to food stamps.
States must continue to provide Medicaid to families that would be eligible for AFDC as of July 16, 1996, so that even if families lose cash aid because of the 60-month limit, they may still qualify for Medicaid. Transitional Medical Assistance will be available for one year to those losing cash assistance due to earnings from employment and/or child support. Kentucky is considering replacing the time limit with a family income eligibility standard.
A new disability standard for SSI (Supplemental Security Income) is established. Children considered disabled because of maladaptive behavior and adults deemed disabled because of substance abuse problems will no longer be eligible for SSI. All new SSI recipients will be evaluated based on these criteria, and by July 1, 1997, all current recipients must be re-evaluated.
The success of the new welfare reform effort not only depends on moving people now dependent on welfare into jobs, but into jobs that pay enough to support a family. The new welfare program offers states considerable discretion in implementing the federal mandates. Kentucky was one of the first states to respond with its own plan, Kentucky Transitional Assistance Program (K-TAP), and in doing so secured an additional $10 million in federal funds.
Historically, Kentucky has posted higher unemployment rates than most states, and a significant number of jobs available to low-skill workers pay so little they will not support a family. The employment situation in Kentucky poses critical challenges to efforts to move people from welfare to independent living, especially in light of the requirement that one half of single-parent and 90 percent of two-parent families must be in the labor force or work activities by the year 2000.
Throughout most of the 1980s and early 1990s, Kentuckians have been more likely to be unemployed than persons in other states. In 1996, state unemployment levels were at their lowest in a decade-4.8 percent in July. But this masks tremendous variation among counties, from a low of less than 2 percent in Fayette, Jessamine and Woodford, to a high of more than 20 percent in Clinton and Fulton. Moreover, rural unemployment rates always tend to be higher than urban rates, and rural workers are more likely to find a job market characterized by part-time and seasonal employment than urban workers. Finally, rural labor markets are more susceptible to boom and bust business cycles than urban labor markets because they tend to be dominated by manufacturing and resource-extraction industries. Yet even in our urban centers the challenge of generating job growth will be daunting. In Jefferson County alone, it is estimated that meeting the required first-year work participation rate of 25 percent will mean moving between 1,200 to 1,500 persons into work activities.
Kentucky will be challenged to generate enough full-time jobs to provide employment to the 86,923 unemployed persons as of October 1996, as well as the thousands more Kentuckians who are "involuntary part-time workers," that is, persons who are employed part time even though they desire a full-time job.
But simply having a job is not enough, for it will not assure earnings sufficient to provide for a family's needs without a social safety net (e.g., food stamps, Medicaid). In 1994, average weekly wages for those employed year round (52 weeks a year) full time (40 hours a week) in different industrial sectors in Kentucky counties shows that residents of many counties face a serious economic challenge to survival. In 109 counties, persons employed in wholesale and retail firms would not earn enough to bring a family of four out of poverty. This is also true for workers in 56 counties employed in service firms; for workers in 24 counties employed in manufacturing firms; for workers in 12 counties employed in any industry; for workers in 7 counties employed in transportation, communications, or utilities; and for workers in 6 counties employed in finance, insurance, or real estate firms.
The tendency for a substantial number of jobs in Kentucky to be at or just above the minimum wage poses a second challenge from welfare reform. In the late 1960s, a person working full time year round in a minimum wage job would earn enough to keep a family of three out of poverty. In 1994, the $4.25 minimum wage would yield about 70 percent of the poverty threshold for that same family of three. After adjusting for inflation, the buying power of the minimum wage job has declined 25 percent since 1979.
It is often assumed that most minimum wage workers are teens earning spending money for clothes or gas. In reality, seven out of ten minimum wage workers in the United States are older than 19. Nearly 6 out of 10 full-time minimum wage workers are women, who comprise nearly two thirds of the part-time minimum wage workforce. Nationally, one in twelve single mothers earns only the minimum wage.
Beginning October 1, 1996, the minimum wage began rising from $4.25 to $5.15 an hour over the next two years. By 1998, the gross earnings of a year-round, full-time minimum wage worker will be $206 a week, $824 a month, or $10,712 a year. These earnings will fall $1,109 below today's poverty line for a family of three. A worker must earn more than $7.28 an hour to bring the income for a family of four above today's poverty level, and more than $5.68 an hour for a family of three.
It is not enough to simply place everyone in a job. Many families depend on the social safety net-Food Stamps, Medicaid, AFDC-to fill in the economic gap left by employment that pays too little and offers no benefits. In Jefferson County, for example, 70 percent of the AFDC cases have an adult in the case who is receiving assistance; 13 percent of these adults are employed and have some wages, and 45 percent of those employed work more than 20 hours weekly.
Kentucky will not only be challenged to find enough jobs for adults currently receiving assistance, but to find jobs that pay enough to enable these adults and their families to live independently of public assistance.
In a November 1996 survey of 1,238 persons currently receiving or applying for welfare assistance in Jefferson County, four in ten respondents cited job training, a GED or high school degree or college or vocational education as the support services they most needed for employment. Yet, the welfare reform act de-emphasizes job training and education. In the past, persons receiving welfare assistance who were attending school or participating in job training would continue to qualify for assistance. This is no longer true. Recipients will now be able to count only 12 months of vocational education towards work requirements, and only 20 percent of a state's caseload can be classified in this way.
Under K-TAP (Kentucky Transitional Assistance Program), Kentucky's response to welfare reform, persons who are considered "work ready" (i.e., living in an area with job opportunities who have a high school credential, a skilled trade or successful work history, and are not incapacitated or caring for a disabled child) may continue earning a post-secondary degree, if already enrolled, for up to 12 months. After the 12 months, these work-ready individuals must participate for 20 hours in work, a work study, practicum, or internship to continue being eligible for assistance.
Individuals classified as "not work ready" under K-TAP lack education, work history, or work skills. Such individuals will be able to obtain life skill, job readiness or basic skills training for no more than six months without part-time employment. After this time, they must have at least 20 hours of allowable employment, and be in allowable work activities within two years.
Kentucky will be challenged to provide the training and education that will enable current recipients to obtain entry-level jobs, to retain their employment, and to find jobs that have the potential for wage or salary increases.
Even when jobs are available and individuals have the skills, training, or education to obtain them, the jobs may not be accessible to a potential worker. For example, 11 percent of Kentucky households do not have access to a motor vehicle, and this proportion increases to 20 percent or more in 67 counties. Ten percent of all households do not have access to a telephone, rising to 20 percent or more in 19 counties. Without access to a phone or a car, finding and getting to a job is difficult if not impossible, especially in rural areas where public transportation is not available.
K-TAP recognizes this problem and eliminates the $1,000 limit on the value of a welfare family's motor vehicle, but this does not address the needs of thousands of families who have no car. In urban areas, efforts are underway to coordinate transportation for new workers by linking employers and public transportation system operators. But even in Jefferson County, the November survey of welfare recipients found lack of transportation to be the sixth most frequently cited barrier to employment. In counties where there are no municipal buses, access to jobs is an even greater barrier.
Kentucky will be challenged to assist new workers in getting to jobs, especially in rural counties where distance, road conditions, and the lack of public transportation create significant barriers to employment.
Welfare reform eliminates the guarantee under current law that child care will be provided to families on welfare that need child care to participate in work or training, and to former welfare families that had received one year of transitional child care help if they left welfare due to earnings. Under K-TAP, transitional child care assistance will be available for up to 12 months for eligible participants if sufficient funds are available. Child care costs can represent a significant portion of a family's weekly income. Moreover, many counties do not have enough certified and licensed child care slots to meet current demands, much less those arising from the new work requirements. The November Jefferson County survey found that child care ranked third as the "most important need" and ranked second as the most frequently cited need among 10 listed concerns.
Kentucky will be challenged under welfare reform to ensure that parents have access to safe and affordable child care, especially in counties where there is an insufficient number of certified and licensed day care slots.
A proposed provision of K-TAP now under consideration involves paying moving expenses for participants who are unable to find work in their home communities due to a persistent scarcity of jobs. Because rural communities have the greatest difficulty creating employment and improving the quality of available jobs, they will be most affected by this provision. This policy decision has potentially far-reaching effects for rural communities, as well as having serious implications for people's lives.
A considerable body of research demonstrates that the poor remain in places of limited opportunity because they have the support of family and friends to help them during lean times. Moving from their home communities means losing a social support system and may, in fact, deepen the economic challenges such families face without the support of friends and kin. Moreover, what will be the consequences for rural communities as residents are forced to leave because of welfare program requirements? Does this proposal represent, in effect, the abandonment of rural communities and rural community ties?
Kentucky will be challenged to ensure that federal requirements do not lead to state policies that depopulate rural communities or force citizens to abandon social and family ties as a precondition for assistance.
What is likely to happen in Kentucky with welfare reform? In the short term, thousands of Kentuckians may find themselves in a situation where they are ineligible for cash welfare assistance but unable to find employment that pays enough to compensate for these funds. Other Kentuckians who experience interrupted employment will discover they and their families are ineligible for food stamps because their periods of unemployment exceed the three months of eligibility over the three-year period limit. Other families with disabled children will find themselves forced to assume a greater share of the costs of the services their children require because their SSI benefits have been cut or eliminated.
State and local governments in Kentucky will face new challenges. The rapid rise in the cost of Medicaid has already strained state finances, yet counties are "legally obligated to maintain a safety net for indigent residents, which includes providing medical care at county hospitals" (O'Hare, 1996:42). How will state and county governments continue to meet their obligations to provide health care for the poor in the face of cuts in federal Medicaid funds? With the responsibility for major welfare programs shifted to states, Kentucky will face new pressures to meet the need for assistance in periods of recession or high unemployment-conditions which have affected Kentucky communities more often than their national counterparts. Yet, these also will be the times when revenues to state government will be in decline.
There is a connection between the growth in the number of working poor families in Kentucky and the structural changes in our economy that have led to a loss of better-paying manufacturing jobs and the rise of minimum wage service jobs. Welfare reform that presumes simply moving people into jobs will solve the problem of poverty is doomed to fail because there are no jobs or the jobs that are available do not provide a family wage.
As a result, Kentucky government and citizens will be faced with serious choices: Shall we allocate state funds to welfare assistance to meet the shortfalls left by reductions in federal spending? How much of the state budget can be allocated to meeting survival needs without causing serious shortfalls in other areas? For example, will Kentucky divert monies from school construction or road improvements to assist families on the economic edge? Should Kentucky modify its eligibility guidelines for welfare assistance, extending the time for use of food stamps or cash assistance? Is it reasonable to suggest that families should move to new communities if no jobs are available where they live? Can Kentucky's working poor survive without the assistance of family and friends in their home communities? Will Kentucky be able to continue providing assistance to poor families when the state's economy takes a downturn?
The answers to these questions are unknown as are the long-term effects of welfare reform. In the short run, there is a growing recognition that welfare reform will, in fact, likely increase the number of families and children in poverty in Kentucky. Whether welfare reform reaches its goal of reducing welfare dependence and reducing the size of the population in poverty in the long run is the unknown outcome of this great social experiment.
Lori Garkovich is a Professor and Gary Hansen and Patricia Dyk are Associate Professors in the Rural Sociology Program of the University of Kentucky College of Agriculture. Dr. Garkovich is a state extension specialist in rural development, and Dr. Hansen is a state extension specialist in family and youth. This article appeared in a slightly different form in SEED, a publication of the Cooperative Extension Service.