Welfare Reforming the Workplace:* The Hidden Threat to Workers and Labor Standards

UNCOMMON SENSE 18© February 1997

by Maurice Emsellem, Staff Attorney, National Employment Law Project, Inc.

Welfare reform came with a promise to “end welfare as we know it.” For many, that phrase creates images of welfare recipients working their way out of poverty, and with the help of better job opportunities, joining the American mainstream. Reality belies this cheerful view. The new law,  the Personal Responsibility and Work Opportunity Act of 1996 (PL 104-193), threatens to create an underclass of workers who will be required to work without benefit of federal laws that protect other workers, such as the minimum wage; the earned income tax credit; occupational health and safety, workers’ compensation, and anti-discrimination laws; and collective bargaining  rights.Temporary Assistance for Needy Families (Title I of PL 104-193 or TANF) imposes strict work requirements on recipients and deprives them of rights guaranteed under the repealed law, Aid to Families with Dependent Children (AFDC). Yet, despite the new responsibilities TANF imposes on welfare recipients, it creates no new work opportunities. Many regular workers will be dismayed to learn that welfare reform not only means exploitation of workfare participants. It also threatens the livelihood of millions of other workers–low-paid and even higher-paid workers. State and city governments are already replacing union workers with welfare recipients, and regular workers face further declines in their wages and working conditions as they are forced to compete with those lacking any protection. Efforts to establish work standards and other protections for both welfare recipients and current workers will have to be conducted state by state.1 To understand the nature of the threat, it is useful to examine some key problems of the law:

Work Requirements Ignore Lack of Jobs and Restrict the Option of Substituting Training or Education for Work. TANF imposes a life-time limit of five years for receipt of benefits, even for individuals who cannot find work. Though states may specify “hardship” exemptions from the time limit, the law caps these at 10 percent of caseloads. In addition, the new law requires that by the year 2002, 50 percent of a state’s caseload of single parents must be engaged in “work activities” at least 30 hours a week. In contrast to previous legislation, TANF work requirements emphasize workfare or performing services in exchange for benefits over education and training.

With these time limits and work participation requirements, it is estimated that that the labor market will have to absorb one to two million new workers.2  Time limits are based on the assumption that there are jobs for welfare recipients forced to leave the rolls. This is not the case. Even in a state with lower-than-average unemployment there are 2.7 applicants for every available job and more than triple that number for every livable-wage job.3  Increasing the number of job seekers without expanding the number of jobs will add to unemployment and depress wages. The Economic Policy Institute estimates that welfare “reform” will result in an average wage loss of 12 percent for those in the bottom third of the pay scale.4   TANF’s work requirements and time limits on benefits are particularly unrealistic and unfair in areas with high unemployment and high rates of participation in public assistance programs. In New York City, which ranks seventh in the country in proportion of the population on welfare, it would take 21 years for all adults on public assistance to be absorbed into the economy at current rates of economic expansion, even if every newly available job went to a welfare recipient.5 Compliance with work participation or workfare requirements in New York City could add new workers equal to one-half of the current municipal labor force.6

TANF could result in displacement for tens of thousands of regular workers. TANF eliminates AFDC’s protection against “partial displacement,” such as prohibition against reductions in non-overtime hours and benefits of already-employed workers. Since workfare participants will receive TANF benefits in return for their services, employers will be getting free labor. This means that employers could cut the hours of their full-time workforce and make up the difference with welfare recipients working off their benefits and therefore costing their employers nothing.

TANF jettisons the requirement that workfare programs support work in the  “public good.” This will create a new pool of free labor for private employers and threaten the jobs, wages, and working conditions of regular workers in the private sector. Whereas the AFDC law stated that Community Work Experience Programs (CWEP) “shall be limited to projects which serve a useful public purpose,” TANF contains no such requirement. States are thus free to place workfare participants in the private sector regardless of the social value of the work performed and without cost to employers.

Moreover, these private employers, have no obligation to offer workfare participants jobs in return for the state’s subsidy. In high-unemployment areas, working in return for their welfare checks could be recipients’ only alternative for meeting TANF work requirements. Here, too, employers will have a strong incentive for replacing regular workers with the free labor of welfare recipients.

TANF eliminates the minimum wage standard designed to prevent exploitation of women on welfare and to protect wages of other low-wage workers. The recently repealed AFDC mandated that the number of hours required of workfare participants be equal to the size of the welfare grant divided by the minimum wage. TANF has no such provision. Instead, as previously mentioned, it requires that by the year 2002, states meet a 30-hour minimum for half of their caseload. This new 30-hour rule, in combination with the increase in the federal minimum wage ($5.15 as of September 1, 1997), means that few, if any, states will “pay” workfare participants the equivalent of the minimum wage unless they count education and training or other activities to reach the 30 hours. If employers are not required by the Fair Labor Standards Act (FLSA) to pay workfare participants the minimum wage, the new welfare law offers them an added incentive to replace regular workers with cost-free workfare participants.

TANF eliminates the labor and employment standards protecting welfare recipients. In contrast to the repealed AFDC law, TANF does not specify that workers are to be covered by workplace standards and protections, such as workers’ compensation and anti-discrimination laws. Unless independent employment law applies, such as FLSA or the Occupational Safety and Health Act, welfare “reform” threatens to create a new class of disadvantaged workers. Because workfare assignments often involve rigorous physical labor that pose significant health and safety risks to participants (for example, maintenance, cleaning, and painting), lack of workers’ compensation is particularly risky and disadvantageous. Because TANF recipients, mostly women, will be forced to take almost any job in order to avoid loss of family benefits, absence of protection against gender discrimination, especially sexual harassment, is another serious risk. States can, and should, pass welfare laws to protect workers and welfare recipients against some of these abuses (but are not obliged to do so). A Florida statute, for example, stipulates that welfare recipients who are working off their benefits must be employed in the public sector and paid the same wages and benefits as unsubsidized workers performing similar benefits.

TANF authorizes a broad expansion of services performed by private job placement agencies. There is, however, no evidence that these services are effective in placing welfare recipients in jobs. Such services might even place people in unstable, contingent work. For instance, a pilot study in Pennsylvania found that, despite the fact that “job contractor” agencies were paid to provide job readiness and job search programs, enrollees in these programs were less likely to find jobs and were paid lower average wages than a control group of independent job searchers.7 Employment agencies often place job seekers in part-time and temporary work. Such contingent work pays less than regular employment and discriminates against women and minorities.8 There are serious concerns regarding the level of public accountability over temporary agencies, e.g., whether welfare recipients would have access to a grievance process in case of a dispute with the placement agency.

TANF emphasizes placement in any job over access to education and training. This downgrades the skills and hence the competitiveness of the nation’s workforce and undermines efforts of welfare recipients to achieve long-term self sufficiency. TANF allows no more than 20 percent of a state’ s caseload to participate in “vocational educational training” in fulfillment of work requirements and recipients are limited to twelve-months of vocational  training. Basic education and training activities, such as the General Equivalency Diploma and English as a Second Language programs, are no longer automatically counted toward a state’s work participation rate. They may therefore be less available to recipients depending on how states implement the federal law. Finally, enrollment in post-secondary education is no longer counted as participation in work activities unless the states provide otherwise.

Limits on education and training have serious consequences for welfare recipients, training institutions and programs, and the productivity of the workforce. For example, the number of students on welfare enrolled in the City University of New York was reduced by nearly half between 1995 and 1996.9 Other providers of education and training are also witnessing dramatic declines in the size of their programs. In addition to downgrading the competitiveness of the workforce, the emphasis on placement in any job over education and training reduces prospects for living wages and self-sufficiency of welfare recipients. Access to higher education, which enrolled nearly one-fifth of participants in the Jobs Opportunities and Basic Skills Training Program under the repealed AFDC law, is the best means of gaining self-sufficiency for women with children on public assistance.10

What can be done?  “People on welfare who work should be treated like any other workers,” says Andrew L. Stern, President of the Service Employees International Union. Stern was reflecting positively on the February 1997 decision of the AFL/CIO Executive Council to back a drive to organize more than 1 million people, who, it is estimated, will be on workfare under the new law.  Like unions, other advocates of welfare rights have work to do if they are to restore the federal standards that formerly protected welfare participants, or to secure  passage of protective state legislation.

The National JOBS FOR ALL Coalition believes that true welfare reform requires jobs for all at decent pay. Before denying assistance to anyone, government should undertake systematic job vacancy studies to determine how many workers there are for each available job and should create jobs wherever job applicants exceed job openings. Government should also provide adequate income support to those who are unable to work, who care for the very young or infirm family members, or who are denied opportunities to earn enough to support themselves and their families. Attacks on welfare recipients are ultimately attacks on the employment conditions and standard of living of a major part of  the work force. We need the creation of jobs for all at decent wages, not the creation of a vast pool of exploited labor that threatens millions of regular workers.

l. For proposals to repeal and amend PL 104-193, see the Coalition’s Policy Statement on Welfare “Reform.” For state proposals, see the author’s original report, cited p. l, above.

2. Lawrence Mishel and John Schmitt, Cutting Wages by Cutting Welfare: The Impact of Reform on the Low-Wage Labor Market (Washington, DC: Economic Policy Institute, 1995) .  

3. Bruce Steurenagel, The Job Gap Study (Phase One: First Report of Findings),  (J0BS NOW Coalition: 1995).  

4.  Mishel and Schmitt.  

5. “Welfare Clients Outnumber Jobs They Might Fill,” New York Times, August 25, 1996, Al.  

6. “New York Girding for Surge in Workfare Jobs,” New York Times, August 13, 1996, A1.  

7. Pennsylvania Department of Public Welfare, Special Project Management Report, July 1996.  

8. See, for example, Commission on the Future of Worker-Management Relations, Report and Recommendations (December 1994); and Marc Bendick, Charles Jackson, and Victor Reinoso, Measuring Employment Discrimination through Controlled Experiments (Washington, DC: Fair Employment Council of Greater Washington, January 1993).  

9. “Workfare Rules Cause Enrollment to Fall, CUNY Says,” New York Times, June 1, 1996, A1. Eleven percent of CUNY students are on welfare, and its enrollment fell from 10,152 to 5,169 (between Spring semester 1995 and l996) .  

10. See, e.g., Marilyn Gittell and Margaret Schehl, with Camille Fareri, From Welfare to Independence: the College Option, Howard Samuels State Management and Policy Center,  Graduate School and University Center of the City University of New York.  

*Adapted from the author’s Welfare Reforming the Workplace? Key Concerns with the Work Requirements of The Personal Responsibility and Work Opportunity Reconciliation Act of 1995 (New York: National Employment Law Project, September 1996). See also Sharon Dietrich, Maurice Emsellem and Karen Kithan Yau, Welfare Reforming the Workplace: Advocating for the Employment Rights of Welfare Recipients, Immigrants & Displaced Workers. New York: National Employment Law Project, Inc., published in the Clearinghouse Review, January, 1997. 

For further discussion of lack of jobs for welfare recipients and millions of other workers, proposals for documenting job deficiencies more accurately, and for work creation, see Uncommon Sense, #5, “Welfare ‘Reform’: Where Are the Jobs?” #14 “Paying for Full Employment,” and #15, “How Many Jobs Are There? The Need for a National Job Vacancy Survey,” all part of the Coalition’s Welfare Reform Packet: Fair Work and Welfare.  

_________ Editors: Gertrude Schaffner Goldberg, Director, Center for  Social Policy,  Adelphi University, and June Zaccone, Economics (Emer.), Hofstra University