Politics & Policy

Ten Welfare-Reform Lessons

From the April 21 issue of NR

New York City’s welfare system is managed out of a boxy 25-story office building on Water Street in Lower Manhattan. Approximately 5,000 employees work there, directing government programs that provide billions of dollars of taxpayer-funded assistance to the poor and near-poor. A solid majority of the workers at 180 Water Street are African-American or Latino; their voter registration is almost certainly overwhelmingly Democratic; and all but about 300 of them are union members. But from 1995 until this past December, the people who worked in New York’s principal social-services agency were leading one of the most conservative and successful welfare offices in the country.

I witnessed it first-hand. From early 2007 until the end of 2013, I was the commissioner of the New York City Human Resources Administration (HRA), the agency with the 1960s-era name that occupies 180 Water Street. And before 2007, going back to early 1996, I worked at, and for a time led, the state agency that was responsible for overseeing many of the government-assistance programs administered by the city. But while my perspective is that of an insider, the facts speak for themselves: From 1995 until the end of 2013, New York City’s cash-welfare caseload shrunk from almost 1.1 million recipients to less than 347,000 — a drop of more than 700,000 men, women, and children.

The achievements of welfare reform in New York City were about more than reducing the number of people on cash welfare. There were also big increases in work rates for single mothers (up from 43 percent in 1994 to 63 percent in 2009) and large reductions in child poverty (down from 42 percent in 1994 to 28.3 percent in 2008). Even in the wake of the 2008 recession, child poverty in New York City in 2011 was almost ten percentage points lower than it had been the year before welfare reforms started.

Welfare-caseload declines, work-rate increases, and child-poverty declines all happened largely because, for eight years under Mayor Giuliani and twelve years under Mayor Bloomberg, New York City required welfare applicants and recipients to work, or look for work, in return for benefits. We aggressively detected and prevented fraud and waste (although we didn’t stop all of them); and we enforced these requirements with a vigilance that every day led to hundreds of case closings and welfare-grant reductions as we made clear that welfare came with responsibilities.

Make no mistake about it: My fellow city workers and I were bureaucrats. But we were bureaucrats on a mission to bring the principles of the 1996 federal welfare-reform legislation to New York City in a way that would help poor New Yorkers improve their station in life. It turns out that, once given the right direction, bureaucrats can accomplish big things. Here are ten lessons I learned about how programs for the poor should be run.

Always promote personal responsibility. The minute an applicant believes that government will solve all of her problems, she loses. Accepting responsibility for one’s own future is the vital first step to moving up. This is not the typical attitude among government workers, especially ones raised on the promises of the Great Society, but, in their hearts, New York City welfare workers knew it was true and were happy to embrace the concept when they were allowed to. They understood that taking full responsibility for the people they served is a burden they could not shoulder. Everyone at the agency knew that absent some effort by the welfare recipient, victory over poverty and unemployment is impossible. This is especially true when it comes to getting a job. Lots of “programs” want to say that they got a participant a job, or “placed” a certain number of people into employment. But for entry-level jobs, the person who gets the job is the person who gets the job, and the sooner the clients and the caseworkers realize that, the better.

Employment is far better than training and education. In the years leading up to the passage of the federal welfare-reform legislation, study after study showed that programs that encouraged training and education over rapid employment proved less successful at getting people into jobs that lasted. Our experience in New York City proved this to be true. After we implemented strong work-first requirements and tied our payments to employment-service providers to their actual records in placing people in jobs, labor-force participation for never-married single mothers rose dramatically — far faster than even the most ardent welfare reformers expected. Though there are many who prioritize education and job training over employment, it is clear that programs with such an emphasis have not produced the desired results. The priority should be work first, then education or on-the-job training as a supplement.

Making work pay is welfare reform too. Being off of cash welfare does not mean a person is off of all assistance. Not only are a lot of former cash-welfare recipients still dependent on some form of assistance, but the increasing use of these programs means that total spending has not been reduced as a result of federal welfare reform. It has actually increased.

Food-stamp benefits, child-care vouchers, and public health insurance all were part of this arsenal of non-cash “work supports” that we promoted in New York. And so long as these forms of government assistance went to working people, the public was supportive. I remember seeing nodding heads of agreement at a large public meeting in the Bronx when I said in response to a question about what we were doing to help struggling families, “If you work, we will help you.”

It would be better if low-skilled former welfare recipients could achieve full self-sufficiency and derive no part of their income from government, but the cost of living and the current state of the labor market require work supports to shore up low wages. As a result, as cash-welfare caseloads plummeted, the number of recipients of food-stamp benefits grew dramatically, as did the number of people getting public health insurance or Medicaid. Most of this growth resulted from assistance to working adults and their children. And — notably, given the reduction in labor-force participation at the national level during the past seven years — New York City’s labor-force-participation rate has risen during a period in which Medicaid and food-stamp receipt has risen as well.

Be honest about the importance of married two-parent families. Very few families with married and involved parents, both working, ever need any form of welfare. This is why I came to believe that it was dishonest for us not to talk about the importance of parents’ marriage in reducing the poverty of children. Children need stable, two-parent families. No government or public program can replace a missing parent. It was the recognition of government’s inadequate response to the problem — and my desire to be honest about it — that led us to put together the city’s public-messaging campaign about the consequences of teen pregnancy. With messages about the bad employment prospects and poor school performance of children raised by unmarried teen parents, we created subway and bus posters that told the truth in a way that kids and adults would see and understand. We got blowback from liberal commentators and politicians, but independently conducted focus groups with low-income teenagers found that the people we were trying to reach understood and agreed with what we were saying.

Caseworkers don’t cost much; benefits do. I understand the temptation to rail against bureaucrats and bureaucracy, but in welfare the money is spent mostly on benefits to clients, not the administrative costs of the agency. Welfare-administration costs are typically less than 5 percent of a program’s total costs. While there is often pressure from some (including conservatives) to streamline the benefits-application process with computer technologies, this is dangerous for two reasons. First, easier access to benefits may reduce personnel costs, but it will drive up use and increase dependency. Second, the workers’ key role of encouraging work and personal responsibility will be lost. Computers are great at sending money to an EBT card; they are not so good at saying, “You need to get a job.”

Medicaid is where the money is. Whenever someone talks about “welfare costs,” make sure you ask whether he is including the health-care costs associated with Medicaid, the nation’s health-insurance program for the poor. In New York City alone, Medicaid cost almost $30 billion in 2012, compared with $3.5 billion for food stamps and less than $1.5 billion for cash welfare. Medicaid dwarfs all other welfare spending nationally, too — just to a slightly lesser extent. Combined federal and state spending on Medicaid ($431 billion in 2012) is more than five times spending on food stamps and more than 25 times spending on TANF, the federal cash-welfare program.

It’s important to recognize that recipients of government assistance don’t receive Medicaid spending — health-care providers do. What recipients receive is a card that helps them get doctors and hospitals to treat them. Medicaid involves a lot of wasteful and fraudulent overspending, but poor people don’t get any of that.

Immigrants get welfare too. I know the stereotype of the hard-working immigrant who comes to America to find work and opportunity is near and dear to many Americans, liberals and conservatives alike, but not every new arrival to the United States steers clear of the social-services office.

To be sure, most legal immigrants in New York City are not poor, work for their income, and contribute to the city positively. On net, immigrants have been an economic boon to the city. But a significant portion of new arrivals apply for and receive welfare benefits. The three biggest programs at HRA were cash welfare, food stamps, and Medicaid, and our data showed that more than 25 percent of cash-welfare and food-stamp recipients and more than 35 percent of Medicaid recipients were non-citizens or children of non-citizens.

You may be thinking: How can that be? Illegal immigrants are not eligible for those programs. They aren’t, but most immigrants are here legally, and legal residents who have been in the United States for more than five years are eligible for most means-tested programs, whether they become citizens at that point or not.

There is one aspect of the immigration process that was intended to discourage welfare use by non-citizens. It is known as the “sponsor recovery” process. Many legal immigrants seeking citizenship are required to submit a form signed by an American citizen who is sponsoring them, and that form clearly states that should the person being sponsored receive welfare benefits, the government agency providing those benefits may recover the cost of assistance from the sponsor. I know of very few welfare agencies that have actually enforced this provision — except New York City’s.

During 2013, we sought to recover expenditures from sponsors of immigrants who had received cash welfare as single adults, a form of welfare that is mostly paid for using city funds. In less than a year, we collected more than $600,000 from sponsors just by asking that they make good on their promise.

Welfare recipients (and workers too) will try to “get over.” “To get over” is a very New York expression meaning to steal – usually from government and usually to obtain benefits that one isn’t entitled to. There’s no better opportunity for it than welfare programs. Turning a blind eye to the potential for fraud and abuse is naïve. An agency like HRA can have the most capable and unimpeachable top leaders, but these welfare programs are huge and involve millions of transactions and thousands of workers and recipients. The opportunities to take a little here and a little there are all over the place. During my seven years at HRA, we had scandals involving child-care centers that had no children, welfare workers who gave themselves food-stamp benefits, nonprofit employment-services providers who billed for phony job placements, and health-care programs that never filled out required paperwork for thousands of clients. I recruited and hired a former federal prosecutor and nationally renowned expert in Medicaid fraud to serve as our agency’s chief integrity officer and gave him wide latitude to improve all of our protections against abuse, and I was still worried.

The vast majority of expenditures in welfare programs are consistent with program rules and not fraudulent. But the overall size of the spending is so great that even a 5 percent error rate is significant. And, more important, taxpayers have a right to expect that spending on programs be managed properly. To be sure that our entire agency was focused on fraud detection, we set an annual goal of more than $600 million in cost avoidance and recoveries from anti-fraud efforts.

When it comes to the disabled, trust but verify. Obviously a work-based welfare program can’t be successful if someone is too sick or disabled to work. But accepting disability claims at face value isn’t the right answer either. That’s why we set up a whole separate (and, yes, bureaucratic) process for welfare applicants who claimed they could not work because of some physical or mental condition. We required them to see our doctors to get a full diagnostic review with an eye toward determining whether they could work normally, could work with some limitations, or could not work and should apply to the federal Supplemental Security Income program. The goal was to be sure they truly could not work before shunting them off to the federal disability program. Over the years, we found thousands of people who said they could not work but in fact could. We helped an equal number improve their underlying conditions so that they could go to work. And we helped those who really did qualify for the federal program gather the documentation necessary to apply.

Always cheer for the economy. I spent seven years running New York City’s welfare programs for Michael Bloomberg, and as proud as I was of what our social-service programs provided to poor New Yorkers, I never forgot that perhaps the most important key to helping struggling families was a vibrant economy that offered an abundance of entry-level jobs. That’s why I was always first in line to support and encourage every kind of thoughtful economic-development idea that promised job creation. Thankfully, we had a mayor who agreed.

At no time was that more apparent than in the period after the Great Recession, when New York City bounced back far faster than the rest of the country. In fact, by the end of 2013, the city had gained back 300 percent of the jobs it had lost in the recession, while the nation as a whole was still struggling to regain pre-recession job levels. And New York City’s job growth was citywide: Growth in the outer boroughs was twice the rate of Manhattan’s. To make welfare programs succeed, always cheer for the economy, and those who nurture it.

What does all of this tell us about welfare in general, and about the prospects of New York City in particular? Helping people in need is important work that is necessary for our nation to fully realize its promise. It’s also hard, and progress is measured in small steps. Poverty is still too high in New York and in America; too many families lack two involved parents with at least one full-time worker; and more people need to be able to move up the economic ladder.

New York City now has a new mayor with his own ideas on how to help the poor. It is likely that many of the policies in place at HRA will be modified or ended completely. The immigrant-sponsor-recovery effort has already been terminated, and the chief integrity officer whom I hired has left. I doubt that someone of his prestige or authority will fill that role, if it is filled at all. The focus on work as a condition of cash welfare will be harder to end, since the federal requirements are still in place, though now with less emphasis from Washington. As for non-cash work supports, it is likely that they will be modified to such an extent that they will become all support and little work.

Will the city’s economy continue to outpace the rest of the country’s? Given the new mayor’s support for policies such as mandated paid sick leave and a higher minimum wage — both of which make workers more expensive for businesses to employ — I am doubtful that job growth will remain as strong as it has been. As a result of these changes, the number of people classified as poor may grow in New York City. This may come as a surprise to some, given Mayor de Blasio’s progressive rhetoric. But it shouldn’t be surprising at all — there is a long history of progressive policies’ losing ground in the war on poverty.

– Robert Doar is the Morgridge Fellow in Poverty Studies at the American Enterprise Institute. From 2007 to 2013, he was the Commissioner of the New York City Human Resources Administration, the city’s principal social-services agency. 



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