In Broken Welfare System, ‘Needy Families’ Fund Offers Break for Jobless

Michelle Chen

You might say that the people who need jobs most today were the ones who needed them long before yesterday – those who were struggling to survive on public assistance before the recession dealt them yet another blow. But could the federal welfare system, often dismissed as a repository for the poorest of the poor, be a fiscal tool for economic recovery?

Nearly a decade and a half after the Clinton administration brought us the controversial end of welfare as we know it,” federal aid for needy households remains a bureaucratic maze that mires many parents and children in poverty. But the Temporary Assistance for Needy Families Emergency Fund also contains a job program that could help employers weather the tumultuous job market.

Though being on the dole isn’t normally associated with job creation, the fund — which Congress recently extended through September as part of the American Recovery and Reinvestment Act—could give local employers a boost while helping low-income families move toward full-time work. The TANF fund covers 80 percent of the costs related to employment, and is fairly flexible, explains the Center on Budget and Policy Priorities (CBPP):

The reimbursable costs are not limited to the actual wage subsidy but also include the costs of workplace benefits, supervision and training, and administrative costs such as the costs of overseeing the program, developing work placement sites, and providing training to participants.”

But advocates say that the measure falls far short of need and warn that letting the funds expire this fall (a vote is pending) would pull the floor out from under thousands of low-income families. For employers, the subsidy may have clinched the hiring decision, and without it, firms may be unable to sustain the new employees. Workers will find themselves stranded after the subsidy initiated the first critical step toward a decent paying full-time job.

Like a conventional hiring tax credit, the TANF subsidy offsets the risk of bringing on a new worker and may encourage a firm to expand in a hostile economic climate. Though the timeframe for the subsidy is generally a few months, agencies have wide leeway in administering the payments. They can share costs with employers over time, or they can target the funds toward the long-term unemployed parents who might not qualify for regular cash benefits. Overall, the program has generated an estimated 160,000 jobs in about 30 states, according to the CBPP.

Aside from the financial cushion, the subsidy gives the government leverage to advance certain kinds of workforce and development goals. The CBPP outlines how the funds have been put to work:

Rehiring laid-off employees. Small businesses hit hard by the recession often lack sufficient reserves to keep valued employees during periods of weak demand for their products or services. The TANF Emergency Fund has allowed some small businesses to rehire laid-off employees sooner than they had planned. For example, a small rental company in rural Ohio was able to hire back an employee who had been laid off for an extended period and would otherwise have remained laid off. This employer is planning to keep the employee on staff after the three-month subsidy ends, in anticipation of a seasonal increase in business after the winter.

Supporting new business start-ups. Starting a new business can be difficult during a period of weak demand because the risk of failure is much greater. This is unfortunate because new businesses are essential to the long-term economic viability of communities that have faced significant job losses before and during the recession. Some of these communities have been able to use the TANF Emergency Fund to attract new firms and to help businesses that are just starting to increase their chances of success. For example, a small city in Ohio worked with local business organizations to put together a package of incentives to encourage a new employer to move to the city. One of the incentives was TANF wage subsidies for new hires.

San Francisco has used the subsidy for a program aimed at local unemployed parents called Jobs Now. In New York, according to the Fiscal Policy Institute, TANF job supports have enabled the state to develop a Green Jobs Corps and a transitional jobs program for people facing employment barriers. The Center on Law and Social Policy (CLASP) notes that this approach to subsidized employment can open access to jobs for people experiencing homelessness, disconnected youth, people who are formerly incarcerated, refugees and immigrants, people with disabilities and veterans.”

TANF rules also have built-in labor protections that help guard against exploitation and the displacement of regular workers with cheaper” ones. The CBPP concludes that the new hires spurred by TANF may actually be more beneficial to some small employers than the measures included in the jobs bill President Obama signed on March 18, which provides a temporary Social Security payroll tax suspension (equal to 6.2 percent of wages) through the end of the year and a $1,000 tax credit if the firm retains the new employee for a year.”

Beyond the employment subsidy, the TANF debate in Congress has called attention to the precarious role of the welfare system in the economy. Russell Sykes, chair of the National Association of State TANF Administrators, testified at a House Ways & Means hearing, Against the backdrop of this severely challenging fiscal landscape, state TANF agencies are already being forced to make extremely difficult decisions on how they will allocate declining resources.”

An analysis by the Government Accountability Office found a stark decline in the number of eligible families oncash assistance since the 1990s. The trend may be due in large part to poor people being unfairly shut out of the TANF program due to draconian sanctions” imposed when participants can’t keep up with meetings or work requirements.

CLASP and other anti-poverty advocates say the current welfare-to-work” paradigm ulimately falls back on blaming the poor for being that way:

With work first” as the mantra, most recipients were denied the opportunity to participate in education and training that might have given them access to better jobs. Instead, they were pushed into a labor market full of low-wage jobs that did not provide enough income to make ends meet.

While the TANF subsidy is just one small stitch in the recovery program, it’s an example of how welfare policy can be reworked to provide more than short-term relief. Ideally, by giving low-income people a pathway into the labor force, the TANF emergency fund works the way a subsidy should: giving struggling workers and unstable employers something to lean on, just long enough until they can both stand on their own.

Michelle Chen is a contributing writer at In These Times and The Nation, a contributing editor at Dissent and a co-producer of the Belabored” podcast. She studies history at the CUNY Graduate Center. She tweets at @meeshellchen.

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