Welfare Reform: States' Implementation and Effects on the Workforce Development System

Published by the Government Accountability Office on 1999-09-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                              United States General Accounting Office

GAO                           Testimony
                              Before the Subcommittee on Postsecondary Education,
                              Training, and Life-Long Learning, Committee on Education
                              and the Workforce, House of Representatives

For Release on Delivery
Expected at 10:00 a.m.
Thursday, September 9, 1999
                              WELFARE REFORM

                              States’ Implementation and
                              Effects on the Workforce
                              Development System
                              Statement of Cynthia M. Fagnoni, Director
                              Education, Workforce, and Income Security Issues
                              Health, Education, and Human Services Division

Welfare Reform: States’ Implementation and
Effects on the Workforce Development
              Mr. Chairman and Members of the Subcommittee:

              Thank you for inviting me here today to discuss our work on welfare
              reform and its implications for the nation’s workforce development
              system. The Personal Responsibility and Work Opportunity Reconciliation
              Act of 1996 (P.L. 104-193) (PRWORA) significantly changed the federal role
              in providing assistance to needy families with children. While the previous
              federal welfare program, Aid to Families With Dependent Children (AFDC),
              provided families with cash assistance for an indefinite period, the new
              one, Temporary Assistance for Needy Families (TANF), provides benefits
              for a time-limited period and focuses on putting clients to work. By the
              time PRWORA was enacted, many states were already engaged in reforming
              their welfare systems using AFDC waivers, but TANF’s emphasis on work has
              given welfare agencies a new focus–one that has long been the province
              of the workforce development system.1 Bringing together two traditionally
              separate systems—welfare and workforce development—to address the
              employment goals of welfare reform could represent an effective way to
              make the best use of each system’s expertise and resources. In fact,
              historically, about a third of the participants in the nation’s primary
              workforce development program for economically disadvantaged
              adults—the Job Training Partnership Act (JTPA) Title IIA program—have
              been welfare recipients. To help foster the linkage and focus assistance on
              welfare’s hardest-to-employ, 1 year after enacting welfare reform
              legislation the Congress created the $3 billion Welfare-to-Work grant
              program. Throughout the course of welfare reform, the workforce
              development system has also been reforming its service delivery
              system—establishing one-stop career centers in an effort to make it easier
              for all clients, including those on cash assistance, to access services. The
              Workforce Investment Act of 1998 (P.L. 105-220) included a provision that
              this one-stop career center system be used in all local areas nationwide to
              deliver many federally funded employment and training services.

              These federal reforms, which in many ways built upon state reforms and
              innovations, represent significant departures from previous policies for
              helping the nation’s vulnerable populations get and keep jobs. Since
              PRWORA was enacted, we have answered numerous congressional requests
              for information with reports on how states have changed their welfare

               For this testimony, we define the “workforce development system” as the state or local entity
              responsible for administering programs that originate through the Department of Labor, such as the
              state Employment Service or Job Training Partnership Act programs; “welfare system” is defined as
              the state or local entity responsible for administering programs that originate through the Department
              of Health and Human Services (HHS), such as the previous Job Opportunities and Basic Skills (JOBS)
              training program and the TANF program.

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Welfare Reform: States’ Implementation and
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programs, the relationship between states’ welfare systems and workforce
development systems, and on what is known about the status of families
who have left welfare. In addition, today we are releasing a report,
required by the Higher Education Act of 1998,2 examining research on
effective welfare-to-work approaches. Because of your interest in these
issues, my testimony today will summarize findings from reports
examining the early outcomes of states’ reforms, with an emphasis on the
extent to which the workforce development and welfare systems are
working together to address the goals of welfare reform. Specifically, I will
discuss (1) what is known about the effectiveness of various approaches
for moving welfare recipients into jobs, (2) how states are implementing
welfare reform, (3) what state-sponsored studies tell us about the status of
those leaving welfare,3 and (4) the challenges that lie ahead as welfare
reform continues to evolve.

In summary, research conducted to date on the effectiveness of different
welfare-to-work approaches—most of which pre-dated federal welfare
reform—suggests that programs that combine approaches, including both
job search assistance and some education and training, tended to have
better outcomes in terms of employment and earnings than either
approach alone. Consistent with these findings and the work focus of
PRWORA, states have been revising their welfare programs to focus on
moving people into employment rather than providing them monthly cash
assistance. To better support this new work focus, many states are
changing how they do business. Clients are often expected to “test the job
market” for a period of time before many other services are provided.
Education and vocational training are largely reserved for those who need
it to get or keep a job or to advance on a career ladder. As welfare
agencies nationwide have focused more on moving clients into jobs than
on providing them cash assistance, the goals and operations of the welfare
system have become increasingly similar to those of the nation’s
workforce development system. The two systems have begun to work
more closely together to meet the needs of TANF clients, although for the
most part the systems are still largely independent. Our review of seven
state-sponsored studies and a recent nationwide study show that most of
the adults who left welfare were employed at some time after leaving the
rolls, usually in low-paying jobs, and that many have returned to the rolls.
As welfare reform continues to evolve, attention should be paid to
emerging challenges, such as

 See Welfare Reform: Assessing the Effectiveness of Various Welfare-to-Work Approaches
(GAO/HEHS-99-179, Sept. 9, 1999).
 For the purpose of this statement, the term “welfare” refers to cash assistance received under AFDC
or TANF.

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                 Welfare Reform: States’ Implementation and
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             •   developing ways in which the systems can help the hardest-to-employ get
                 and keep a job;
             •   enhancing opportunities for low-wage workers to maintain employment
                 and increase their earnings; and
             •   developing ways to foster greater collaboration between the workforce
                 development and welfare systems, such as through one-stop career
                 centers, to meet the employment needs of TANF clients.

                 For at least 30 years, states’ welfare and workforce development systems
Background       have been collaborating to various degrees to provide employment and
                 training services to welfare clients. The requirement for states to
                 administer employment and training programs for their AFDC clients began
                 in 1967 with the Work Incentive (WIN) program, which was jointly
                 administered at the federal level by the Department of Labor and HHS and
                 at the state and local levels by the workforce development system’s
                 Employment Service and by public welfare offices. Starting in 1981 with
                 WIN demonstration projects, states were given greater flexibility to design
                 their programs and could begin to require clients to work. States could
                 also opt to give welfare agencies full responsibility for administering their
                 welfare-to-work programs instead of sharing responsibility with
                 Employment Service agencies. Half of the states adopted WIN
                 demonstration projects in lieu of the traditional WIN program, leading, in
                 part, to a diminished role for Labor in providing employment and training
                 services to welfare clients.4 In 1988, the Congress replaced the WIN
                 program with the JOBS program. JOBS provided AFDC participants a broad
                 range of services, including education and training assistance, and for the
                 first time states were required to place a specified minimum percentage of
                 adult AFDC participants in education and training activities. Unlike WIN,
                 which had a clear federal role for Labor, the JOBS program was
                 administered at the federal level by HHS and at the state level by state AFDC
                 agencies. However, at the local level, welfare agencies often continued to
                 rely on federally funded workforce development programs, such as the
                 Employment Service, to provide services to JOBS clients. When TANF
                 replaced both AFDC and the JOBS program in 1996, HHS continued to oversee
                 TANF at the federal level, but states were given much more flexibility to
                 determine the nature of financial assistance, the types of client services,
                 and the structure of the program and how services are to be delivered at
                 the state and local levels. More recently, the Congress passed the
                 Welfare-to-Work grant program, which provided a total of $3 billion during

                  For more background information, see Pamela A. Holcomb, Welfare Reform: The Family Support Act
                 in Historical Context (Washington, D.C.: Urban Institute, Nov. 1993).

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                      Welfare Reform: States’ Implementation and
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                      fiscal years 1998 and 1999 to help TANF’s hardest-to-employ participants
                      obtain jobs. This latest welfare employment and training program is
                      administered at the federal level by Labor in coordination with HHS. At the
                      state and local levels, it is administered through the system that was
                      established for another federally funded workforce development

                      In concert with welfare system reforms, the Congress recently passed
                      sweeping new legislation, the Workforce Investment Act of 1998 (WIA), to
                      consolidate and streamline the workforce development system. A key
                      provision of the legislation is to require states to use their fledgling
                      one-stop career center systems to deliver most employment and training
                      services. At the time of WIA’s enactment, one-stop centers had begun to be
                      established in all 50 states and were focused on bringing together services
                      for Labor’s various employment and training programs. Under WIA, the
                      services provided at one-stop centers are being expanded beyond Labor
                      programs to include federally funded employment and training programs
                      administered by the Departments of Education, Housing and Urban
                      Development, and Veterans Affairs, as well as other programs. Services
                      provided under the TANF block grant, however, are not included in the
                      legislation. Currently, 11 states have had transitional WIA implementation
                      plans approved by Labor; one more state has had its WIA plan approved for
                      full implementation. The remaining states are in the process of developing
                      their WIA plans.

                      Over the years, states’ welfare-to-work programs have emphasized
What Research Tells   different goals and philosophies for moving individuals into work and have
Us About What Works   provided different types of services and activities to help program
                      participants reach these goals. Programs with the goal of rapid
                      employment, also called the “work first” approach, emphasize quick
                      exposure to and entry into the labor force, reflecting the belief that
                      participants can best acquire employment-related skills when they are
                      working, regardless of the quality of the job. These programs’ service
                      strategies tend to rely heavily on job search activities, but they may make
                      use of education and training to some extent. On the other hand, programs
                      with the goal of skills-building, often called an education-based approach,
                      usually involve a greater initial investment in clients’ education and
                      occupational skills so that when clients do enter the labor market, they
                      can obtain “good” jobs—those with higher pay and opportunity for

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Research conducted to date on the effectiveness of different
welfare-to-work approaches, most of which pre-dated federal welfare
reform, suggests that programs using a combined approach—including
both job search assistance and some education and training—tended to be
more effective over a 5-year time period than either approach alone in
increasing employment and earnings while reducing welfare payments. In
our review of five evaluations begun in the 1980s with relatively long-term
results (5 years),5 we found that programs that focused on rapid
employment and job search activities combined with education and
training activities more often increased employment and earnings and
reduced welfare payments compared with programs that focused solely on
job search activities or those that placed the greatest emphasis on
education. In addition, preliminary results (2-year findings) from a more
recent ongoing evaluation (started in 1992)—and the only evaluation
designed to explicitly compare the effectiveness of a rapid employment
approach with an education-based approach—found that, while each
approach increased participants’ employment and earnings, one approach
was not clearly better than the other. The rapid employment approach did,
however, cost about half as much per person as the education-based
approach. Furthermore, research showed that even some of the most
successful welfare-to-work programs did not usually move families out of
poverty during the time period studied.

While the studies we reviewed provided useful information, more needs to
be known about how well different approaches are performing in the
current welfare environment, which none of the evaluations covered. The
most recently completed evaluations that had 5-year results provided
information on welfare-to-work programs operated in the 1980s and 1990s;
none included results on programs operated since welfare reform.
Currently, HHS is funding 23 studies in 20 states on welfare reforms that
began under waivers to the AFDC program and are continuing in the new
welfare environment. These studies will provide more information on
effective approaches for moving welfare recipients into work.6

 See Welfare Reform: Assessing the Effectiveness of Various Welfare-to-Work Approaches
(GAO/HEHS-99-179, Sept. 9, 1999).
 For more information, see Web sites http://www.acf.dhhs.gov/programs/ opre/rd&e.htm and
http://aspe.os.dhhs. gov/hsp/hspres.htm#outcomes

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                            Our studies conducted in 1997 and 1998 found that states have begun
States Are Changing         changing their welfare systems to emphasize employment for people
Their Systems to            seeking or receiving cash assistance. In contrast to the JOBS program,
Emphasize Work              states now require more welfare recipients to look for work or participate
                            in work activities; emphasize job placement activities rather than
                            long-term education and training; provide other forms of assistance, such
                            as child care and transportation, to keep families employed and off
                            monthly cash assistance; and focus more on helping families solve
                            problems that interfered with work. To provide these services, many states
                            turned to the workforce development system. However, some states have
                            implemented separate service delivery structures to provide
                            employment-related services to welfare clients only. In addition, we found
                            that the welfare system often established the policies related to
                            employment and training, determining such things as the nature of
                            employment assistance and the type of training to make available to

Services Focus on What Is   Our work7 and other studies show that the employment and training
Needed to Get and Keep a    approaches in many states have changed from helping clients acquire
Job                         skills before employment to preparing clients to enter the job market as
                            quickly as possible. When we made site visits in 1997 and 1998 looking at
                            11 states’ early implementation of TANF,8 most adults receiving TANF were
                            required to work or participate in work-related activities9; previously,
                            adults with children under the age of 3—about two-thirds of the
                            caseload—were exempted from work participation requirements. In
                            addition, among the 11 states we visited, most provided employment and
                            training services that focused on preparing TANF clients to enter the
                            workforce quickly. In fact, many states required clients to “test the job
                            market” for a specified length of time before investing in what can be
                            costly assessments or vocational training programs. In some instances,

                             See Welfare Reform: States’ Experiences in Providing Employment Assistance to TANF Clients
                            (GAO/HEHS-99-22, Feb. 26, 1999) and Welfare Reform: States Are Restructuring Programs to Reduce
                            Welfare Dependence (GAO/HEHS-98-109, June 18, 1998).
                            These states were Arizona, California, Connecticut, Louisiana, Maryland, Massachusetts, Michigan,
                            Ohio, Oregon, Texas, and Wisconsin.
                             To receive a TANF grant, states must impose work requirements for adults–at least 25 hours per
                            week in fiscal year 1999 (which we call the “minimum work requirement”). States must meet steadily
                            rising requirements for the percentage of adults that must participate in work activities—50 percent by
                            fiscal year 2002. States may decide which activities constitute “work” for the purposes of obtaining
                            assistance, but PRWORA limits what states can count as work to meet their federal participation rate.
                            Allowable work activities for adult recipients include subsidized or unsubsidized employment,
                            on-the-job training, unpaid work experience, community service, vocational educational training, and
                            providing child care services to certain other participants.

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applicants were expected to engage in job search activities as soon as they
applied for assistance.

In these states, the training focused more on job-readiness skills than on
acquiring new vocational skills. This job-readiness training—lasting from 1
to 6 weeks—usually included instruction in preparing resumes, developing
interviewing skills, and dressing appropriately for the work environment.
Sometimes these readiness training classes were also used to teach
employability skills—such as getting to work regularly and on time and
resolving interpersonal conflicts appropriately—found to be important in
preparing clients with no previous work history for the world of work.10 In
a growing trend under welfare reform, employability skills were also
taught by way of experience in the job market, such as trial jobs, unpaid
work experience, community service jobs, or subsidized and unsubsidized
employment. Nationwide, the percentage of welfare recipients who were
working or participating in work-related activities such as work
experience or community service increased from 7 percent in 1992 to
27 percent in fiscal year 1998, according to data from HHS.

We also found that vocational and basic skills training, including English
as a second language and general equivalency diploma training, was
generally reserved for those who needed it to get or keep a job or to
advance in a career path. This represented a dramatic shift from services
provided under JOBS. Under TANF, we found that skills training was often
simultaneous with a work activity and in addition to meeting the minimum
work requirement. In the case of English language training, the focus was
often on learning vocabulary needed in the work environment. Long-term
vocational training was generally declining in these states. For example, in
Ohio, where 1 in 3 clients had received job skills training or postsecondary
education in prior years, after the state came under federal welfare reform,
only about 1 in 10 received such training. Shorter-term skills
training—usually not more than a month—had replaced the longer-term
vocational training for most clients. These short-term classes were geared
toward acquiring specific new skills, such as computer skills; or upgrading
current skills, such as typing; or were driven by local employer needs.

Sites like Santa Clara County, California, had traditionally placed a strong
emphasis on education and training under JOBS, but officials told us that
they, too, had embraced the “work first” approach, having found the
education-based approach less successful in moving recipients into work

 See Employment Training: Successful Projects Share Common Strategy (GAO/HEHS-96-108, May 7,

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and toward self-sufficiency. While encouraging recipients to find jobs as
quickly as possible, however, Santa Clara officials said they have
continued to emphasize the importance of education for becoming
self-sufficient. They estimated in 1997 that about 25 percent of the county’s
recipients were able to find jobs with a wage that enabled them to be
self-sufficient, but as many as 75 percent would need to combine work
with further training to obtain the skills necessary for self-sufficiency.

The extent to which states and localities provided skills training
sometimes varied depending on the local economy. In many areas we
visited, the strong economy, coupled with entry-level labor shortages, led
employers to require little of their entry-level candidates. In Circleville,
Ohio, for example, we were told that many employers did not require high
school diplomas as a condition of hire, and therefore TANF clients readily
obtained jobs that met their work requirements without being given skills
training. On the other hand, in Ironton, Ohio, where unemployment rates
were well above the statewide average and clients often lacked high
school diplomas, employers demanded higher skill levels of their new

As many welfare offices increased their emphasis on employment and
work-related activities, they also began to focus more on helping clients
address and solve problems that interfered with work, in some cases
“diverting” families from monthly cash assistance. In our work in 199711
we found that many states used some of their additional budgetary
resources under TANF12 to provide services to help TANF families address
barriers to employment, including lack of child care,13 lack of
transportation,14 and complex mental and physical health problems. In
addition, states sometimes provided other forms of assistance, such as
one-time, lump-sum cash payments and assistance with job search, in an
attempt to keep families from needing monthly cash assistance. One-time
cash payments can help families catch up on rent, repair the car, or get
through a medical emergency, thereby allowing them to more readily get
or keep a job. A study sponsored by HHS showed that as of August 1998, 31

  See GAO/HEHS-98-109, June 18, 1998.
 For more information, see Welfare Reform: Early Fiscal Effects of the TANF Block Grant
(GAO/HEHS-98-137, Aug. 18, 1998).
 For more information on welfare reform and child care, see Welfare Reform: State Efforts to Expand
Child Care Programs (GAO/HEHS-98-27, Jan. 13, 1998).
 See Welfare Reform: Transportation’s Role in Moving From Welfare to Work (GAO/RCED-98-161,
May 29, 1998) and Welfare Reform: Implementing DOT’s Access to Jobs Program (GAO/RCED-99-36,
Dec. 8, 1998).

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                            states had reported using at least one “diversion” strategy in at least part
                            of the state.15 A 1999 Rockefeller Institute review of 20 states’ welfare
                            programs found that states and localities had developed a range of
                            diversion programs.16 For example, a diversion program in Texas allowed
                            caseworkers to provide families with employment counseling or refer
                            them to public or private agencies for a variety of services. Arizona’s
                            diversion program offered families emergency shelter, rent or mortgage
                            assistance, or assistance with utility payments. In addition to diverting
                            clients from the welfare rolls, states were also providing services to
                            families that had left the rolls as a result of employment, including, in
                            some cases, providing case management services to help ensure that
                            families could deal with problems that could jeopardize employment.

Workforce Development       To provide employment and training services to welfare clients, the
and Welfare Systems Are     workforce development and welfare systems are still operating largely as
Still Largely Independent   two separate systems. In our visits to five states in 1998, we found that, at
                            the state level, only one—Wisconsin—had fully integrated its welfare and
                            workforce development systems into a single agency. In the other four
                            states, where workforce development and welfare systems were not
                            integrated, only Michigan used its workforce development agency to
                            establish employment and training policies for TANF clients. In the
                            remaining three states, the welfare system established the employment
                            and training policies for the states’ TANF clients, deciding such things as the
                            nature of employment assistance and the type of training to make
                            available to clients. Only in Wisconsin had the organizational structure
                            changed from what existed before welfare reform. However, all five states
                            were continuing to make changes in their workforce development and
                            welfare systems to respond to the new environment under welfare reform.

                            At the local service delivery level, the workforce development system was
                            called upon throughout the state in Wisconsin, Michigan, and
                            Massachusetts to deliver employment and training services to TANF. In
                            addition, in some locations in Ohio (a state with county-based TANF
                            policymaking), county welfare agencies used the workforce development
                            system to provide services. When services were provided by the workforce

                             See Kathleen Maloy and others, A Description and Assessment of State Approaches to Diversion
                            Programs and Activities Under Welfare Reform (Washington, D.C.: George Washington University,
                            Aug. 1998). See also Kathleen Maloy and others, Diversion as a Work-Oriented Welfare Reform
                            Strategy and its Effect on Access to Medicaid: An Examination of the Experiences of Five Local
                            Communities (Washington, D.C.: George Washington University, Mar. 1999).
                             See Richard P. Nathan and Thomas L. Gais, Implementing the Personal Responsibility Act of 1996: A
                            First Look (Albany, N.Y.: Federalism Research Group, The Nelson A. Rockefeller Institute of
                            Government, 1999).

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development system, they were usually provided through one-stop career
centers. One-stop centers were used statewide in Wisconsin and Michigan;
however, they played somewhat different roles in each state. In Wisconsin,
all services to welfare clients—including eligibility determination—as well
as services to nonwelfare clients were available at the one-stop center. In
contrast, Michigan’s eligibility determination was performed at the local
welfare office, and TANF clients were then referred to a one-stop career
center to receive employment and training assistance, often side by side
with nonwelfare clients. Services in Massachusetts, however, were
brought to TANF clients at the welfare offices by the workforce
development or one-stop center staff rather than sending the TANF clients
to the local workforce development agency or one-stop center to receive
those services. Massachusetts’ workforce development officials told us
that they provided employment and training assistance in welfare offices
as a convenience to the client and to facilitate a client’s easy transition to
meeting work requirements and obtaining other supportive services.

Rather than use the workforce development system to provide
employment and training services, Arizona and some locations in Ohio had
developed separate welfare-dedicated centers to serve their welfare
clients. These structures were designed to provide all TANF-related
services, including eligibility and employment and training services in one
location. Nonwelfare clients received their employment and training
services elsewhere, often through one-stop career centers that were being
developed concurrently, but these one-stop centers generally did not serve
TANF clients in Arizona. Similarly, four counties in Ohio at the time of our
visit were developing welfare-dedicated centers to serve their TANF clients.

The welfare system—through TANF funds—and not the workforce
development system was the principal source of funding for work-related
services for TANF clients. In fact, even where the workforce development
system was providing services to the state’s TANF clients, it was doing so
largely with TANF funds, even though these clients could also obtain
services funded by the workforce development system, such as through
the JTPA Title IIA program. Nationwide, the use of the JTPA Title IIA
program to serve TANF clients had generally begun to decline at the time of
our visits. From July 1995 through June 1997, the proportion of JTPA Title
IIA clients who were also receiving AFDC/TANF benefits declined in
thirty-four states, with declines as high as 19.1 percentage points in New
Hampshire. In four of the five states visited during our 1998 site visits, the
declines continued through June 1998. The declines in these states ranged
from 8.8 percentage points in Massachusetts to 5.2 percentage points in

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Arizona over the 3-year period. Only Wisconsin, with an integrated
workforce development and welfare system, showed an
increase—9.1 percentage points—of JTPA Title IIA clients who were also
AFDC/TANF clients.

During our visits to the five states, no clear-cut answer emerged as to
which service delivery approach—using the traditional workforce
development or the welfare-dedicated structures—worked best in meeting
the employment and training needs of welfare clients in these states. State
and local officials we spoke with differed about where they believed
welfare clients’ needs are better served. The philosophy of the one-stop
career center system, as well as the workforce development system as a
whole, has been one of serving a “universal population”—services are
available to all clients, with some services for some clients funded out of
targeted, categorical programs. In this view, welfare clients are seen as
similar to all other job seekers, obtaining employment and training
services, side-by-side with all other clients, from service providers who
specialize in the field of employment and training. According to HHS
officials at the time of our visits, 17 states used one-stop career centers or
other traditional workforce development structures as the primary means
to deliver employment and training services to welfare clients. An
alternative approach to serving welfare clients in workforce development
structures is to provide services to these clients in centers that target all
services to welfare clients only. These centers are usually staffed by
service providers who specialize in the needs of welfare clients, and they
often include workers who specialize in determining program eligibility.
These welfare-only centers can also provide welfare clients with a range of
other related services, including child support enforcement services, help
with finding child care, and screening for domestic violence and mental
health problems. In this latter approach, welfare clients are seen as having
unique needs that are better served by individuals with special knowledge
of welfare and welfare-related issues. HHS officials reported that, at the
time of our visits, 14 states had established welfare-only centers as the
primary means to provide employment and training services to TANF

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                        Given the large decline in the number of families receiving
Most Adults in Former   welfare—47 percent between January 1994 and March 1999—greater
Welfare Families Were   attention is being focused on learning how these families are faring. The
Employed at Some        information available from some states and national sources indicate that
                        most families who left welfare had at least some attachment to the
Time After Leaving      workforce. There are no federal requirements for states to report on the
Welfare, Often at       status of former welfare recipients. As a result, the only systematic data at
                        the state level on families who left welfare come from research efforts
Low-Wage Jobs           initiated by states. During our review on the status of former welfare
                        recipients,17 we identified studies from seven states18 that provided
                        representative data on families leaving welfare. Because the seven states’
                        studies differed in key ways, including time periods covered—from as
                        early as 1995 to as late as 1998—and categories of families studied, the
                        results are not completely comparable among the studies. However, the
                        studies provided information on the status of families who had left welfare
                        in these states at the time of the studies and, because certain results are
                        consistent across the studies, suggest a pattern of what was happening to
                        such families.

                        Seven of the state studies reported that most of the adults in families
                        remaining off the welfare rolls were employed at some time after leaving
                        welfare. Employment rates ranged from 61 to 87 percent for adults in the
                        families who left welfare in these seven states. However, the employment
                        rates were measured in different ways. Studies measuring employment at
                        the time of follow-up reported employment rates from 61 to 71 percent.
                        Studies measuring whether an adult in a family had ever been employed
                        since leaving welfare reported employment rates from 63 to 87 percent.
                        These employment rates generally excluded families who returned to
                        welfare, which can be a substantial portion of the families who leave
                        welfare.19 The percentages of the families who initially left welfare and
                        then returned to the rolls ranged from 19 percent after 3 months in
                        Maryland to 30 percent after 15 months in Wisconsin.

                        Turning to the incomes of those who left welfare, former recipients in
                        these seven states had average quarterly earnings that generally ranged

                          See Welfare Reform: Information on Former Recipients’ Status (GAO/HEHS-99-48, Apr. 28, 1999).
                          The states are Indiana, Maryland, Oklahoma, South Carolina, Tennessee, Washington, and Wisconsin.
                         Removing families who return to welfare from the employment rate calculations results in higher
                        employment rates than when they are included, since many former recipients who return to the
                        welfare rolls are not employed.

                        Page 12                                                                       GAO/T-HEHS-99-190
Welfare Reform: States’ Implementation and
Effects on the Workforce Development

from $2,378 to $3,786—or from $9,512 to $15,144 annually.20 This estimated
annual earned income is greater than the maximum annual amount of cash
assistance and food stamps that a three-person family with no other
income could have received in these states.21 However, if these earnings
were the only source of income for families after they leave welfare, many
of them would remain below the federal poverty level.22 While the studies
provide information on individuals’ earned incomes, much remains
unknown about families’ total household income, such as earnings by
other household members, child support payments, or financial assistance
from relatives and friends, or about receipt of income supports such as
Medicaid, food stamps, subsidized child care, and the earned income tax
credit. However, a recent study, performed after our review by the Center
on Budget and Policy Priorities, suggests that the very poorest
single-mother families—those at 55 percent of the federal poverty
level—experienced a loss in income between 1995 and 1997, even when
the incomes of others residing in the household were taken into account.
The study linked this loss to a reduction in public assistance received by
these families.23

While we could not draw conclusions about the status of most families
that have left welfare nationwide on the basis of studies in several states, a
recently issued study on the status of families nationwide indicate similar
findings. On the basis of a 1997 survey of a nationally representative
sample of families, the Urban Institute reported that 61 percent of the
former recipients who were still off welfare at the time of the interview
were working, with a median wage of $6.61. For the families with earnings,
the median amount of monthly earnings was $1,149. The study also found
that nearly 30 percent of those who left welfare in 1995 were receiving
welfare benefits again in 1997. A significant percentage of former welfare
recipients were not working—20 percent neither had jobs nor lived with
spouses who had jobs.24

 We estimated the amounts of annual incomes by extrapolating the quarterly earnings; the states did
not provide information on annual earnings.
 In these seven states, for a single-parent, three-person family with no income, the maximum annual
amount of cash assistance and food stamps combined ranged from $6,000 in Tennessee to $9,744 in
Washington as of Jan. 1997.
  For 1998, the federal poverty level for a family of three was $13,650.
 Wendell Primus, Lynette Rawlings, Kathy Larin, and Kathryn Porter, The Initial Impact of Welfare
Reform on the Incomes of Single-Mother Families (Washington, D.C.: The Center on Budget and Policy
Priorities, Aug. 22, 1999).
 Pamela Loprest, How Families That Left Welfare Are Doing: A National Picture, Series B, No. B-1
(Washington, D.C.: Urban Institute, Aug. 1999).

Page 13                                                                       GAO/T-HEHS-99-190
                       Welfare Reform: States’ Implementation and
                       Effects on the Workforce Development

                       On the basis of our work in several states, we have already seen some of
Challenges Ahead as    the effects of the dramatic changes related to state and federal welfare
Welfare Reform         reform on states’ workforce development systems. We expect even more
Continues to Evolve    changes in the future, as the two systems continue to respond to changing
                       dynamics—dynamics that include states’ increasing focus on supporting
                       low-income workers under welfare reform. As welfare reform and the
                       workforce development system evolve, attention should be given to
                       several emerging issues, including getting jobs for the hardest-to-employ,
                       finding ways to enhance opportunities for low-wage workers, and
                       fostering greater collaboration between the workforce development and
                       welfare systems.

Getting Jobs for the   As states must meet steadily rising work participation rates, they must
Hardest-to-Employ      require an increasingly greater proportion of their welfare caseloads to
                       participate in work-related activities—including some recipients who may
                       have been exempted previously or who are less job-ready. As a result,
                       even if economic conditions remain favorable, states’ initial successes
                       with moving applicants and recipients into employment will probably slow
                       over time. In response, states will need to adjust their approaches to better
                       enable families with a range of problems to take steps toward becoming
                       more self-supporting. Finding ways to involve the recipients who remain
                       on the welfare rolls in work activities was one of the most challenging and
                       widespread implementation issues cited in many of the states we visited.
                       The Welfare-to-Work grants provided added funding to allow states to
                       experiment with different approaches, and states developed plans to use
                       these funds to meet local needs. For example, Michigan’s and Wisconsin’s
                       plans emphasized assistance to unemployed noncustodial
                       parents—individuals who often have child support payments in arrears
                       that result in dependents seeking welfare cash assistance. Massachusetts’
                       plan focused on serving TANF recipients who were reaching their time
                       limits on cash assistance. One area in New York planned to have staff
                       available 24 hours a day to assist the hardest-to-employ TANF recipients
                       find and keep jobs. While TANF and Welfare-to-Work grant funds are
                       available to provide a variety of services to the hardest-to-employ, little is
                       known about how best to help these individuals move to economic
                       self-sufficiency, largely because they have often been exempted in the past
                       from participating in work. More research and evaluation will be needed
                       to identify approaches that show the most promise for working with these
                       welfare families.

                       Page 14                                                     GAO/T-HEHS-99-190
                            Welfare Reform: States’ Implementation and
                            Effects on the Workforce Development

Finding Ways to Enhance     Our work and other studies consistently show that many of the families
Opportunities for           leaving welfare are employed in low-wage jobs. While many former
Low-Wage Workers            welfare recipients are now employed, these families’ prospects for
                            achieving a measure of economic stability remain an important issue,
                            especially in light of prior research showing that AFDC mothers have
                            generally experienced little rise in wages over time.25 Some states and
                            localities have undertaken efforts to help these former welfare recipients,
                            as well as other low-wage workers, upgrade their skills to improve their
                            job prospects.26 Michigan, for example, set aside $12 million in 1998 for
                            postemployment training for TANF clients who were already meeting their
                            work requirements. Similarly, Wisconsin had a $1 million Employment
                            Skills Advancement Program under which poor working
                            parents—including TANF clients—received grants for attending vocational
                            training or education programs. This focus on serving clients engaged in
                            work may require establishing new service strategies, such as offering
                            training in the evenings and on weekends, and providing for the child care
                            needs of participants. It may also mean broadening the coverage of
                            existing federally funded training programs through the workforce
                            development system to clearly embrace those already in the workforce,
                            such as through continued training after employment.

Collaboration Between the   When we did our fieldwork in 1998,27 we observed that the workforce
Workforce Development       development and welfare systems were still largely independent. When the
and Welfare Systems         Congress authorized the Welfare-to-Work grant program, it provided an
                            opportunity for the two systems, in those states that participated, to
                            collaborate. However, we also found that, because TANF funds were
                            plentiful and flexible, the need for additional resources alone was not
                            sufficient to bring together the workforce development and welfare
                            systems in the states we visited. With the passage of WIA and the expansion
                            of one-stop career centers, states and localities have an opportunity to
                            reassess how services are coordinated and delivered. Providing TANF
                            services through these centers is a state and local option, and some states

                             See Gary Burtless, “Employment Prospects of Welfare Recipients,” The Work Alternative: Welfare
                            Reform and the Realities of the Job Market, Demetra Smith Nightingale and Robert H. Haveman, eds.
                            (Washington, D.C.: Urban Institute Press, 1995).
                             See Rebecca Brown and others, Working Out of Poverty: Employment Retention and Career
                            Advancement for Welfare Recipients (Washington, D.C.: National Governors’ Association and HHS,
                            1998); Mark Elliott, Don Spangler, and Kathy Yorkievitz, What Next After Work First? (Philadelphia,
                            Pa.: Public/Private Ventures, Spring 1998); and Brandon Roberts and Jeffrey D. Padden, Welfare to
                            Wages: Strategies to Assist the Private Sector to Employ Welfare Recipients (Chevy Chase, Md.:
                            Brandon Roberts and Associates, Aug. 1998).
                             See Welfare Reform: States’ Experiences in Providing Employment Assistance to TANF Clients
                            (GAO/HEHS-99-22, Feb. 26, 1999).

                            Page 15                                                                        GAO/T-HEHS-99-190
                  Welfare Reform: States’ Implementation and
                  Effects on the Workforce Development

                  may call upon the centers to deliver at least some services to welfare
                  clients. Many states are already doing so. It is too early to know whether
                  the various reforms and collaborative efforts will lead to greater flexibility
                  and cooperation in providing services. As the implementation of WIA
                  unfolds, more research will be needed to determine how one-stop career
                  centers can be most effective in meeting the employment and training
                  needs of all clients, including welfare clients and low-income workers, and
                  how the structure of the federal programs in WIA can provide for more
                  efficient program operation.

                  Mr. Chairman, this concludes my prepared statement. I will be happy to
                  answer any questions you or other Members of the Subcommittee may

                  For future contacts regarding this testimony, please contact Cynthia M.
GAO Contact and   Fagnoni at (202) 512-7215. Individuals making key contributions to this
Acknowledgments   testimony included Sigurd Nilsen, Gale Harris, and Dianne Blank.

                  Page 16                                                     GAO/T-HEHS-99-190
Page 17   GAO/T-HEHS-99-190
Page 18   GAO/T-HEHS-99-190
Page 19   GAO/T-HEHS-99-190
Related GAO Products

              Medicaid Enrollment: Amid Declines, State Efforts to Ensure Coverage
              After Welfare Reform Vary (GAO/HEHS-99-163, Sept. 10, 1999).

              Welfare Reform: Assessing the Effectiveness of Various Welfare-to-Work
              Approaches (GAO/HEHS-99-179, Sept. 9, 1999).

              Food Stamp Program: Various Factors Have Led to Declining Participation
              (GAO/RCED-99-185, July 2, 1999).

              Welfare Reform: Information on Former Recipients’ Status (GAO/HEHS-99-48,
              Apr. 28, 1999).

              Welfare Reform: States’ Experiences in Providing Employment Assistance
              to TANF Clients (GAO/HEHS-99-22, Feb. 26, 1999).

              Welfare Reform: Status of Awards and Selected States’ Use of
              Welfare-to-Work Grants (GAO/HEHS-99-40, Feb. 5, 1999).

              Welfare Reform: Implementing DOT’s Access to Jobs Program
              (GAO/RCED-99-36, Dec. 8, 1998).

              Domestic Violence: Prevalence and Implications for Employment Among
              Welfare Recipients (GAO/HEHS-99-12, Nov. 24, 1998).

              Welfare Reform: Early Fiscal Effects of the TANF Block Grant
              (GAO/AIMD-98-137, Aug. 18, 1998).

              Welfare Reform: Changes Will Further Shape the Roles of Housing
              Agencies and HUD (GAO/RCED-98-148, June 25, 1998).

              Welfare Reform: States Are Restructuring Programs to Reduce Welfare
              Dependence (GAO/HEHS-98-109, June 18, 1998).

              Welfare Reform: Transportation’s Role in Moving From Welfare to Work
              (GAO/RCED-98-161, May 29, 1998).

              Medicaid: Early Implications of Welfare Reform for Beneficiaries and
              States (GAO/HEHS-98-62, Feb. 24, 1998).

              Welfare Reform: States’ Efforts to Expand Child Care Programs
              (GAO/HEHS-98-27, Jan. 13, 1998).

(205506)      Page 20                                                  GAO/T-HEHS-99-190
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