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The Welfare of All of Us: A Square Deal for American Families

The welfare of each of us is dependent fundamentally upon the welfare of all of us.
                        —President Theodore Roosevelt on Labor Day, 1903

The coronavirus pandemic has changed people’s expectations of what government can and should do. Debate around the limits of mar­kets has accelerated, creating more space for conservatives and progressives alike to put forward new ideas for reform. Many sense that the rapid expansion of federal power and spending over the past year marks a major turning point for the future of the American state and the broader realignment of American politics.

When lockdown measures forced businesses to shut, unemployment figures skyrocketed. By April 2020, unemployment hit an historic high of 14.8 percent.1 The economy contracted by 31.4 percent in the second quarter of last year, sending shock waves across the country.2 A RAND Corporation survey in May 2020 reported that 36 percent of adults with a household income below $25,000 per year experienced a fall in income since February. For middle- and higher-income households, it was 31 percent.3 Amid the current disruption to working patterns, unemployment is not forecast to return to the pre-pandemic level of 3.5 percent until the end of the decade.4

To tackle the crisis, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (cares Act), a $2.2 trillion stimulus package. The cares Act briefly prevented an increase in poverty, but as its measures began to lapse after July 2020, the poverty rate rose rapidly. From June to November, the poverty rate went up from 9.6 percent to 11.7 percent, marking the biggest one-year increase in sixty years.5 The economic and social impact of the pandemic has been severe and will be long-lasting, forcing legislators to grapple with the challenge of finding new solutions that will adapt the welfare system to the post-coronavirus world.

Finding the New Majority

The pandemic has also brought into focus an intellectual debate that has been happening on the right since President Obama’s 2012 victory, when a group of “reform conservatives” made the case for a root and branch review of policy that could help secure a new majority for the Republican Party. They argued that the Republican Party needed to reconnect with lower-middle-class and working-class families by be­coming friendlier toward the welfare system and less deferential toward the needs of big business.

But these efforts were ultimately overtaken by the 2016 presidential election. As a populist insurgent, Trump built his coalition through opposition to ruling elites in both major political parties and a promise to restore economic and cultural security for the working class, speaking to their sense of grievance rather than providing new policy solutions.

Despite enjoying unified government for the first time in over a decade, Republicans could not find a consensus on how to deliver Trump’s vision. Speaker Paul Ryan expended his party’s political capital on a failed attempt to repeal the Affordable Care Act under pressure from the pro-business and anti-government wings of the party. The passage of the Tax Cuts and Jobs Act, whatever its merits, was a clear demonstration of how Republican legislators are still more responsive to their donors than to their voters. This dynamic has continued to be an obstacle to any serious moves by the GOP toward a more populist economic appeal to working-class voters.

Frustration with pro-business and anti-government Republicans has led to a deepening of divisions within the conservative movement and inspired an intellectual challenge to the primacy of free market economics. Social conservatives and populists are now much more open to using government intervention to promote pro-worker, pro-family policies. The purpose here is not only to tackle poverty in the deindustrialized Heartland but to resolve the wider economic and cultural crisis in work­ing-class America, which has been exacerbated by the pandemic.

In the aftermath of the 2020 presidential election, the Republican Party and the conservative movement are still coming to terms with the fissures exposed by Trump’s time in office. It has become commonplace to say that a return to Reaganism will not help conservatives come together and win again. That does not mean conservatives cannot look at their past for inspiration. In today’s second gilded age of billionaire robber barons, tech monopolies, offshored jobs, and concentrated wealth, conservatives can emulate the example set by President Theodore Roosevelt.

Promising a “Square Deal,” Roosevelt made it his mission to achieve national unity and strength by reconciling the class interests of business and labor. Busting trusts and protecting consumers put the Republican Party firmly on the side of ordinary Americans. Going against the pro-business orthodoxy of his party’s old guard allowed Roosevelt to pursue reforms that could help save industrial capitalism from itself.

It is in the spirit of Roosevelt’s “Square Deal” that conservatives can shape a policy agenda that rebalances the nation’s relationship with global capitalism, helping a left-behind working class and a shrinking middle class. Welfare reform has already become a flash point in this struggle to reform conservatism after Senator Mitt Romney put forward a bold proposal for child allowances earlier this year. To expand the coalition and become a truly multiethnic working-class party, conservatives have to peel away years of orthodoxy and put together a fresh program of economic and social reform that can appeal directly to low-income Americans.

Why America Needs Child Allowances

President Biden’s ambitions have been fundamentally changed by the pandemic. At first promising a return to normalcy and the center ground, he is now charting a course that is much more favorable to progressives, while facing his party’s own internal divisions. If Senate Democrats reform or remove the filibuster and usher in a raft of new changes, it will not just mean a major transformation of American politics. It will also demand a robust policy response from Republicans that can provide a credible alternative to the American people.

Under the new administration and a Democratic Congress, the pandemic has also facilitated the shift from discussing short-term relief measures toward long-term reform. Progressives see that this is the moment to deliver more expansive government programs, starting with the American Rescue Plan Act. The legislation has shattered the fragile bipartisan consensus on welfare that has existed since the 1990s.

At the center of this debate is the proposed expansion of the Child Tax Credit (CTC), making it a fully refundable benefit paid on a monthly basis. Though it is currently a temporary, one-year measure under the American Rescue Plan Act, President Biden is now pushing for the CTC to become fully refundable on a permanent basis, extending its expanded benefits through to 2025 in the Build Back Better Act. To provide a conservative alternative, Romney put forward the Family Security Act earlier this year, which would introduce child allowances on a permanent basis; his proposal in turn became a lightning rod for the ideological divide within the conservative movement.

Tax credits have made a major contribution toward halving child poverty from 1970 to 2016.6 Despite this progress, child poverty has cost the United States between $800 billion and $1.1 trillion per year in lost adult productivity, crime rates, and health problems.7 As well as promoting the social value of work, most conservatives believe in supporting stable families as the essential building blocks of healthy and prosperous communities. That is why there is a growing conservative case for increasing the welfare system’s support for families to address the costs of raising children.

Preparing the ground for Biden’s CTC expansion (albeit unintentionally), Senators Mike Lee and Marco Rubio scored a significant victory with the expansion of the CTC in the 2017 Tax Cuts and Jobs Act, which doubled the annual CTC payment and raised the gross income threshold for the phaseout.

Romney has taken this one step further by supporting a permanent child allowance that would apply to everyone regardless of whether they are working or not. Most conservative advocates for reform favor an expanded CTC that would only apply to families in work, but even this more restrained option has received significant opposition from other parts of the conservative movement. That is why pro-business and anti-government Republicans prioritized a deeper cut to corporate tax rates over the modest expansion of the CTC in 2017.

The Romney proposal is also more generous than the American Rescue Plan Act, providing monthly payments of $350 for children aged under six and $250 for children aged six and over, starting in the third trimester of pregnancy. All families with income under $400,000 per year, or $200,000 if single, would receive the benefit regardless of employment or income. This has been framed as a pro-life, pro-marriage policy that tackles poverty, reduces bureaucracy, and addresses punitive marginal tax rates.

In order to ensure the new child allowance is budget neutral, it would replace the CTC as well as the Child and Dependent Care Tax Credit and SALT deduction, which largely benefit upper-middle-class families. It would also simplify the Earned Income Tax Credit (EITC) and re­place the Temporary Assistance for Needy Families program (TANF)—two anti-poverty programs that have defined the welfare reform debate over the past thirty years.

Samuel Hammond of the Niskanen Center has been a leading advocate for this new conservative approach to welfare and family policy. The Niskanen Center estimates that the Romney proposal could reduce poverty by 14 percent, cut child poverty by a third, and halve “deep” child poverty.8 The main inspiration for the Romney proposal is the example of Canada, where child allowances played an instrumental role in cementing a political realignment in center-right politics, uniting moderate and populist conservatives.

Bolstering the conservative argument for child allowances is the fertility crisis. In 2019, the fertility rate fell to its lowest level in thirty-five years after five consecutive years of decline.9 This sustained decrease has led to 5.8 million fewer babies being born in the last decade.10 Increasing levels of immigration have not resolved this crisis, as immi­grants assimilate to the low fertility rate over time. The pandemic has only worsened these trends as fears grow of a “Covid Baby Bust.”

As people start to plan for life after the pandemic, conservatives should be thinking about how to make it easier for people to start a family and raise children. For many potential parents, the desire is there, but they worry about being put at a financial disadvantage. There are also many parents who have fallen through the cracks in the welfare system because they did not earn enough to qualify for the CTC and earned too much to access welfare. On top of this, working families are paying for Social Security through their payroll taxes. The economy does not provide a proper family wage, so it makes sense that social insurance ought to fill the gap.

Low-income households are not just under financial strain when it comes to raising children. They also enjoy fewer choices in how they raise their children. Many are forced to adopt the two-earner model to stay afloat. This means parents spend more time working low-paid jobs and spend less time with their children at home. Research from American Compass has found that, across class lines, 53 percent of married mothers would prefer to have one full-time earner and one stay-at-home parent when raising children.11 That does not mean every family should be pressured into adopting this model. Rather, the system should be neutral toward its treatment of different family structures, giving parents more choice.

How to Put Work First in Welfare

As part of this new relationship between families and the state, the Romney proposal is about making the welfare system fit for the twenty-first century. For decades, Republicans have used the tax code as a way of increasing spending—leading to waste, complexity, and a weakened tax base. By transferring the administration of child allowances from the Internal Revenue Service (IRS) to the Social Security Administration (SSA), there would be a more rational and simple means of delivering this support, fostering greater trust in the welfare system.

Under the current system of tax credits, there is a high fraud and error rate, especially in the EITC. The sheer complexity of the system leads to a significant number of EITC payments being classed as “im­proper payments.” According to the IRS, $18.4 billion of the program’s $73.6 billion in EITC claims were improper in 2018.12 This can be caused by people incorrectly claiming children, misreporting their income, or using an incorrect filing status.

Monthly payments are also more popular with parents than the annual lump sum provided under the old CTC and the current EITC. American Compass found that 60 percent of parenting-age Americans favor monthly payments.13 A lump sum can certainly help with large purchases, such as a new car, but it does little to help with the day-to-day issues that create hardship for working families. Instead of using tax credits as a means of forced savings, child allowances can help families with their cash flow on a regular basis.

As well as using child allowances to replace the CTC, the Romney proposal makes fundamental changes to the EITC, which is an anti-poverty policy tool that has been popular with conservatives. The EITC has been widely praised for targeting low-income earners in both urban and rural America, increasing labor force participation (especially for single mothers), reducing poverty, and making the tax code less regres­sive.

The current EITC, however, does not provide enough support for workers with no children. Despite making up 25.8 per cent of EITC returns in 2016, single workers with no dependents only received 3.1 per cent of the benefits.14 In the same year, EITC reduced the number of unmarried households with three children in poverty by 20.2 percent, but there was only a 1.5 percent reduction for unmarried childless workers.15 Increasing the EITC benefit for workers with no children has received substantial bipartisan backing, but disagreements between Democrats and Republicans over funding such an increase have pre­vented this situation from changing.

EITC’s phaseouts also create a penalty against marriage. In 2020, a married couple with two children filing jointly could lose $2,357 com­pared with an unmarried couple with two children and the same income but filing separately.16 Around 82 percent of couples earning with a two-year-old or younger in the second and third quintiles ($24,000 to $79,000), and 66 percent with a two-year-old or younger in the bottom quintile (below $24,000) were affected by the marriage penalty across multiple welfare programs in 2016.17 The cost of eliminating the mar­riage penalty under the existing system has also stopped legislators from taking action.

The consolidation of welfare under the Romney proposal is certainly an opportunity to reform the EITC, making it more generous for people with no children and removing the marriage penalty. Increasing EITC benefits, however, is not guaranteed to incentivize people to work more. For example, MDRC ran “Paycheck Plus” in New York City in 2013, a study of the benefits of EITC expansion for single adults. The incidence of severe poverty fell by 3.4 percent and the average annual employment rate increased by 1.9 percent. But there was no significant increase in work rates.18 The “Paycheck Plus” study in Atlanta, Georgia, in 2015 found no increase in work rates at all.19

But these proposed changes to the welfare system have triggered opposition from some conservatives who prefer to maintain the post-1996 reforms. They are concerned that child allowances, on top of food stamps, housing vouchers, and other welfare programs, would lead to a spike in dependency and discourage work. Scott Winship of the Ameri­can Enterprise Institute (AEI) has been a particularly prominent voice for this argument. Even advocates for CTC expansion, including Lee and Rubio, have not signed up to the Romney proposal and fear the consequences of turning the CTC into an almost universal benefit.

These concerns are partly driven by the proposal to abolish TANF. Winship and other conservative opponents of child allowances say that TANF provides a point of contact between families in poverty and key support services. Removing the work requirements in EITC, CTC, and TANF would leave unaddressed the underlying causes of poverty—such as substance abuse, absent parents, poor schooling, and crime. To conservatives like Winship, the best starting point for people in poverty is to find a job with adequate support from the government, not just to receive cash from the government.

Oren Cass of American Compass has attempted to square the circle with his Family Income Supplemental Credit (Fisc) proposal. It follows a broadly similar model to the Romney proposal, but it would not be available to most people out of work. Instead, it would be tied to a household’s income reported in the previous year. This maintains a work requirement, ensuring recipients have already paid into the system, and leaving TANF untouched. Cass believes this would deliver a sus­tainable form of social insurance for middle class families without trap­ping them in the welfare system, but the inclusion of a work requirement might be unnecessary.

Supporters of child allowances have considered how the income effects from the Romney proposal could lead to parents changing how they work. Looking at the Canadian experience, both single mothers and married mothers, overall, actually increased their number of hours worked three years after child allowances were introduced. Only married mothers without a college degree and with children aged below six worked less.20 This suggests the child allowances helped families to find arrangements that best suited their circumstances.

Child allowances would prevent parents from being trapped on welfare by removing punitive marginal tax rates, and divert families away from welfare when they run into financial difficulty. This was not the case under the pre-1996 welfare system. It would also be difficult for people to abuse a child allowance system. Only twenty-two thousand out of fifty or sixty million households have five children and earn between $17,000 and $19,000, so it is unlikely that a large number of people would claim the maximum amount allowed under the Romney proposal.

The conservative fight over child allowances is about the fundamental question of who the welfare system is for. Some conservatives do not want welfare to be expanded to support the middle class. They see child allowances as being different from other forms of middle-class support such as health insurance, college savings, and the mortgage interest tax deduction. There is also fear that these benefits could be ratcheted up around election time by politicians bidding for people’s votes. Robert Doar and Matt Weidinger, both of AEI, have gone even further in complaining that CTC expansion is a “stealth plan” for a universal basic income.

It is right to say that child allowances would mark a major shift in how welfare is designed. Many of the means-tested welfare programs that have developed since the 1960s, including TANF, fail to discern between families in poverty and families with temporary financial problems. Broad benefits lend equal dignity to parents of all backgrounds, removing the stigma of means-tested welfare. It is a move toward a model of social insurance that can act as a bond between the majority of Americans.

In debates over the Build Back Better Act at the time of this writing, and likely similar legislation in the future, conservatives have an oppor­tunity to use the Romney proposal as the basis for compromise with progressives, shaping the long‑term future of the welfare system. It is highly unlikely that a majority of Democrats will accept a permanent child allowance with a revived work requirement. Instead, accepting the principle of child allowances for families in and out of work could help deliver other reforms to simplify and rationalize the welfare system. It would also send a powerful message to everyday Americans about the social value of parenting.

Ending Welfare as We Know It?

Despite the disagreement among conservatives, the history of TANF can still provide useful lessons for future reform. The program has made significant progress in tackling poverty and promoting work, although it is now a much-reduced part of the safety net and contains a number of flaws in its design. Before going ahead with child allowances, conservatives of all persuasions have to consider TANF’s success and failures.

Under Presidents George H. W. Bush and Bill Clinton, states were first granted waivers from the federal government to test welfare reform due to frustration with the failings of Aid to Families with Dependent Children (AFDC). This led to groundbreaking experiments with work requirements. Wisconsin became a famous pioneer during these years.

After the controversy over the widespread “welfare queen” story in the 1970s, partly inspired by the case of Linda Taylor in Chicago, the emphasis of welfare reform was placed firmly on single mothers, but with safeguards for children and disabled people. AFDC was the pro­gram most closely associated with the perceived failure to help single mothers become independent of the welfare system. It is the fear of returning to this situation that has motivated much of the opposition to child allowances.

The failings of these programs inspired Clinton’s pledge to “end welfare as we know it.”21 He signed the 1996 welfare reform law (the Personal Responsibility and Work Opportunity Reconciliation Act), largely written by a Republican Congress. The legislation replaced AFDC with TANF, which introduced work requirements, time limits, and a work-support system to subsidize low-income earners. This was the last major overhaul of means-tested welfare at the federal level and has shaped the welfare reform debate ever since.

Following the 1996 welfare reform law, there was a decrease in child poverty and an increase in single mothers and never-married women entering employment within five years. The share of poor single moth­ers with children aged under eighteen in work increased from 44 percent in 1993 to 64 percent in 1999.22 Poverty among children of single parents fell from 50 percent in the early 1980s to 15 percent, with decline starting during the 1990s.23 This suggests that the 1996 welfare reform was related to gains in employment and poverty reduction. There were also other factors at play during this period. The economy was growing strongly during the 1990s, creating jobs and raising wages. More importantly for low-income households in employment, tax credits became a crucial support for workers.

Conservative supporters of the 1996 welfare reform law claim that work requirements account for 27 percent of the rise in the employment rate of single mothers between 1993 and 2002.24 But the evidence on the ground is decidedly mixed. The National Evaluation of Welfare-to-Work Strategies (newws), made up of eleven trials from 1991 to 1999, found that only programs with trained staff and sufficient funding deliv­ered positive results, such as in Portland, Oregon. Even then, people in the Oregon program group claimed benefits for around twenty months during the five-year trial period. The newws data shows that the loss of income from withdrawn benefits was greater than the gains in earnings, averaging a loss of $339 per year.25

The case for TANF has also been largely undermined by its flawed method of funding and administration, leading to the program not being evenly implemented across all states. Peter Germanis, a conservative economist who served under the Reagan and first Bush administrations, has exposed how state agencies have moved away from the 1996 welfare reform law and manipulated the system.

For example, Illinois and California have combined low-unemploy­ment counties in order to qualify for the work requirement waiver. Due to the limited set of federal regulations, TANF funds are often used for purposes other than helping families in poverty. Since 2007, Michigan has spent $100 million annually in TANF funds on scholarships, including tuition at private colleges for families with annual incomes over $100,000.26

The TANF block grants given to the states are also flat-funded, meaning they have declined in value relative to prices, wages, and population growth since 1996. At TANF’s start, it reached 68 percent of families experiencing poverty, but in 2019 it only reached 23 percent of families experiencing poverty.27 The decline in support from TANF has arguably increased people’s reliance on other means-tested welfare programs, especially the Supplemental Nutrition Assis­tance Program (SNAP). In 2019, SNAP and housing assistance, respec­tively, kept 2.5 million and 2.6 million people out of poverty.28

These design flaws have led to TANF’s exclusion from much of the recent coronavirus legislation under Trump and Biden. Instead, unem­ployment insurance (UI), SNAP, and stimulus checks have provided the bulk of support to people impacted by the pandemic. Work requirements have already been suspended or covered by good-cause exemptions in thirty-one states.29 In its current form, TANF is not providing the support that is needed during an economic downturn, and is being overtaken by other, more effective programs.

TANF’s diminished status has contributed to the disintegration of the bipartisan consensus on welfare, making it less likely that work requirements can be expanded in SNAP and other welfare programs. There are also limited benefits to be gained from tougher work requirements. A Center on Budget and Policy Priorities study found that 74 percent of nondisabled adults receiving SNAP benefits worked in the year before or after being surveyed, going up to 87 percent for families with children.30 States have also been able to waive work requirements for SNAP during the Great Recession and the pandemic.

Work requirements have only been tested with housing assistance on a very limited basis. Just nine public housing authorities (PHAs) had work requirements in 2015 with a small share of tenants affected. A rigorous study of work requirements in the Charlotte Housing Author­ity in South Carolina showed modest effects on employment and income, and no increases in average hours worked.31 An attempt to apply work requirements to Medicaid in Arkansas led to the uninsured rate increasing from 10.5 percent to 14.5 percent, while employment fell from 42.4 percent to 38.9 percent from 2016 to 2018.32 The re­quirements were put on hold after a federal judge ruled that the policy violated federal law.

The 1996 welfare reform was certainly an improvement on the previous system, but TANF has arguably fulfilled its purpose and is in need of replacing; its design flaws ought not to be repeated in other programs like SNAP. That is not to say the use of work requirements should always be avoided or that encouraging people on welfare to find work is wrongheaded. Conservatives who favor the Romney proposal would be unwise not to consider how abolishing TANF would have an impact on connecting people in poverty with job opportunities and support from state and local services.

The Best Social Program Is a Job

The focus on tax credits and work requirements has led conservatives to neglect workforce development as a necessary anti-poverty tool. In fact, conservatives should be thinking strategically about labor policy to find new ways of helping workers to get better-paying jobs and start families. A good place to start would be to look at subsidized employment programs as a means of ensuring that anyone can find a job if they are able and willing to work. This involves giving employers a subsidy to hire workers from eligible groups who then receive on-the-job training and wraparound services.

Such a program would create jobs for people that employers would otherwise not normally hire. This means helping those who face the most serious barriers to work and need intensive preparation for entry into the competitive labor market. These barriers can include caring responsibilities, health problems, discrimination from employers, crimi­nal records, and limited social and economic resources. Even before the pandemic, almost twelve million people were unemployed or underemployed in April 2019.33 Subsidized employment can also provide auto­matic stabilizers to protect workers during an economic downturn alongside UI and SNAP.

There are over forty years’ worth of such programs being tested in the United States, which were comprehensively examined by the U.S. Department of Labor (DOL) in 2010. These programs have mostly been randomized controlled trials taking place over two to four years, target­ing small, specific groups of people. The evidence collected has shown short-term success with raised employment and earnings, but mixed long-term results due to the limited nature of the programs.

One of the most successful examples of transitional jobs was the New Hope for Families and Children demonstration project in inner city Milwaukee, Wisconsin, between 1994 and 1998. New Hope provid­ed those unable to find full-time work after eight weeks with help and referral to a minimum-wage-paying community service job (CSJ) on a full-time or part-time basis. Nearly 40 percent of CSJ users transitioned to unsubsidized jobs, and 25 percent used CSJs to fill the gap between two periods of unsubsidized work.34 About a third of participants used a CSJ at some point.35

Five years after the three-year intervention, MDRC evaluated New Hope’s impact through a random assignment study. Findings show that adults in the program were more likely to work and have better well-being during the three-year period, but these benefits did not last long after the program’s completion except for people facing moderate barriers to work. Impact was more long-lasting for their children who became more likely to have a positive attitude toward work. This is a powerful example of an employment-based poverty intervention. As a time-limited project, it has limitations on what could be achieved, but the results do suggest it is worth pursuing further experimentation with subsidized employment.

More recently, the American Recovery and Reinvestment Act established the TANF Emergency Fund, which included $1.3 billion for subsidized employment programs before expiring in 2010. This was taken up by thirty-nine states and the District of Colum­bia, placing 260,000 workers in subsidized jobs. A five-state survey showed that 63 percent of employers taking part in the programs said that they created jobs that otherwise would not have existed.36

Scrapping TANF offers a chance to experiment more ambitiously with these programs. The Center on Poverty and Inequality at Georgetown Law and the Center on Poverty and Social Policy at Columbia University estimate that a national subsidized employment program could move 3.5 million people out of poverty.37 This policy has largely found congressional support from Democrats, but it is an idea that conservatives should consider adopting as part of their own policy agenda.

The Economic Ladders to End Volatility and Advance Training to Employment Act (elevate Act), introduced in 2019 by Democratic legislators, provides a potential model for reform. The legislation would add a new title to the Social Security Act allowing states to establish subsidized employment programs. Under this legislation, states would have to use at least 70 percent of funding for employment costs such as wage costs, training expenses, and employers’ payroll tax bills, and 15 percent of funding at most on administrative costs. Three tiers of evidence standards would ensure 50 percent of state spending goes to the most promising programs. This gives states the freedom to experiment while still demanding proof of value for money and gains in employment.

A national subsidized employment program would also bring the United States closer into line with other Anglosphere countries that spend more on workforce development. The UK’s Conservative govern­ment has started testing this approach, introducing subsidized employment schemes for young people and the long-term unemployed in response to the pandemic. Expenditure on labor force participation programs in the United States has actually fallen from 0.25 percent of GDP in 1985 to 0.11 percent of GDP in 2016.38 Delivering a major overhaul of workforce development would help the people who struggle most to get a job.

Biden’s Build Back Better Act includes significant investment in workforce development. Engaging with Democrats could help put a conservative stamp on this issue or take this work toward a more ambitious reform under a future Republican administration. It would also stop the momentum growing among progressives for a federal jobs guarantee. By directing more attention toward workforce development, conservatives can help bring about a welfare system that encourages greater experimentation with services to help people find work and escape poverty.

Laboratories of Democracy

To successfully deliver an expansion of workforce development, a well-funded and efficient administration at the state and local level is re­quired. Case managers must ensure that work is at the center of their relationship with recipients. There also needs to be space for a trial-and-error approach which encourages innovation. Recent evidence suggests how new approaches toward the delivery of employment programs can be explored further to help guide people in poverty toward full-time work and long-term careers.

Notable success has been observed in sectoral-based employment programs. The DOL’s Sectoral Employment Impact Study in 2010 examined a number of training providers specializing in particular industry sectors. Overall, participants were found to have earned 18 percent more than control groups.39 Following on from this work, the bipartisan Work Innovation and Opportunity Act was introduced in 2014 to expand the workforce development system, including a large number of sectoral employment programs. Studies over the past decade have shown further promising evidence to support this approach.

For the “WorkAdvance” study launched in 2011, providers in the program supplied formal training to help people on low incomes achieve industry-recognized certifications. Across all four programs, 40 percent of participants were earning at least $30,000 in 2018, which was 6 percent higher than the control group.40 As there was no overall increase in employment, this suggests that participants were able to sustain improvements to their earnings. When designed and administered well, these programs could play a significant role in helping more people to find work and advance in the labor market.

“Capital IDEA” in Austin, Texas, has developed a program focused on local labor market conditions and the best avenues for higher earnings. Participants undergo intensive case management through a career navigator with full coverage of training-related expenses including tuition, books, childcare, and transportation. Participants also have to establish a specific career path. There is constant communication with employers and cross-checking of training programs with industry leaders.

For over twenty years, Capital IDEA has been helping people move out of low-wage jobs and into higher-skill jobs. In 2019, its graduates earned an average starting wage of $22 per hour. Analysis found that sustained wage gains for participants continued for at least four years after program completion.41 A program in San Antonio, Texas, named “Project quest,” follows a similar model. Nine years after entering training, participants are still experiencing high rates of employment and earning over $5,000 more annually than the control group.42

There has also been promising progress with place-based employment programs overseen by the U.S. Department for Housing and Urban Development (HUD). These programs mainly target people re­ceiving housing assistance, either through public housing or the Section 8 Housing Choice Voucher (HCV). The goal is to help people achieve self-sufficiency and move off housing assistance.

The most prominent example of this approach is the “Jobs Plus” program. Jobs Plus is a combination of employment and training services provided on-site at a job center, modified rent rules to incentivize work, and community support for work through neighbor-to-neighbor information sharing. It targeted all working-age, nondisabled tenants in public housing, and was implemented by local interagency part­nerships that linked together workforce development, welfare, and the housing authority.

MDRC tracked five thousand people over six years in six different cities who participated in Jobs Plus from 1998 to 2003. It was a voluntary program, but three-quarters of targeted residents made use of its services and/or incentives. During the program, there were gains in earnings of around $4,600 per resident and $6,000 per working resident.43 Success was, however, dependent on the quality of implementation by local administration and the participants were largely stable families with people considered to be more employable than poor adults overall. Jobs Plus is now being scaled up to thirty-one sites for further study.

A promising HUD trial, the “Family Self-Sufficiency” (FSS) pro­gram, first launched in 2007, is being applied to HCV recipients. The program provides case managers who help participants to establish employment goals, connect with services, and manage an escrow account. The “Work Rewards” study by MDRC examined New York City’s FSS program, leading to further trials in March 2012 with 18 PHAs and 2,556 working-age HCV holders. Despite the FSS trials increasing participation in employment-related services by 13 percent, there was no increase in employment or earnings in its first two years.44

“MyGoals for Employment Success” is another ongoing workforce program run by MDRC alongside the Housing Authority of Baltimore City and Houston Housing Authority. It is testing a coaching and incentives program for HCV recipients. The aim is to help these families to find work, build careers, and move toward self-sufficiency. This could then inspire approaches toward other groups of disadvantaged adults. It is using financial incentives, local labor market analysis, and financial coaching over a three-year period.

Many of these programs have been run on a voluntary basis and on a small scale, but there is strong enough evidence to support further experimentation. These studies reinforce some key lessons about suc­cessful workforce development. People need tailored support through effective case management, supplemented by wraparound services and links with local industry, in order to discover their route out of poverty. By expanding workforce development, everyone who is in poverty and able to work would have the chance to participate in and benefit from what these programs have to offer.

Renewing America’s Social Contract

When President Theodore Roosevelt said that “the welfare of each of us is dependent fundamentally upon the welfare of all of us,” he was speaking to people’s sense of solidarity. A successful welfare system largely depends on the majority of citizens feeling they have a stake in its future. It is true that people expect the welfare system to help those most in need and not to trap them in dependency, but that does not mean it has to entrench class differences.

The welfare reform debate since the “War on Poverty” began has been defined by decades of political polarization and distrust toward programs that have stigmatized people in poverty through means-testing. The slow and arduous journey toward the EITC in 1975 and TANF in 1996 certainly delivered significant policy victories for con­servatives, but they have not brought about a lasting consensus.

Instead of finding new ways of toughening up means-tested pro­grams that reinforce barriers between the middle class and people on welfare, conservatives should be looking at ways of simplifying the system. A new focus on reforming tax credits and expanding workforce development would establish a welfare system that is better placed to be well administered, secure the public’s trust, protect the most vulnerable, and incentivize people to find work.

The pandemic presents conservatives with a new opportunity to recast the shape of the American state and realign American politics. Falling back on culture war tactics in the media or obstructionism in Congress will not improve the lives of working-class Americans or grow the middle class. Conservatives can only build a new majority by giving American families and workers a square deal that renews America’s social contract.

This article originally appeared in American Affairs Volume V, Number 4 (Winter 2021): 119–37.

Notes
1 Congressional Research Service, “Unemployment Rates During the Covid-19 Pandemic,” April 14, 2021.

2U.S. Economy Plunges 31.4% in the Second Quarter but a Big Rebound Is Expected,” CNBC, September 30, 2020.

3 Katherine Grace Carman, and Shanthi Nataraj, “How Are Americans Paying Their Bills During the Covid-19 Pandemic?,” RAND Corporation, 2020.

4 Congressional Budget Office, “Additional Information About the Economic Outlook: 2021 to 2031,” February 2021.

5 Jeehon Han, Bruce D. Meyer, and James X. Sullivan, “Real-time Poverty Estimates During the Covid-19 Pandemic through November 2020,” Harris Public Policy, December 15, 2020.

6 The National Academies of Sciences, Engineering and Medicine, A Roadmap to Reducing Child Poverty (Washington, D.C.: National Academies Press, 2019).

7 The National Academies of Sciences, Engineering and Medicine, A Roadmap.

8A Poverty Reduction Analysis of the American Family Act,” Center on Poverty and Social Policy, April 20, 2021.

9 Samuel Hammond and Robert Orr, “The Conservative Case for a Child Allowance,” Niskanen Center, February 4, 2021.

10 Oren Cass and Wells King, “The Family Income Supplemental Credit,” American Compass, February 18, 2021.

11Home Building Survey Part II: Supporting Families,” American Compass, February 18, 2021.

12 Agency Financial Report: Fiscal Year 2018 (Washington, D.C.: Department of the Treasury, 2018), 43.

13 “Homebuilding Survey Part II,” American Compass.

14 Robert Bellafiore, “The Earned Income Tax Credit (EITC): A Primer,” Tax Foundation, May 21, 2019.

15 Gene Falk and Margot L. Crandall-Hollick, “The Earned Income Tax Credit (EITC): An Overview,” Congressional Research Service, April 18, 2018, 17.

16What Are Marriage Penalties and Bonuses?,” Tax Policy Center, February 2020.

17 W. Bradford Wilcox, Joseph P. Price, and Angela Rachidi, “Marriage, Penalized: Does Social-Welfare Policy Affect Family Formation?,” American Enterprise Institute, July 26, 2016.

18 Cynthia Miller et al., “Boosting the Earned Income Tax Credit for Singles: Final Impact Findings from the Paycheck Plus Demonstration in New York City,” MDRC, September 2018.

19 Kali Aloisi et al., “A More Generous Earned Income Tax Credit for Singles: Interim Findings from the Paycheck Plus Demonstration in Atlanta,” MDRC, March 2020.

20 Hammond and Orr, “The Conservative Case for a Child Allowance.”

21 Amy A. Fowler and Douglas J. Bersharov, “The End of Welfare as We Know It?,” Public Interest (Spring 1993): 95–108.

22 Lawrence M. Mead, “Overselling the Earned Income Tax Credit,” National Affairs, no. 21 (Fall 2014): 20–33

23 Scott Winship, “The Conservative Case against Child Allowances,” American Enterprise Institute, March 5, 2021.

24 Winship, “The Conservative Case against Child Allowances.”

25 Ed Dolan, “Earning It: Why Work Requirements Don’t Work,” Milken Institute Review, January 22, 2018.

26 Ife Floyd, Ashley Burnside, and Liz Schott, “TANF Reaching Few Poor Families,” Center on Budget and Policy Priorities, November 28, 2018.

27 Ife Floyd and Laura Meyer, “Cash Assistance Should Reach Millions More Families to Lessen Hardship,” Center on Budget and Policy Priorities, November 30, 2020.

28The Supplemental Poverty Measure: 2019,” U.S. Census Bureau, September 15, 2020.

29 Justin Schweitzer, “How States Can Use TANF to Immediately Help Struggling Residents,” Center for American Progress, December 17, 2020.

30 Brynne Keith-Jennings and Raheem Chaudhry, “Most Working-Age SNAP Participants Work, but Often in Unstable Jobs,” Center on Budget and Policy Priorities, March 15, 2018.

31 William M. Rohe, Michael D. Webb, and Kirsten P. Frescoln, “Work Requirements in Public Housing: Impacts on Tenant Employment and Evictions,” Housing Policy Debate 26, no. 6 (2016): 909–27.

32 Dylan Scott, “Major Study Suggests Medicaid Work Requirements Are Hurting People without Really Helping Anybody,” Vox, June 19, 2019.

33 Sophie Collyer et al., “Fighting Poverty with Jobs: Projecting the Impacts of a National Subsidized Employment Program,” Georgetown Law Center on Poverty and Inequality, June 2019.

34 Cynthia Miller et al., “New Hope for the Working Poor: Effects After Eight Years for Families and Children,” MDRC, July 2008.

35 Miller et al., “New Hope for the Working Poor.”

36 Melissa Boteach, Rebecca Vallas, and Rachel West, “A Subsidized Jobs Program for the 21st Century: Unlocking Labor-Market Opportunities for All Who Seek Work,” Center for American Progress, January 2015.

37 Sophie Collyer et al., “Fighting Poverty with Jobs.”

38 Samuel Hammond, “The Elevate Act Explained: A ‘Job Guarantee’ That Can Actually Work,” Niskanen Center, January 24, 2019.

39 Angela Hanks and David Madland, “Better Training and Better Jobs: A New Partnership for Sectoral Training,” Center for American Progress, February 22, 2018.

40 David H. Greenberg and Kelsey Schaberg, “Long-Term Effects of a Sectoral Advancement Strategy: Costs, Benefits, and Impacts from the WorkAdvance Demonstration,” MDRC, March 2020.

41 Brent Orrell and Caleb Seibert, “In Austin, a Public/Private Partnership for Workforce Success,” RealClear Policy, August 30, 2019.

42 Orrell and Seibert, “In Austin, a Public/Private Partnership for Workforce Success.”

43 James A. Riccio, “Jobs-Plus: A Promising Strategy,” MDRC, June 2006.

44 Barbara Fink et al., “Promoting Work and Self-Sufficiency for Housing Voucher Recipients: Early Findings From the Family Self-Sufficiency Program Evaluation,” MDRC, March 2019.


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