Welfare Reform at 20

There is something special about work. For most, this simple fact can often get overlooked or lost in the endless pressures of a job. But work is more than just a checklist of tasks: rather, it is activity directed towards a goal. Furthermore, work, within a system of free enterprise that is based on mutually beneficial free exchange, is literally directing your energy towards the betterment of others and being rewarded for that. This dignity and purpose that comes with work is crucial to a fulfilling and rewarding life. So when public policy creates a disincentive against work, it can be much harder to fully achieve the rewards of a fulfilling and purpose-filled life.

This week marks the 20-year anniversary of the landmark 1996 welfare reforms. In August of 1996, President Bill Clinton signed a welfare reform package embodied by the Temporary Assistance to Needy Families (TANF) program. The program was unique to federal welfare policy because it sought to highlight the role of work rather than ignore its importance. It is hard to overstate the magnitude of the shift in welfare policy embodied by the 1996 reforms. Rather than simply creating a series of handouts for the less fortunate, welfare policy would serve as a hand up to employment and self-sufficiency. The 1996 reforms recognized those goals were only to be achieved by individuals engaged in productive work.

By limiting the available time to receive government assistance to 24 months, instituting job training programs, and giving states a great deal of flexibility in determining how to tailor programs to state-specific challenges and needs, the culture around welfare shifted to one that actively encourages a re-entry into the labor force. The results were incredible. Welfare caseloads were cut by about 50 percent and there are now 2.9 million fewer children living in poverty than in 1995. Additionally, in 1994 58 percent of female headed households were receiving welfare. After the reforms, by 2008, only 17 percent of female-headed households were receiving welfare.

While it is important to understand the importance of getting a job, there also have to be jobs to get. A growing economy that incentivizes entrepreneurship and produces employment opportunities is one where welfare recipients can more easily find their way out. Tearing down arbitrary barriers to employment, such as occupational licenses or over-regulation can have an enormous effect on how many (and what kind) of jobs are available to those seeking employment. A strong economy is an important factor when looking to reduce poverty and citizens’ reliance on government assistance.

The resounding success of the welfare reforms signed in 1996 are still being refined and studied today. The lessons learned by allowing states the flexibility to experiment and design programs to fit the needs of their citizens can be applied to other areas of federal spending. The sea change in attitude around welfare reform cemented the idea that the less fortunate are not simply liabilities to be managed, but rather important assets to be developed. That development can best occur when states have the means to run innovative programs, customize ways that make it easier for people to find and keep a job, and the state tax and regulatory policies are conducive to job creation.