VI. Work First in Context:

Advice on Related Policies

Work first programs do not exist in a vacuum. Other rules and policies, both within and outside the welfare system, create the environment in which the program operates. Thus, they affect the way participants experience the program's services and mandates and how participants view the trade-offs between welfare and work. Part VI of this guide (sections 37-40) discusses some of these related policies, explains how they affect the design and operation of a work first program, and offers suggestions on how they can support efforts to move welfare recipients into jobs. For example, transitional benefits can cushion the jolt of leaving welfare for work by extending some supports through the first year or years of employment. Other policies-such as financial incentives and the Earned Income Credit (EIC)-can make work pay for participants who get jobs. Finally, time-limit policies put pressure on both participants and work first programs to succeed.

37. Transitional Benefits

Particularly for long-term welfare recipients, leaving welfare can be difficult, both financially and emotionally. Transitional benefits can smooth the transition from welfare to work by continuing to provide government supports for a limited time. They can also help to make work pay for families who leave welfare. There are two main transitional benefits generally available to former welfare recipients: child care and medical assistance. In addition, some programs provide other types of transitional benefits.

Child Care

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 consolidates welfare-related child care programs into block grants to states. Funding from the child care block grant can be used to extend child care subsidies for parents who leave welfare for work. States can also choose to provide transitional child care through other programs available to all low-income working parents. Some states require parents to pay some of their child care costs on a sliding scale.

However transitional child care is structured, work first programs need to market available options to participants and help them take advantage of that support. A study conducted by the General Accounting Office found that utilization rates of Transitional Child Care (a program now consolidated under the block grant) were extremely low, with roughly 20 percent of eligible families making use of the program for at least one month. The study found that in some states, inadequate mechanisms for informing welfare recipients about the availability of the transitional benefits limited the effectiveness of the benefits as work incentives.

Medical Assistance

Because many of the jobs participants get will not provide health benefits, transitional medical assistance can help make work pay and provide security for parents who leave welfare for work. Transitional Medicaid is available for a limited time to most families who would otherwise become ineligible due to earnings. Some states also operate state-funded programs that subsidize medical assistance for low-income families. Because Medicaid is no longer categorically linked to welfare receipt, states will need to decide whether they wish to establish their own link (for example, by creating a single application form for both welfare and Medicaid) and what systems to develop for transferring the eligibility of families who leave welfare for work. Again, work first programs need to educate participants about the availability of medical assistance and help participants take advantage of it.

Other Transitional Benefits

Some programs provide other types of transitional benefits. For example, Utah allows former participants to access all program services for two years after leaving welfare. This includes assistance for transportation, car repairs, uniforms, and other work-related needs, as well as access to education and training. In addition, former participants are encouraged to ask case managers for help with any issues that might jeopardize employment. Some offices have specialized staff who take over closed cases; in other offices, participants keep their work first case manager for two years after leaving the program.

Facilitating the Use of Transitional Benefits

Individuals will be more likely to take advantage of transitional benefits if they have accurate information about the benefits and if the benefits are easily accessible. Clearly communicating information about transitional benefits can also alleviate the fear that participants may have about leaving welfare for work. Below are some suggestions:

Services Available After Transitional Benefits End

It is also helpful to inform participants about-and assist them in receiving-supports available to them beyond transitional benefits, particularly as they near the end of their eligibility. When Transitional Medicaid ends, states should determine whether any member of the family is eligible for Medicaid under another category. In addition, many states provide subsidized medical coverage for low-income working families and children who are not eligible for Medicaid. Low-income working parents who exhaust transitional child care benefits may be eligible for other federally and state-funded child care programs. Funding for low-income child care benefits is limited, however, so it may be helpful to give parents information on how to access benefits or get on waiting lists early.

States should design fluid delivery systems that bridge the gaps between welfare and transitional benefits, and between transitional benefits and follow-up supports. For example, some states have established systems that automatically roll over child care assistance from transitional benefits to another funding stream. Consistent payment rates and mechanisms can also ease transitions from one funding stream to another.

38. Financial Incentives

Financial incentives are a popular part of state welfare reform efforts. As of May 1996, 30 states had been granted federal waivers to make changes in earnings disregards to help make work pay and ease the transition from welfare to work. By changing the way earnings are counted in determining a family's monthly welfare grant, financial incentives allow recipients to keep more of their earnings from work while still receiving welfare. Financial incentives can also address one of the main criticisms of a work first approach: that it leads to low-wage jobs without benefits, leaving employees in a worse financial position than when they were on welfare. However, it must be recognized that financial incentives will also keep many participants on welfare longer than they otherwise would have been, by raising the level of earnings at which they become ineligible. In additional to its fiscal implications, this poses potential problems in the context of time limits (see section 40).

Financial Incentives and Work First Programs

Field research suggests that, used together, work first and financial incentives might be more powerful than either would be alone, for the following reasons:

Making the Most of Financial Incentives

Financial incentives will increase the income of participants who would have gone to work even in their absence, and thus will help to make work pay for those people. In order to increase total employment, however, the incentives must encourage participants to go to work who would not have gone to work otherwise. The following ideas can help make this happen by promoting communication about and marketing of financial incentives:

39. The Earned Income Credit

The Earned Income Credit (EIC)-also known as the Earned Income Tax Credit, or EITC-can help make work pay for low-income families. The EIC is a federal tax credit that was worth as much as $3,556 for some families in tax year 1996. While the EIC did not generally count as income under the AFDC program, this is a state decision under TANF. States can support work effort by not including the EIC in eligibility and benefit calculations.

Educating participants about the EIC and helping them take advantage of it can enhance their success and the success of your program. The following suggestions can assist you in promoting the EIC:

40. Time Limits

Federal law restricts states from using TANF funds to provide benefits to most families for more than five years (though states can exempt up to 20 percent of their caseload from the federal time limit). Beyond the limitations on the use of federal funds, the law gives states the flexibility to design their own time-limit policies. For example, states can set time limits shorter than five years. States can also use maintenance-of-effort or other state funds to provide benefits that do not count against the federal time limit or that assist those who have exhausted their federal time limit. Many states have already established time limits under federal waivers. In general, these tend to be shorter than five years, but allow opportunities for exemptions and extensions.

Although time limits are widely supported, no evaluations of this approach have been completed. The first state-initiated time-limit programs are still relatively new, and only a handful of people had reached the time limits as of late 1996. The stated goal of time limits is the same as that of work first-to move welfare recipients into paid employment. Time limits can help to motivate participants in their job search, and in doing so may bolster the program's success. However, as time limits change the nature of welfare, they affect work first programs as well. Program planners and administrators who couple a work first program with time limits should be aware of the following issues: