How Effective Are Work Requirements?
Work requirements in safety-net programs are nothing new. In fact, they are already used in the United States to address concerns about employment disincentives. And contrary to what some critics contend, the evidence more often than not suggests that work requirements increase employment and earnings among those who receive government assistance and are capable of work.
But the evidence remains largely limited to cash welfare programs from the 1990s, and much of it is misunderstood. This partly explains why current discussions of work requirements have been full of uncertainty.
Congress is now considering adding work requirements to the Supplemental Nutrition Assistance Program (SNAP). While several states have already received approval or have pending requests to implement work requirements in Medicaid, both efforts have been met with fierce opposition and claims that work requirements are ineffective. To the contrary, the evidence largely supports these policies, and states should be allowed to implement them on the condition that rigorous evaluation accompanies the initiatives.
Some argue against work requirements because of the welfare reform experiments from the 1990s. But too often critics misread the evidence from those early studies, which included the National Evaluation of Welfare to Work Strategies (NEWWS). NEWWS studied 11 different programs across the country using the gold standard of evaluation. Evaluators randomly assigned people to a program group that included a work requirement along with services or to a control group that had no requirement and no services. But of the 11 programs studied, only four were considered labor force attachment — or “jobs-first” — programs, meaning that they focused initially on placing people in jobs. The seven other programs, in contrast, were called human capital development or “education-first” programs, which focused on gaining education credentials first, then employment.
Critics incorrectly cite the results from the education-focused programs, which were found to be largely ineffective compared to jobs-first programs, to suggest that work requirements would not be effective today in SNAP or Medicaid. The education-first programs are largely irrelevant to today’s discussion of extending work requirements to other safety-net programs — no one proposes that recipients be required to go to college in order to receive SNAP or Medicaid.
The jobs-first programs in NEWWS most relevant for today’s discussions showed impressive gains in employment and earnings. In those programs, increases in the average number of quarters worked in a five-year follow-up period ranged from 8 percent to 21.1 percent, with similarly high increases for average total earnings. Any fade out that occurred in later years was largely due to the control group becoming subject to work requirements, which diluted any subsequent program effects.
The authors were unwavering in their conclusions:
Nearly all 11 programs increased how much people worked and how much they earned, relative to control group levels, but the four employment focused programs generally produced larger five-year gains in employment and earnings than did most of the seven education-focused programs.
Critics of work requirements often argue that even with the employment and earnings increases generated by these programs, they failed to increase income (or reduce poverty) substantially for participants during the five-year follow up. There are two problems with applying this argument to today’s discussions.
First, refundable tax credits for low wage workers are more generous now than during much of the study period. Second, participation in SNAP among working households is much higher now than during the late 1990s. Both suggest that total income from working today is likely to be higher than cash welfare alone. It is also worth noting that even absent significant gains in income, an increased share of income coming from earnings has its own benefits — for the participant who becomes more self-sufficient, the taxpayer who supports less government expenditures, and the program, which can direct resources to those not capable of working.
In any case, the question of increased income and poverty reduction is better assessed by population-based research, which incorporates the broader question of how potential recipients would be affected by work requirements — not only those who self-selected into a welfare program. Part of the appeal of work requirements is that they might lead potential recipients to avoid assistance altogether once they realize that it’s better for them to work. Research suggests that welfare reform (which included work requirements, as well as other provisions) increased employment and reduced poverty among single-mother families, along with contributions from other policies like the EITC and a strong economy.
Today’s debates about work requirements rely on decades-old welfare-to-work studies because research in other safety-net programs is more limited. When it comes to SNAP, studies of work requirements on able-bodied adults without dependent children (the only group with a requirement) suffer from a number of limitations: problems with underreporting of SNAP on surveys; the inability to appropriately construct comparison groups; and difficulties capturing all employment and earnings (such as informal employment) all make existing studies hard to interpret.
For this reason, researchers often look at how sensitive employment is to SNAP and other safety-net program participation. The recent report by the Council of Economic Advisers (CEA) summarized this evidence, which largely concludes that program participation negatively affects employment. This leads to the conclusion that work requirements could offset any negative employment effects created by these programs.
Debate over work requirements in safety-net programs is healthy. But misreading and misrepresenting the evidence does not advance that debate. An accurate read of the evidence suggests that work requirements are more likely to lead to employment gains than not. States should be given an opportunity to see whether this is true.
Robert Doar is the Morgridge Fellow in Poverty Studies at the American Enterprise Institute. Angela Rachidi is a Research Fellow in Poverty Studies at the American Enterprise Institute.
