If We're Going to Raise the Minimum Wage, We Need to Fix Welfare

In 1996, Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), also known as “welfare reform.” First Lady Hillary Clinton, who whipped the votes for the bill, explained at the time that its purpose was to eliminate welfare as an anti-poverty program. Besides the racial motivation of this law, the goal was to facilitate self-sufficiency, and eliminate dependency on government.

As such, the PRWORA replaced the Aid to Families with Dependent Children (ADFC) program — what everyone thinks of as traditional welfare — with Temporary Assistance For Needy Families (TANF), which imposed a work requirement, and a lifetime limit of five years on assistance.

In addition to this work requirement, TANF also provides the states with the power to set a monthly income maximum for eligibility. Those maximums are shown in this figure from the Congressional Research Service:

Many of those income allowances are extremely low as a result of states wanting to minimize the number of people on the welfare rolls. Right now, recipients are able to meet TANF’s minimum work requirement entirely with paid employment in just 17 states.

When an individual no longer qualifies for assistance, there is an immediate cut-off.

A consequence of this situation is that many recipients opt for qualifying unpaid alternatives, (shown in the table below from the Center on Budget and Policy Priorities), or end up foregoing hours of paid employment to meet the work requirement. And herein lies a serious failing of TANF since the whole point of the program was to “put people back to work.”

The end result of TANF’s inherent contradiction, as history has shown, is that most people do not escape poverty. There is no point at which they can have both a full time job and aid; no point at which recipients can truly build themselves up. On top of that, many needy people are unable to get the assistance they need.

An increase of the minimum wage to $12 or $15 an hour will exacerbate this problem without appropriate supplemental action.

These increases would shrink the number of states where recipients can meet the work requirement exclusively with paid employment to just 13 with the former, and only one with the latter.

While there is no denying the fact that we must raise our minimum wage — economists are in agreement on this point — we must simultaneously address the flaws of our welfare system. If we do not raise the wage enough to offset the loss of TANF assistance, or if we do not extend that assistance past the current eligibility period, we will undermine the very purpose of the increase: lifting people out of poverty. That’s because, considering that people already dock their hours of paid work to maintain assistance, recipients would not necessarily end up making more money than they made prior to the wage hike.

Thus far, neither Democratic campaign has outright addressed this issue. Senator Bernie Sanders, who voted against the ‘96 legislation to “reform” welfare, did excoriate Clinton for her complicity in getting the law passed (she whipped the votes), but that has been the only mention of the topic in this primary.

I spoke with Brian Fallon, Hillary Clinton’s press secretary, who told me that the Clinton Campaign “would be happy to explore any of the implications” that minimum wage hikes have on welfare to “ensure the safety net still exists.” However, as history has shown, there is a big difference between “still exists” and “works” — especially considering that Hillary Clinton still touts “welfare reform” as a success.

I also reached out to the Sanders Campaign to see if the Bernie had any plans to un-reform welfare. The representative for the campaign told me to send in the data I had compiled so they could review it with their policy director. I have not heard back.

Politics

In addition to these concerns over how well an increase in the minimum wage works in tandem with our current welfare system, we must also consider the political consequences of such a move. Because both plans raise the minimum wage significantly, it is likely that if either were passed it would kill the political will to pursue the issue further. That is why it is so imperative that we pursue a livable wage from the outset. Let’s remember that if minimum wage kept up with inflation, it would be around $21.72 an hour.

A $12 an hour wage is still unlivable in many places around America — especially for single-parent families. Assuming one works 40 hours every week, that comes out to an annual income of $23,000 — still below the poverty line for a family of four, and just barely above the poverty line for a family of three. It is also important to note that simply being above the poverty line does not mean stable. We need a minimum wage that elevates people above ‘barely making it.’

And so, all things considered, if we’re going for a large wage hike, we should probably be pursuing something even more ambitious than Bernie Sanders is proposing with $15 an hour. That way, even if we do not un-reform welfare, we can offset the loss of assistance for many people, while simultaneously taking advantage of the political situation that faces us. As far as the wage is concerned, the closer to $21.72 an hour we get, the better — keeping in mind that implementation will be gradual. Of course, eventually, welfare and minimum wage will have to be dealt with together.

If We’re Going to Raise the Minimum Wage, We Need to Fix Welfare