Press Release - CEA Report: Expanding Work Requirements in Non-Cash Welfare Programs

Today, the Council of Economic Advisers (CEA) released a report outlining the likely effects of expanding work requirements for non-disabled working-age adults in social welfare programs. The following is the executive summary. Read the full report here.

The American work ethic, the motivation that drives Americans to work longer hours each week and more weeks each year than any of our economic peers, is a long-standing contributor to America's success. However, while working Americans contribute more time to work than our peers in comparable economies, the share of working-age Americans participating in the labor force has fallen behind the share in peer countries over the last several years. Today, many non-disabled working-age adults do not regularly work, particularly those living in low-income households. Such non-working adults who receive welfare benefits may miss important pecuniary and non-pecuniary benefits for themselves and their households, and can become reliant on welfare programs.

To help transition more non-disabled working-age Americans into the workforce, President Trump signed an executive order in April 2018 instructing agencies to reform their welfare programs by encouraging work and reducing dependence, in part by strengthening and expanding work requirements (to the extent current law allows). This effort builds on previous bipartisan commitments to require and reward work in welfare programs. In the 1990s, President Clinton promised to advance welfare reforms that would transition those expected to work into the workforce. Bipartisan legislation during his presidency reformed the main cash-based welfare program for low-income households—Aid to Families with Dependent Children (AFDC)—in part by imposing strong work requirements on non-disabled working-age adults in its work-focused replacement, Temporary Assistance for Needy Families (TANF). Though work requirements have been an important component in promoting employment for TANF recipients, today most recipients of non-cash welfare programs are not subject to work requirements, despite the fact that these non-cash programs now provide the vast majority of welfare assistance to low-income individuals and households.

In this report, we document the share of adult recipients in the three major non-cash welfare programs who society generally expects to work: non-disabled working-age adults (between 18 and 64). Low employment rates of non-disabled working-age recipients suggest that legislative changes requiring them to work and supporting their transition into the labor market, similar to the approach in TANF, would affect a large share of adult beneficiaries and their children in these non-cash programs.

We then discuss three reasons for expanding work requirements in non-cash welfare programs as a means of solving the problem of a large number of non-disabled working-age recipients on non-cash welfare programs who work few, if any, hours. First, self-sufficiency has been declining in recent decades while material hardship has fallen, motivating a renewed focus on building self-sufficiency via work requirements. Second, an alternative solution of increasing positive incentives for work (for example, by increasing the Earned Income Tax Credit) could exacerbate already-high implicit taxes on low-skill part-time workers. Third, evidence suggests that welfare programs that require work in return for benefits increase adult employment and may improve child outcomes.

The timing is ideal for expanding work requirements among non-disabled working-age adults in social welfare programs. As was the case in the period of welfare reform in the mid-1990s, current labor markets are extremely tight and unemployment rates are at very low levels, even for low-skilled workers. Still, even if work requirements improve outcomes for the majority of affected recipients, some may experience negative effects, which is why it is important to carefully design requirements and increase support in helping recipients overcome barriers to employment (e.g., lack of childcare, mental illness, or criminal records). Quite the opposite of harming people, expanded work requirements can improve the lives of current welfare recipients and at the same time respect the importance and dignity of work.