The Lessons of W-2

by Amy Sherman

American Outlook Magazine, 1 June 2002

Like pious Muslims making the pilgrimage to Mecca, policy wonks have been flocking to Milwaukee to study its ambitious experiment in welfare reform. The reason why isn’t hard to figure out. Since 1987, Wisconsin’s welfare rolls have plummeted a stunning 88 percent; in Milwaukee, the state’s largest city, the welfare caseload has fallen 75 percent, far bigger than the average drop of other large cities. "Wisconsin Works," or W-2, is the pinnacle of Wisconsin governor Tommy Thompson’s reform efforts. Launched in 1997, W-2 has won praise from conservatives for its hard-nosed "work-first" principles and from liberals for its generous benefits. W-2’s ultimate success, though, will depend on what happens in Milwaukee, since over 80 percent of Wisconsin’s remaining welfare caseload—made up of the hardest cases—resides in that city. Milwaukee’s experience will demonstrate whether W-2 can serve as a model for all cities or works only for the easier-to-employ.

Critics of welfare reform gloomily predicted that W-2 would devastate Milwaukee’s inner city, but so far it hasn’t. In fact, in conversations with about 50 individuals in three low-income Milwaukee neighborhoods (Parklawn, Keefe Avenue, and the Hispanic south side), I found that many poor families are faring better. Even more important, W-2 promises to have beneficial long-term effects on families, community life, and the culture as a whole. Yet while the news from Milwaukee is heartening, frontline poverty workers are identifying key points where the system isn’t living up to its promise. If W-2 supporters dismiss these constructive criticisms as the tired laments of antireform liberals, they’ll miss a crucial opportunity to improve the program and preserve it from the backlash that just a few, easily avoidable, horror stories of welfare-reform failure will surely provoke.

A Successful Program

The roots of W-2 go back to 1987, when the state began, through a series of incremental reforms, to strengthen work requirements as a condition of receiving public assistance. Precursors to W-2 instituted the "diversion" principle -- insisting that an applicant for welfare complete a thorough job search while her application for aid is under review. Wisconsin’s 1996 "Pay for Performance" initiative established financial incentives for counties (which oversaw welfare provision) to boost job placements among welfare recipients.

W-2 built on both ideas—diversion and incentives—but it went much further. It opened up the very administration of welfare to competition, shattering the counties’ monopoly on the delivery of services. In Milwaukee, five agencies—the for-profits Maximus and YW-Works and the non-profits UMOS, OIC, and Employment Solutions—soon won state contracts worth, in total, $357 million to serve various areas of the city. The drop in the caseload and the cost savings from privatization (the Wisconsin Policy Research Institute estimates that Wisconsin saved $10.25 million in W-2's first 28 months) have enabled the state to spend 45 percent more per family while keeping W-2’s aggregate costs below what they would have been under the old system.

The idea of work is central to the new system. Almost no one, including the disabled, the drug addicted, and mothers of young children, is exempt from working. Under W-2, a needy individual visits the job center assigned to her locality. A "Resource Specialist" assesses whether she can be diverted from aid (i.e., simply given job tips or a referral to a private helping organization) or should meet with a Financial and Employment Planner (FEP) —W-2’s version of the old caseworker. The FEP judges which of W-2's four "tiers" provides the most appropriate level of assistance. Thus far, approximately one-third of the caseload has needed only modest, "first tier" aid (e.g. transportation or daycare benefits). But as agencies reach down to help the remaining welfare caseload—made up of the hardest cases—the percentage of applicants assigned to tiers offering intensive support (such as a "work experience" placement or drug rehabilitation) is growing.

From the start, critics have relentlessly criticized W-2. The biggest fear has been that not enough jobs would be available for those individuals W-2 pushed into the labor market. But using pilot study data from the Bureau of Labor Statistics, economist John C. Weicher estimates that in May 1996, there were probably 35,000 job openings with 30,000 people looking for work in Milwaukee. Today, the city’s unemployment is a mere 3.1 percent.

W-2 participants seem to be taking advantage of these abundant opportunities. The state’s 1998 study of individuals leaving the welfare rolls showed that a full 83 percent had worked at least at some time since leaving, and that 62 percent were working at the time of their interview (most of them full time). Those not working were not bereft of support: More than half received Food Stamps or unemployment compensation, nearly 20 percent lived with a working spouse or friend, and more than 80 percent received Medicaid benefits.

There’s strong corroborating evidence for these findings. At the Hillside public housing project in Milwaukee’s blighted central city area, the number of households with at least one full-time income jumped from 17 percent in January 1996 to 55 percent in January 1998. Data from other low-income city neighborhoods indicate a huge rise in the aggregate amount of money returned to residents through the Earned Income Tax Credit, available only to the working poor (up 176 percent in Parklawn and 148 percent in the south side district). Since W-2, temporary employment agencies and tax preparation firms have been springing up across Milwaukee, signaling more people in the work force. And faith-based groups running used clothing centers report more individuals requesting "career clothes." Though these striking indicators don’t prove that W-2 has more poor people working, they certainly fit that hypothesis.

Even if former welfare recipients are working, critics say, W-2 is deepening poverty and hunger. But data from food pantries are ambiguous. The Hunger Task Force of Milwaukee’s 1998 study suggested heightened food insecurity among the needy and told harrowing stories of poor people digging through dumpsters or selling their blood plasma for money to buy food. But Barbara Caravella of the Salvation Army’s emergency services reports that half of the city’s food pantries have seen an increase in requests for assistance while the other half have seen a decrease. And Mike Rintelman of the Milwaukee Outreach Center, a non-profit serving low-income and homeless families, thinks claims of increased hunger are ludicrous: "The food pantries have surpluses," he reports.

Critics have also worried that W-2 would throw helpless people into the streets, but information on evictions and homelessness is inconclusive. Calls to the Salvation Army for rent assistance are "definitely up," Caravella reports. But William Martin, CEO of Employment Solutions, notes that evictions in Milwaukee County have been steadily rising for the last eight years, long before W-2 or Pay for Performance. Maria Rodriguez from the Milwaukee Housing Authority reports that there’s been no rise in public housing evictions since W-2 kicked in.

Creating Workers

Of course, even if W-2 participants are moving into the labor force ,and poverty and homelessness are not getting worse, we still need to know how former welfare recipients are actually faring. Is W-2 improving their lives?

One of the positive "leaver" stories belongs to Alida Rodriguez, a conscientious 26-year-old single mother with two young sons. During her first year at the Latino Health Organization, Inc., she’s already received two promotions. At a full time annual salary of over $18,000, Rodriguez says she’s much better off now than when she was on welfare. She’s been able to afford a 1979 Oldsmobile that has slashed her morning commute from two hours to 30 minutes, Nintendo for her kids, and a used washer and dryer. "I’m able to pay my bills on time," she says, " even though I don’t get Food Stamps anymore and my co-pay for childcare has increased." That Rodriguez still lives in subsidized housing in Hillside helps her financial situation, to be sure, but she’s well on her way to complete independence. And Rodriguez is hardly the only Hillside tenant doing better. Ricardo Diaz from the Milwaukee Housing Authority notes that the average income of Hillside residents has risen more than 30 percent from January 1996 to January 1998.

Michelle Crawford, an African-American single mother, became W-2’s best-known success when Governor Thompson invited her to address the state legislature during his 1999 "state of the state" address. On welfare for 10 years before W-2, Crawford admitted that when she heard about the new program, she was scared—she had gotten used to a life of passive dependency on the state. Thanks to W-2, she wound up in a Community Service job at the Engineered Plastics factory in Menomonee Falls. She was bored at first, but stuck with it and even volunteered to complete additional assignments when other Community Service job participants employed at the plant didn’t show. The company rewarded her diligence with additional training, and Crawford now is a machine operator making over $11 an hour.

Nonetheless, things aren’t easy for leavers. In late 1997, authors Kathryn Edin and Laura Lein published Making Ends Meet based on interviews with welfare-reliant and working poor single mothers in five cities. They calculate that poor single parents can "make it" if they earn something over $8 an hour—about $16,000 a year. Many W-2 participants with full-time jobs come close. Eight I interviewed, who worked in full-time, unsubsidized jobs, had an average wage of $7.97 an hour. Maximus’ clients average $7.46 an hour. Community Enterprises of Greater Milwaukee, which offers computer training to W-2 participants, reports its graduates typically start at $8.00 an hour.

Citing a survey by the Wisconsin Catholic Bishops in which leavers say they still "worry a lot" about paying bills, reform critics complain that W-2 has merely turned the welfare poor into the working poor. But surely it is unrealistic to think W-2—or any other reform program—could move participants miraculously from the poorest to the middle class. The journey almost certainly includes a stopover in the ranks of the working poor. More to the point, the working poor are better off than the welfare poor, both materially and in terms of possible advancement. Indeed, according to Milwaukee’s Center for Self-Sufficiency, a Wisconsin parent with two children who works full time at $8 an hour will, once Food Stamps and the federal and state Earned Income Tax Credit get tacked on, gross $19,647 annually—nearly $6000 above the federal poverty level of $13,650 for a family of three from private charities and taxpayer-funded programs. Cities should also note that Americans are more likely to consider the working poor as deserving assistance from private charities and taxpayer-funded programs.

W-2’s positive impact on participants goes well beyond economics. Almost all the W-2 participants I spoke with said that work had boosted their sense of self-worth and their hope for the future. W-2 has also sparked the development within some low-income families of a more structured life style through the rigors of the workaday world. According to Anthony Taylor of the Westside Housing Cooperative, "Before, there were lots of people walking the streets at 11 or 12. Now you see a thrust of people between 6 a.m. and 8 a.m. and again between 3:30 and 6 p.m." Seeing mom go to work also has a positive effect on children, say school social workers like Barbara Haag. "Kids don’t like to admit that their family is on welfare. They feel proud of their working moms." Plus, Anthony Taylor maintains, kids seem better behaved—there’s less nuisance and truancy, at least at Westside.

W-2’s work requirements also undercut the notorious "crayfish syndrome" that plagued highly motivated welfare recipients under the old AFDC system. Folk wisdom has it that if you put a bunch of crayfish in a bucket and one starts to climb out, the others will pull her down. A similar phenomenon sometimes confronted welfare recipients who sought to improve themselves. When public housing resident and welfare recipient Clarissa Crews set out to get her GED in the early 1990s, her neighbors harassed her. "Who do you think you are? You think you’re better than us?" Crews recalls their words with a grimace. Now, with W-2 essentially requiring all welfare recipients to better themselves, "strivers" won’t find themselves singled out for ridicule.

Fighting the Bureaucracy

Not surprisingly, given the scope of W-2, the successes have been accompanied by some hardship. School officials complain that W-2 is taking a toll on children whose families bounce from one insecure housing arrangement to another. School social worker Maxine Winston of Keefe Avenue Elementary says she’s seen "three or maybe four families living together in one house," and adds, "We’re also watching fourth and fifth graders missing school to baby-sit sick younger siblings at home when mom can’t find daycare and has to go to work."

That these troubling things are happening is indisputable. But the simultaneous existence of such suffering, and of the new W-2 system, does not automatically mean W-2 caused these hardships. Simplistic analysis won’t help the people who need help, or fix the parts of the system that need improvement. We need a clearer understanding of who is suffering and why. Judging by interviews with those who are struggling, there are multiple reasons for hardship.

In some cases, the suffering results from the individual’s failure to meet W-2’s expectations. "Elizabeth," a middle-aged resident at the Salvation Army shelter (known locally as the Lodge), admits that she ended up homeless not from W-2 but from "getting back onto drugs" and subsequently failing to fulfill the program’s work rules.

Other individuals gave up on W-2 too quickly. They had one negative interaction with agency staff, got disgusted, abandoned W-2, and attempted to find a job on their own. For some, the end result was tolerable; others experienced disaster. Pauline Nash bitterly remembers her short-lived experience on W-2. Her family hit a crisis in 1998 when her unemployment ran out and her husband was temporarily unable to work. "I didn’t know how I was going to pay my rent, my lights, my gas. My kids didn’t have anything to eat," Nash recalls. "So I went down there [to the W-2 agency] to get help and they made me feel so bad. They told me I’d have to work 55 hours before I could get a check or emergency Food Stamps. It was crazy!" This should not have been Nash’s experience—emergency Food Stamps are available immediately when appropriate—but it may have arisen because the system’s emphasis on diversion discourages staff from offering instant help. Nash abandoned W-2 and successfully petitioned Cordelia Taylor for a job at the nursing homes Taylor runs in the Keefe Avenue neighborhood.

Some of Nash’s friends who tried to make it on their own didn’t fare as well. She knows three who gave up on W-2 — "too much red tape" — and sought help from temporary agencies. Six months later, one was working at Kentucky Fried Chicken, one at Family Dollar, one as a security guard in the mall — all making minimum wage. The woman at KFC, who has four kids, fell behind on her rent, got evicted, and had to move in with the Nashes for a few weeks.

Breakdown in communication between agency workers and recipients is another source of unnecessary hardships. Former AFDC recipient Judie Eschrich has flourished in her job at Amerivoice, a small telephone service company, having worked her way up in nearly two years to the CEO’s "right-hand woman." But she failed to report her new job at Amerivoice to the County agency overseeing her rent assistance. Says Eschrich: "I thought it was intertwined with W-2 and they’d know I was working." The result: she had to pay back $1500 in rent assistance overpayments, seriously crunching her budget.

Still other W-2 participants suffer because of shortcomings by agency and county employees. Ruby Rodriguez had been staying with her kids at the Salvation Army Lodge for twenty days when I met her in late April 1999. An articulate Latino woman, Rodriguez spent an hour describing the run-around she was getting at her assigned W-2 agency. "I’ll go down there, wait for two or three hours, and finally talk to a guy. He’ll give me some job listings and tell me I have 72 hours to find a job. When I get one I should let them know, and then the childcare will be provided," she explains. "But after I get a job, I’ll get a letter saying my daycare has been denied. So then I can’t find anyone to watch my two youngest ones, and so I’m jumping from job to job. And I’d go back to the W-2 agency and ask, ‘Why am I being denied?’ And they’ll say, ‘Ms. Rodriguez, you’re not participating correctly.’ But I tell them, ‘I am participating, I’m trying to cooperate.’"

Rodriguez’ two main complaints—an incompetent and inattentive FEP and screw-ups with her daycare benefits — have some legitimacy. From her multiple interactions with agency staff, Barbara Vanderburgh of the Joy House shelter for homeless women says simply, "Some FEPs are fantastic, others, jerky." W-2 agency staff admit that in the early days, FEPs were handling caseloads of 120 to 130 clients—well above the original 55 client per caseworker guideline suggested by W-2’s designers. With such big caseloads, some W-2 participants were bound to get short shrift.

The daycare snafus Rodriguez related weren’t the fabrication of a disgruntled welfare recipient. They were embarrassingly frequent in W-2’s early days. Richard Buschmann, Director of Childcare for Milwaukee County Department of Human Services, admitted in October 1998 that "glitches" had arisen in as many as 60 percent of the daycare cases in W-2’s first six months. Clients eligible for help were wrongly denied benefits, and childcare providers often did not receive timely payment from the county.

To handle complaints, W-2 does have a formal grievance process in place. Statistics from grievance cases indicate both good and bad news. As agencies have gained experience in administering W-2, the number of formal "fact-finding" procedures demanded by upset clients has decreased. However, slightly more often than not in grievance cases that get to the hearing stage, the client’s complaint is determined legitimate and the agency found negligent.

Compassionate Conservatism

For W-2 to become the nation’s most successful reform initiative in lifting the needy out of poverty, administrators will not only need to get errant caseworkers in line or fine-tune the eligibility and sanctions processes so that needy individuals are neither wrongly denied help nor penalized unfairly. They will need to avoid such a blind devotion to the system’s personal responsibility message that it prevents them from acting realistically toward the remaining, hardest-to-serve, people.

W-2 works well for clients who pay attention to details, stay organized, and are diligent, patient, thick-skinned, and able to cope with the workaday world. But not all clients currently possess these strengths; indeed, fewer and fewer in the bottom tier of the welfare caseload do. Many cannot deal effectively with the bureaucracy. They may be illiterate, have a poor command of English, or be unable to organize themselves and their paperwork. Under AFDC, welfare recipients could be passive: they attended a couple meetings, answered a few questions, filled out some forms — and month after month, their aid check appeared. W-2 demands that they be active participants in shaping their own road to self-sufficiency. They must attend more meetings, complete a minimum amount of job search activities, and pro-actively inquire into the wide range of services available to them. There’s nothing inherently wrong with all this. But without a lot of handholding, the nonchalant, the timid, the slow-to-understand, and the touchy and impatient will not succeed in this system. So, W-2 administrators can choose. They can legitimize handholding, and risk being called spineless by purists who see this as countering the personal-responsibility message of W-2. Or, they can permit many poor people to fail, and thus risk being called heartless by the Left.

In making their choice, policymakers would do well to heed the advice of frontline pro-reform poverty workers like Deborah Darden. She is the Executive Director of "Right Alternatives," the program Marvin Olasky, a strong national advocate for work-based welfare reform, has commended. Darden got herself off welfare by eschewing the entitlement mentality, accepting personal responsibility for her circumstances, working hard, and relying on God. Then she began helping others in the Parklawn project to do the same. For nearly ten years she has run support groups emphasizing personal responsibility and traditional values, and she has established a neighborhood center to provide training and daycare. Darden’s complaints about W-2, in short, do not come from a welfare defender.

Darden says the country needed welfare reform and work requirements. Nevertheless, she emphasizes, "There is so much in the details of the suffering of the people that is not being [publicized]. I’ve known people — good workers, not the kind who had to be pried out of their seats — who’ve got caught up somehow and have been evicted, homeless!" Darden would like to see welfare reform’s time limits extended for individuals with legitimate hardships and thinks the W-2 agencies need to do more outreach and home visits, patiently explaining the system’s procedures to clients who feel overwhelmed and confused by the changes.

Darden also stresses that the agencies need to crack down on businesses that are taking advantage of W-2 workers. Too often, she asserts, once the W-2 participant is placed in a job, caseworkers fail to monitor her circumstances, leaving her unprotected against businesses that "jerk her around." For example, she relates stories of W-2 participants who, at the encouragement of their W-2 agency, have accepted private sector jobs in suburban companies, with disastrous consequences. The firms have abruptly shifted the women’s work schedules -- wreaking havoc on their carefully designed daycare and transportation plans. They have promised the women full-time hours but delivered only part-time hours, creating financial crises. Or company staff have failed to submit crucial reports back to the W-2 agencies concerning the work records of W-2 employees — resulting in unfair sanctions.

Darden’s belief in the need for handholding is shared by Cordelia Taylor of Family House. "A lot of these [W-2 participants] have never seen anybody who worked before," Taylor says. "They don’t understand how to get themselves ready for work or why it’s important to be on time." Taylor wishes more welfare reform supporters would embrace the necessity — and legitimacy — of mentoring and one-on-one support. "People say to me, ‘But you’re holding people’s hands, and they have to learn to make it on their own.’ That’s true. But [hand-holding] has to be done if we’re going to make a success out of this W-2."

If the experiences of the W-2 "success stories" I interviewed are illustrative, they support the contentions of Darden and Taylor. In every instance, these W-2 participants credited their success to the personal, caring support they received from someone who helped them walk the road from welfare to work. For some, the extra help came from family; for others, it was an agency staff member or church pastor who went the extra mile. Lewanna Alexander, a W-2 participant flourishing in her Community Service Job at Vieau Elementary School, says she’d still be a drug addict if it weren’t for the storefront church that rescued her, housed her for months, and helped her navigate the W-2 process. For still others, it was the employer who made the difference. Alida Rodriguez and other W-2 participants working at the Latino Health Organization expressed fervent gratitude for its Executive Director, Maria Gamaz. Gamaz takes the praise in stride; she doesn’t see the extra handholding she does — such as interceding with the W-2 agencies — as charity, but as good business. "I place a call. I get it resolved -- and here’s a happy, smiling, productive employee," Gamaz says.

Realism and Grace

Judging by the enhanced supports W-2 agencies have erected in recent months for clients in the remaining 20 percent of the caseload, it appears that they are heeding the advice of friendly critics like Darden and Taylor. Maximus has instituted a wake-up program to call clients during the first few weeks of their new job to help ensure they get to work on time. YW-Works bought its own factory so that it could run its own on-the-job training center for unskilled W-2 participants. All of the agencies are exploring partnerships with faith-based groups specializing in drug rehabilitation, soft-skills training, and mentoring. Neighborhood associations and homeless shelters report with satisfaction that they’re seeing an increase in W-2 agencies sending outreach workers to meet with low-income families on-site. These attempts to go the extra mile in reaching the most disadvantaged and dysfunctional low-income families are critical to W-2’s success in Milwaukee — and any other city where it is tried.

W-2’s strong work-first message is laudable. Its assumption that the needy themselves, and not government, are primarily responsible for their own well being is indisputable. The system’s expectations do not need major adjustment. Pragmatism and grace, though, are necessary to its success in Wisconsin or anywhere else. An emphasis on diversion is appropriate when the issue is helping a client to avoid a potentially unhealthy dependency on an income-support program. But those programs are inherently different from "work-support" initiatives — like wake-up call programs, job clubs, or classes on handling stress — that seek to ensure that the newly-working retain their jobs. If these work-support efforts are disdainfully viewed as coddling able-bodied adults who "just need to get it together," many clients will fail unnecessarily. A little more patience and realism, by contrast, could be the key to success. As Cordelia Taylor sums up, "We’re going to have to start to meet people where they are, not where we assume they should be."

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