NFG Jobs Toolbox. Chapter 1: Introduction

NFG Jobs Toolbox: A Funder's Guide to Jobs

Jobs and Public Policy

While welfare reform is the best known and most controversial of new policies affecting jobs, other changes are also underway in the areas of employment and training, transportation, and federal housing programs. State and municipal policies on education and economic development also have important implications. Grantmakers should become acquainted with these changes and anticipate their impact on job strategies.

Welfare Reform

welfare reform is undoubtedly the most significant public policy change in recent years. While almost two years old, this federal statute is still unfolding in local communities with radical consequences. The Personal Responsibility and Workforce Opportunity Reconciliation Act of 1996 brought four major changes to the welfare system:

The former Aid to Families with Dependent Children (AFDC) program, emergency assistance program, and the JOBS program (Job Opportunities and Basic Skills) have been consolidated into a single block grant known as Temporary Assistance for Needy Families (TANF). Under TANF, states do not have to provide direct cash assistance to poor families and have broad discretion in designing and implementing services.
Federal funds may not be used to assist recipients for more than a total of 60 months (five years) in the recipient's lifetime, subject to limited exemptions. States may set shorter time limits.
Recipients face work requirements in exchange for assistance. If states do not place a steadily increasing percentage of their case loads into work activities, they incur penalties.
Child care funding is decreasing relative to the increased need created by new work requirements. People who have been on welfare are not entitled to child care under the new federal welfare law.

The enactment of federal welfare reform was driven by a number of factors, many of them ideological. Saving money was, however, the most often cited reason for these sweeping changes. The five-year limit on assistance automatically reduces welfare caseloads, removing from the rolls those individuals who require assistance the longest and consequently incur the greatest costs to the system. Over time, this purging will decrease program expenses.

Welfare reform will force many low-skilled individuals into the labor market. The impact of this movement will vary for different types of welfare recipients. Welfare caseloads generally consist of two populations: those receiving welfare for a relatively short period of time (two years or less) who transition out of the system, and those whose dependence on the welfare system is longer and deeper, sometimes spanning generations.

TANF time limits now force the latter population into the labor market. These new job seekers flooding the labor market increase the number of low-skilled, inexperienced workers competing for low-end, entry-level jobs. Predictable outcomes of this oversupply of labor are wage deflation and reduced job security. Many people will be unable to find employment at all.

Welfare reform will also affect job training and social service programs. For example, time limits place new demands on job training programs to move a greater number of people into jobs, including individuals with severe labor market difficulties. TANF puts more pressure on neighborhood-based institutions that administer these activities to place people in jobs quickly. Short term performance gains may be won at the cost of long-term employability.

Social service agencies face similarly increased demands. Additional single-parent welfare recipients holding jobs require more child care services. Without additional investments from grantmakers and public agencies, existing support services in many communities will be overwhelmed.

Workforce Development Reform

A second major area of public policy change is occurring in the area of job training, or "workforce development." (See Chapter 2, Workforce Development, for more information.) Current employment and training policy consists of a largely uncoordinated mass of federally-funded programs, many of which are only marginally effective. These programs are organized into systems controlled by separate federal and state programs. Some of the most important systems are:

The job training system, administered at the local or regional level by Workforce Investment Boards (formerly called Private Industry Councils or PICs) and local employment and training agencies funded by the Boards;
The state Jobs Service (funded through the federal Wagner-Peyser Act) and operated through state departments of labor or employment security;
Community colleges, vocational-technical institutions, and other adult educational institutions, many of which receive funding under the federal Perkins Vocational Education Act; and
Social service systems, including child care, substance abuse, and mental health.

Congress completed an overhaul of federal job training programs in 1998. Changes include consolidation of existing programs into three block grants to state and local governments, greater involvement in program administration by the corporate sector, merger of local program sites into one-stop job centers, and greater use of vouchers for eligible individuals. A number of states have already adopted these policies - most popularly the creation of one-stop job centers and business-led administrative boards known as Workforce Investment Boards.

Reforms offer both hazards and opportunities for low-income neighborhoods. Possible benefits include a workforce development system that is better and more relevant than the existing one. Conversely, these reforms could result in reduced services to targeted neighborhoods and groups. Some cities have already eliminated job centers in poorer neighborhoods in order to consolidate services at new one-stop facilities. Or, because federal eligibility criteria and targeting have been eliminated, the impetus for serving special populations targeted in the categorical programs will likely decrease.

On the other hand, many states are concentrating training funds on their welfare-to-work programs. While this direction is understandable, it means fewer resources for the non-welfare poor, including males of all ages, youth of both genders, displaced workers, and women without children 18 years and under.

The law also gives state and local officials greater discretion over governance issues. This discretion represents a setback from previous laws, which contained explicit requirements about the composition of its governing bodies, insisting on some measure of representation for low-income persons. Furthermore, earlier programs were designed to maintain a mix of programs and services, including some for those with severe employability barriers. How the service mix changes will be a critical issue in many areas.

Other problems might arise from the specific mandates included in the new reforms. A case in point is the one-stop service model. Depending on where the one-stop job centers are located and which agencies run them, services could be more or less accessible to residents of particular neighborhoods. (See Making Workforce Development Programs Effective for more information.)

Other Policy Issues

In addition to welfare and workforce development reform, there are a host of other public policy issues of concern to grantmakers and to local communities that should be considered as funding strategies are created. They include:

Local and state economic development policies to help create jobs in neighborhoods or that are accessible to neighborhood residents;
Minimum wage and living wage laws that could help reduce the number of working people living in poverty;
Affirmative action and public contracting preferences for minority- and women-owned businesses;
Child care support services and other systems that facilitate employment
Transportation policies to connect neighborhood residents to areas of high job growth;
First-source hiring policies that give neighborhood residents a first chance at jobs created by publicly subsidized projects;
Physical infrastructure investments that create new jobs and may stimulate economic development in lower-income neighborhoods;
Tax policies - ranging from local business relocation tax incentives to the federal earned income tax credit - that affect job creation, the location of jobs, and the after-tax income of employed persons; and
Education policy and programs.

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