Welfare Reform Faces a Softening Economy

For the first time in the era of welfare reform, people who left public assistance for private jobs have begun to suffer layoffs in the economic fallout from the Sept. 11 terrorist attacks.

The post-Sept. 11 woes have been concentrated in some of the very areas that offered many welfare beneficiaries their first real jobs--service industries such as hotels, restaurants, airport concessions and other travel-related fields that, during the boom of the 1990s, soaked up workers with limited skills and experience.

Now, in today’s more austere climate, poverty experts await an answer to the single largest question about the nation’s five-year experiment with welfare reform: How will those who left welfare, and others who wish to follow them, fare in a world where jobs are less plentiful and state aid is more restricted?

“Recent events are going to put significant pressure on the welfare system,” said Mark M. Zandi, chief economist at Economy.com, a private firm in West Chester, Pa. “It’s going to be the first real test of the policy changes that were enacted in the 1990s.”

Already, a growing collection of personal accounts, layoff notices and reports from those who work with the welfare population point to new pressures at the bottom of the economic ladder. The difficulties affect not only the working poor but also welfare recipients looking to follow them into the workplace. Among the signs:

* In New York City alone, 108,500 jobs may be lost as a consequence of the terrorist attacks, including major cuts by hotels, restaurants, retail, building services and other employers that hired workers with limited education, according to a report by the Fiscal Policy Institute, a think tank there.

* In Washington, D.C., applications for welfare and other aid for the needy has skyrocketed by more than 50% since Sept. 11, according to an analysis by district officials. Until the terrorist attacks, layoffs for low-pay workers “were absolutely not noticeable,” said Kerry O’Brien, co-founder of the D.C. Employment Justice Center, a workers’ rights organization. “This hits home. This hits hard.”

* Nationwide, the hotel and restaurant industries, which by some estimates employed as many as 1 in 5 former welfare beneficiaries, have laid off more than one-third of their unionized workers since Sept. 11, according to the Hotel Employees and Restaurant Employees International Union. The toll ranges from 4,000 jobs cut in Los Angeles to 6,500 in New York to 13,000 in Las Vegas. And because most of the industry’s workers are not union members, “to say that [those numbers] are just scratching the surface is an understatement,” said Tom Snyder, a union spokesman.

* Social service workers have begun to report cases of former welfare beneficiaries returning to job counseling centers. Those who went to work at the Marriott, Hilton, Century Plaza and Radisson hotels near Los Angeles International Airport have lost jobs and now face the prospect of retraining, said Bob Nelson, director of development at the Long Beach-based Labor Employment and Training Corp.

Sisnie Calvario, 46, of Long Beach, lost her data-entry job just two weeks after the attacks. The single mother left welfare in 1998 for a training program with United Airlines. The effort paid off handsomely, and she was finally living “the good life,” Calvario said recently.

Before she was laid off, she was earning $1,900 a month in her job with the airline near LAX. Her plan was to put away some savings to eventually send her son, who is now 12, to college. Now the future is uncertain.

“I really, really worked hard to get this job, and it’s really hard for me to lose it,” she said in tears.

Just what will happen to people such as Calvario--whether they ultimately land in equally good jobs, struggle instead with other financial supports such as help from families or return to welfare--has become a matter of keen interest to policymakers and advocates of the poor.

An uncertain number of former welfare recipients who lose their jobs may get unemployment insurance, which typically lasts up to 26 weeks, although those with a limited time on the job may not meet state eligibility requirements.

Some experts wonder whether the workplace experience has changed some of the former welfare beneficiaries, making them averse to accepting welfare again. In a world of fewer jobs, those lacking skills could face a much harder scramble to survive on their own.

“The issue is: If you have a group of people who [has] shown that they’re willing to take available low-wage jobs, what do you do if they are still willing but there are no jobs available?” asked Sheldon Danziger, professor of social work and public policy at the University of Michigan.

Even for those who may feel compelled to return to the rolls of public aid, it is harder to get welfare than it used to be, because of new hurdles that states have put in the law, such as requirements for documented job searches.

On top of that, states--which have slashed their welfare rolls about 50% since the mid-1990s--are beginning to impose cutoff dates for longtime welfare recipients, posing further hazards if the economy continues to weaken. (The time limits vary, and California’s do not begin until 2003.)

Given limits on their federal welfare grant money, “will states be willing to let their welfare rolls go up?” asked Mark H. Greenberg, an attorney at the Center on Law and Social Policy in Washington.

Employer surveys reflect the changing picture. An Oct. 2 spot-check of 400 employers across the country by the Welfare to Work Partnership found that 57% still wanted to hire entry-level workers, a decline from 62% earlier this year and well below a peak of 76% in December 1999.

“We are concerned about it,” said Jennifer Adach, a spokeswoman for the Welfare to Work Partnership, a group of employers that have sought to hire former welfare recipients. “But seeing that there are still a good number of businesses in need of workers is encouraging.”

The encouraging evidence is less common than it used to be, however, reflecting economic changes that were apparent long before Sept. 11.

Nationally, the welfare rolls plunged a spectacular 50% in the years after 1996, when Congress adopted a set of policies to promote work rather than welfare. But as the U.S. economy slowed down this year, some states began to report plateaus and even increases in their welfare caseloads.

Meanwhile, business at some of the industries that opened their doors to former welfare beneficiaries in the 1990s has slowed more sharply than the overall economy in recent months, said Heather Boushey, a labor market specialist at the Economic Policy Institute in Washington. (Government employment data for October are scheduled for release Friday, providing a more detailed look at the terrorist attacks’ effects on jobs.)

More bad news is expected. “There obviously has been a surge of layoffs at hotels and travel-related destinations and resorts that hasn’t shown up in the data yet,” said Zandi of Economy.com.

For those who have yet to make the leap from welfare to work, the economic chill may prove most difficult of all.

Felicia Boone, a mother of five children ages 7 to 17, had never held a job until two years ago. Then 29, she had already spent a decade on welfare; most of her friends also were recipients, she said.

Today, the San Fernando Valley resident is studying in a Los Angeles Unified School District program to become an office assistant. But harder times threaten a squeeze on the sorts of jobs for which Boone would like to qualify.

She knows it. But Boone insists she can find a niche in the post-Sept. 11 economy even if it comes down to juggling a batch of jobs rather than the office position she wants. “I’m not going to allow myself to get depressed. I’ve been doing hair since I was 15, and that can always be a second or third job.”