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Study Gives Minnesota Welfare Program Rave Reviews

Reform: Innovative initiative uses financial incentives to encourage work and help reduce poverty. But critics point to added state costs.

August 28, 1997|MELISSA HEALY | TIMES STAFF WRITER

WASHINGTON — A groundbreaking welfare reform initiative in Minnesota has achieved impressive success in not only putting some of the system's toughest customers to work, but lifting them out of poverty as well, according to a study released Wednesday.

As welfare reform takes hold across the country, an independent analysis of the Minnesota program appears to challenge a key assumption of many policy experts: that even if a state puts welfare recipients to work, those workers are likely to continue leading lives of deprivation because they cannot command wages sufficient to sustain a family.

By offering long-term welfare recipients financial incentives to work and requiring them to participate in organized job-search efforts, Minnesota drove more of them into work and reduced the likelihood that they would live in poverty once they landed an entry-level job. That is the conclusion of a report by the Manpower Demonstration Research Corp., a nonprofit research organization that specializes in conducting independent assessments of domestic social programs.

Those dual goals of reducing poverty and encouraging work resulted from a number of incentives for welfare recipients to go to work. They included a hefty income supplement for those who started work at low pay or with short hours, and a year's worth of health and day care assistance. Participants in the program could even get up to $300 a year for car repairs--a proposal intended to keep participants from losing jobs because of transportation problems.

Under the experimental Minnesota Family Investment Program, or MFIP, a recipient's basic welfare grant would be increased by 20% by taking a job, and benefits would be reduced by only 62 cents for every dollar earned on the job. By contrast, recipients enrolled in the traditional federal welfare program, called Aid to Families With Dependent Children, who took jobs had almost a dollar taken from their welfare checks for every dollar earned.

But there are a couple of hitches to Minnesota's innovative effort, the report concluded.

Such a program, at least in the short run, is likely to increase a state's welfare costs and to keep people on welfare rolls longer, the study's authors warned. And, in an era of strict new time limits on welfare aid, such a program could encourage recipients to use up their federal five-year lifetime limit even as they work.

"A state whose primary goal is to reduce welfare rolls tomorrow may not want to choose this model" of reform, said Virginia Knox, one of the study's authors.

But Minnesota's initiative managed to rival some of the nation's most successful welfare-to-work programs in moving long-term recipients into jobs. At the end of 18 months, 52% of urban, single-parent, long-term welfare recipients were employed. By contrast, fewer than 38% of such recipients got jobs when they were assigned to AFDC.

The MFIP job-placement record rivals that of such nationally recognized welfare-to-work programs as Riverside County's GAIN program, said Knox. And the MFIP program had the added benefit of moderately reducing poverty among those who took jobs, she noted. While the poverty rate for Minnesota's urban, single-parent, long-term AFDC recipients was a staggering 85%, the figure for similar MFIP recipients was 71%.

Minnesota officials concede that their program has higher costs--MFIP participants get benefit payments 8% higher than AFDC recipients. But they argue that such an up-front investment will bring savings later on, when greater numbers of employed welfare recipients work their way off the rolls and up the wage ladder into jobs that can support a family for the long term.

Minnesota officials hope those recipients will not return to the welfare rolls. Whether that is true will be the subject of a later study.

Minnesota, which has a reputation for having some of the nation's most generous welfare policies, decided in 1994 that it wanted to pursue two goals that most welfare reformers have found very difficult to reconcile: to push welfare dependents into jobs, but to ensure that in doing so, the state did not keep families in poverty or push them deeper into that hole.

Under federal welfare reform enacted last year, at least 35 states have drafted plans that would let working welfare recipients keep a substantial portion of their employment income and still receive welfare benefits. But experts said Minnesota has gone further than any other state in designing anti-poverty measures into its state welfare plan.

"We're really looking at that higher goal of investing in the family," said Deborah Huskins, assistant commissioner of Minnesota's Department of Human Services. "We also looked at the 100,000 children on welfare in Minnesota. We know that poverty is associated with problems in school, and those children's problems will become their schools' problems."

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