The Great Recession has revealed that our social safety net--primarily established by Franklin D. Roosevelt during the Great Depression--is more hole than net. For many Americans, this is not news. Low-income families have spent decades dealing with economic insecurity and a system that provides little buffer on the way down. The current downturn has only made matters worse.
The latest unemployment numbers bear this out. For workers with the least education, the May unemployment rates jumped to 15.5 percent, up from 6.7 percent in 2007. Job seekers now average nearly 6 months without a job. Hidden behind these numbers, however, are the underemployed--those lucky enough to still have a job, but a job that is offering fewer hours than what they are willing to work. Bureau of Labor Statistics data suggest that nearly 9 million workers are in part-time positions but want full-time jobs--an increase of 4 million workers since the recession started.
This dramatic collapse of the low-wage job market takes place against the backdrop of a 10-year shift in poverty policy away from income support for the very poor and toward programs that emphasize work and supports for those who are working, often under the label "Work First." As a result, the fundamental income-support programs for those in need--unemployment insurance, cash welfare through the Temporary Assistance for Needy Families (TANF) program, and food assistance through the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps)--have been off the front burner in the policy debate and are in need of reforms.
How threadbare is the net? Urban Institute researchers found that low-income programs in 2005 lifted fewer families out of deep poverty (those living at below half the official poverty line) than programs in 1995. Of the major programs, SNAP seems to be working the best in providing for basic needs. Caseload data from March shows that participation in this program has increased 28 percent since 2007. Still, a recent study shows that in 2006, the program served about two-thirds of those eligible, but rates vary widely by state: California, for example, serves only half of its eligible food-stamp population. Further, some eligible populations, like low-income seniors and individuals in working families, are less likely to be enrolled. Despite these challenges, SNAP provides an instructive model because eligibility for this program is based primarily on financial need, not tied to work or past work efforts.
TANF and unemployment insurance, on the other hand, do not seem as well suited to buffering low-income families during recessions. TANF, where the work-first principle is the most entrenched, is particularly ill-suited to helping the poorest Americans. Despite rising unemployment and increasing poverty, initial reports show that states' cash-assistance programs have remained flat or experienced only small increases in the number of people they serve in the early stages of the recession (more recent data is not yet available). Even before the economic nosedive, there were signs that the TANF program was not meeting its mission. Less than half of all eligible families receive TANF, and studies show that one in five adult recipients who left welfare is not working.
Unemployment insurance is also disconnected from the current labor market and the needs of low-wage workers. This program reportedly provides benefits to about one-third of all those unemployed and an even smaller percentage of low-wage unemployed workers. Additionally, the benefit amount participants receive is typically capped, so that the average replacement rate is under half of average earnings. While unemployment insurance was greatly enhanced through provisions by the American Recovery and Reinvestment Act (ARRA), some states are not taking advantage of these resources because of the required policy expansions tied to the federal dollars. …