House of Commons - Social Security

Select Committee on Social Security Second Report

APPENDIX 4 (continued)

VISIT TO WASHINGTON AND WISCONSIN 1-5 DECEMBER 1997

12. WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT

Mr Bruce Hagen Deputy Secretary, Department of Workforce Development

Wisconsin had had an innovative role in historical developments in employment and welfare legislation. For example, the US's first Workers' Compensation Scheme was introduced in 1911, and Wisconsin had been the first State to have comprehensive unemployment insurance (which the Federal government then copied). It was also the first State to have an automated unemployment insurance scheme - known as Dialling for Dollars.

Wisconsin had a partnership for full employment which included the State Division of Equal Rights, the W2 programme and the one-stop job centres. The eventual model would be a one-stop for all job seekers, whether currently employed or unemployed. The Racine County Welfare Development Center, for example, catered for the workforce needs of the whole community. The Federal government had recently shown greater interest in Wisconsin's workforce development initiatives.

Mr Orlando Canto
Administrator, Administrative Services Division

The major issue in workforce development was the school - youth training - workplace interface. The German system was being used as a model in the US.

In Wisconsin, the combination of a booming economy and Governor Thompson's initiative had orientated many policies towards the world of work. There was a widespread belief that underlying the best social policies was that all those who can work should work. Since 1987, under Governor Thompson, the economy had wanted new workers; welfare changes had not forced reluctant workers onto reluctant employers.

Essentially, money was divided up between the various different branches of government using traditional political bargaining methods, with the Governor processing a budget and the legislative bargaining and exerting political pressure. This could take many months. There were many different schemes: block money under TANF was paid for specific purposes; various different findings schemes can finance one project. There were currently 105 pieces of Federal legislation concerned with someone seeking and getting a job, plus yet more schemes dealing with issues such as war veterans, food stamps, and people with disabilities.

W2 initiatives were, in part, an attempt to bring both coherence and flexibility to the currently existing State and Federal structures.

Money was allocated to the States from the Federal government according to a formula based on factors such as unemployment rates and the number of poor children.

Most Federal money was allocated for one year whereas the States worked on two-year cycles; counties and cities could sometimes operate on yet different cycles.

One important message from Wisconsin is that the reforms were not cheap: they were an investment in people which might lead to long-term savings but should not be seen as short-term cost cutting mechanisms.

Mr Gary Kuhnen
Bureau of Welfare Initiatives

Wisconsin had a population of 5 million (USA population 268 million) with an unemployment rate of 3.4 per cent (USA 4.7 per cent). The rate of unemployment had been below the national average for the past five years. Dane County had the lowest unemployment rate at 1.3 per cent. Businesses needed employees.

The AFDC system established in 1935 as part of the Social Security Act was primarily concerned with widows. It was subject to Federal regulation and jointly funded by Federal and State funds, with the Federal level paying 60 per cent of the entitlements and 50 per cent of the administrative costs. It was a needs-based system, subject to income and asset tests. Payment was assessed by family size and need according to Federal standards. Wisconsin paid a family of 3 (a mother and two children) $517 per month. It ranked thirteenth among US States which paid rates ranging from $923 in Alaska to $120 in Mississippi. AFDC was an entitlement programme, payable as long as a family met the eligibility criteria, totalling $276 billion a year.

In 1965 the Medical Assistance programme was introduced for individuals who met needs tests. Wisconsin had a broad coverage for its medical assistance programme. AFDC was a passport for medical assistance, with a 60/40 split between Federal and State levels. In 1996 the programme had cost $2.1 billion, of which 34 per cent had been spent on nursing care.

The food stamp programme since 1996 acted as a supplement to low income households, based on an income and asset test. It was funded 100 per cent by Federal dollars, with rules almost all set at the Federal level. Administration costs were split 50-50 between State and Federal levels. The programme cost $188 million in Wisconsin.

Wisconsin Works replaced AFDC , but medical assistance and food stamps remained in place. The national average rate of children uncovered by health insurance was 14 per cent, with Wisconsin having only 6 per cent of children not covered. In 1987 Governor Thompson had begun to modify AFDC and had obtained Federal waivers to run 13 experimental programmes.

Experiments had been aimed at emphasising work, individual responsibility and opportunity. Waivers had been granted to allow a benefit penalty if children of claimants did not go to school. A variety of strategies had been tried out, culminating in the Wisconsin Works programme. Federal approval had been needed to obtain matching funds, and States had been given the opportunity to demonstrate different approaches. The age exemption under which parents of younger children had been relieved of requirement to work had been reduced from a youngest child aged 6 years down to 3 years and now to only 12 weeks.

The message to lone parents was that they were expected to make an effort to support themselves. The legislature had approved the age limit, subject to the caveat that adequate child care should be available. The 12 week limit was comparable to maternity/paternity leave for employees. The legislation intended to apply the same entitlement to benefits as someone had in the world of work. The programme aimed to be like the real world of work, in this case of the operation of the Family Leave Act. It was intended to carry out an objective evaluation of the effectiveness of the programme and its effect on families. With proper childcare people could be moved into independence. The AFDC caseload had decreased by 72 per cent, which was a significant reduction. A longitudinal study would be needed to track people who had voluntarily left the welfare rolls. They could not be compelled to report their new circumstances. The available data came from the automated benefit and eligibility system.

The AFDC Federal grant in aid programme had ended in 1996. The States now received a block grant based on 1994 expenditure plus a 'maintenance of effort' requirement. In order to qualify a person had to be resident, i.e. be physically present with an intent to reside. There was a 60 day residence requirement before a person could apply for help from the W2 programme. Food stamps and medical assistance were available on demand without this requirement. The US Social Security number could be used to identify individuals. Caseworkers could contact other States to track the past claim records of new claimants.

AFDC had been an open-ended entitlement. The Federal government had pulled out of administration leaving States to work out how best to cross match data in order to enforce time-limits. The 5 year lifetime limit had to be applied across the nation. This was a challenge that had yet to be met.

There was anecdotal evidence that some people had moved up from Chicago, for example, because of the higher benefit payable in Wisconsin, but there were many factors in anyone's decision to move.

There were city programmes for housing subsidies. An employer could be subsidised with $300 a month for 3 months for giving someone a trial job. A training position in a community service job providing meaningful work in return for benefits would pay $673 per month for 30 hours work regardless of family size. The general majority of families would be better off than on the previous sliding scale of benefits.

Mr Peter van NessPolicy Analyst Supervisor, Bureau of Welfare Initiatives

Discussion of help for low income people through the tax system has been around since Milton Friedman advocated a Negative Income Tax during the late 1960s. The Earned Income Tax Credit introduced in 1975 built on some of Friedman's ideas. Friedman identified six beneficial aspects that a negative income tax would bring and EITC delivered on four of these:

- encourages independence

- incentives to work

- costs less than other welfare schemes

- eliminates welfare bureaucracies

- cannot be used as a political slush fund

The Internal Revenue Service (IRS) did not do any promotion for take-up of the EITC but the States and independent groups did promote it.

Wisconsin had its own EITC which provided an additional maximum credit of $1529 per annum; about a dozen States had similar top-up schemes. There was no advance feature to the Wisconsin scheme which had to be claimed at the end of the year, although very few people actually took advantage of the advance feature in the Federal scheme.

There were other credits available: for example the Work Opportunity Tax Credit, introduced in 1996, which provided $2,100 for employers to employ targeted individuals such as ex-AFDC and food stamp recipients, veterans, disabled and ex-felons.

In Wisconsin there was also a special Community Development zone for employment in areas which needed an economic boost. Wisconsin was working hard to encourage employers to take advantage of all the incentives available.

Veronica Harper Bureau of Child Support Policy Analyst

The child support operation fell into three parts: establishing paternity, getting a court order and collection/enforcement. Most clients who had children were either divorced or had children out of wedlock. Non-custodial parents were basically expected to pay 17 per cent of their gross income for one child, 25 per cent for two children and up, according to the State guideline. Wisconsin had piloted the withholding of income, so that money could be deducted from payroll direct to the county to collect child support. Still less than half the amount owed in child support was collected.

If a non-custodial father was in prison, he could request the court to suspend the payment order, which was based on a person's ability to pay.

The new State-wide KIDS computer system being developed by IBM Global would be able to yield figures on the numbers of fathers in prison and a range of tother useful data.. The amount collected in 1996, based on pre-KIDS data, was $440 million. One of the reasons collection had increased was the link with other computerised systems, such as drivers' license records. New hire reporting would be implemented fully from 1998, and was Federally mandated. There were some inter-State issues. Poor women had a habit of marrying poor men; and when they divorced the men could move off to another State. Child support was only a modest factor in getting single mothers off welfare, but it was significant in keeping them off welfare.

There was a new venture to get away from the old adversarial approach to establishing paternity by a court order. It was now possible to enter a voluntary acknowledgement of fatherhood on a birth certificate at its time of issue in hospital following the birth of a baby. The aim was to increase the declaration of paternity to 50 per cent of out-of-wedlock births. There would soon be an administrative procedure by which the agency could order a blood test to establish paternity.

The message to non-custodial fathers was 'welcome to the world of unwed parenting' the reality of which was child support, beginning with the reimbursement of the costs of the birth met by medical assistance. Even if paternity was established, poor men did not prove to be good payers. In a recent sampling from the CARES and KIDS databases, of the 7,000 women needing child support, 5,000 of the men were not paying because they were poor.

The Children First programme, characterised as "Pay or Paint", smoked out cases where payments were made under the table. It ordered absent parents into a work readiness programme. Voluntary acknowledgement of paternity was a part of embracing fatherhood. Child support had a role in access of parents to their children. There was a Team Parenting Demonstration Project in Racine County, where separated couples would be helped to work out co-parenting agreements. Help could be given with transportation costs, or substance abuse counselling, to help non-custodial parents do better for their kids.

One of the demonstration project waivers would be to pass on money paid under a court order, unless money was owed to the State for medical assistance costs. Under the W2 control project, 41 per cent of what a non-custodial parent paid was passed on to a custodial parent on welfare. Non-control group participants would get a full pass-through. This experimental model would be carefully studied.

Fathers could be ordered to pay up to some $15,000 for a Caesarean birth. An average birth cost order was around $2,00 to $5,000. Fathers who were at poverty level themselvesdid not hav eto begin paying immediately. It should be remembered that 10 per cent of custodial parents were men.

Wisconsin had achieved a collection rate of 38 per cent (cases with money being collected compared to number of orders in force), which was the second highest rate in the nation, and double the national average rate of 19 per cent. Paternity was established in 1995 in 76 per cent of cases, which ranked fifth in the nation, compared to a national proportion of 50 per cent.

Mr David Edie
Office of the Child Care Director

Child care had traditionally had a number of diverse funding sources and was regarded as not being well co-ordinated and structured. In Wisconsin, the emphasis had changed so that welfare status would not determine access to child care; child care was now available to all low income families with subsidies available to families with income 200 per cent of the poverty level.

It was recognised that to encourage people to leave welfare the 'unemployment traps' had to be broken. In the US these traps involved around medical insurance and child care. Medical insurance and childcare were the key to helping families go to work.

Funding on child care had been tripled in recent years and waiting lists for subsidies had been eliminated through increased funding, although there was still a long waiting list for places. The various funding sources had been streamlined and barriers over county line demarcations had been resolved.

Parents could choose what sort of child care they wished to have

- child minder

- day care centre

and special needs were recognised. There was unease about some of the quality of child care. There was extensive regulation of childcare centres but regulation of more informal arrangements was only up to the level of what would be expected in a normal family; it was regarded as 'regulation lite'. The costs of child care generally met amounted to $400 per month but this amount could vary.

The main unresolved problems were obtaining child care that was close to either home or the workplace. Otherwise journey times and inconvenience could be major deterrents to work. There were also problems for people working late/night shifts and coping when children were sick.

There were waiting lists for child care but the majority of arrangements were informal and inability to find any child care at all was quite rare.

Toya Nelson Transportation Consultant, Department of Transportation

Generally there was little inter-city transportation in the USA, although cities in the east had commuter networks. Bus systems usually operated only within municipalities. The lack of public transport could be quite a barrier to people seeking work. There were multi-layered issues to deal with, as childcare arrangements were related to transportation needs. A typical case would be a single mother with 2 children. In 70 per cent of cases (85 per cent in Milwaukee county) the younger child was less than 6 years old. In only 3.3 per cent of cases did the lone parent have access to a personal automobile, but even then it might not be always available or reliable. Yet for most workers the primary method of commuting was by car. AFDC recipients as a group were highly transit dependent, because of their needs for childcare, shopping, dealing with child emergencies and medical appointments. In the seven-county area in the south-east of the State of Wisconsin, the six counties which had set growth is the number of jobs were those outside Milwaukee, beyond the public transit area. There were 585 buses in the Milwaukee system which ran a subsidised service from 4.30 am to 1.00 am but they did not go beyond the county line. There was a need to make a link between low income job seekers in the inner city and the jobs being created in out of town areas. Rural areas presented different problems.

Bus passes were subsidised up to $60 a month. Some employers made arrangements to shuttle workers between the place of work and the end of the bus route. TANF included an employment transportation assistance programme. Public transportation was not the solution in all cases. Employers could encourage car pooling by using computer software to analyse employees' routes to work. Better use could be made of specialised transportation in less busy periods, for example using excess capacity to help with transit to medical appointments. The State's view was that those who benefited should be those who paid for transportation initiatives; in other words, the employers should support the cost of special transportation programmes.

Ms Marlene Duffield Wisconsin State Employment Team Management Liaison Co-ordinator for W2

Since 1989, all department and agencies of the State with more than 100 employees had been expected to provide community service jobs for welfare recipients. There was no option under W2 to go to college: recipients had to enter the labour market. The training for child care workers was being expanded.

Mr Jay Hein Hudson Institute (Madison Office)

The Hudson Institute had a two person staff in Madison studying the Wisconsin reforms, acting mainly as consultants to the evaluation and monitoring processes being undertaken in the State. There were some important themes behind the success of the Wisconsin reforms:

- a belief that a profound culture change in the welfare programme was needed;

- competent and committed bureaucracy and staff was vital;

- change in claimant perception of welfare

- change from passive income maintenance system to pro-active welfare to work strategy.

Wisconsin had been changing welfare continuously since 1987. It was difficult to evaluate because of the fast moving nature of change: a genuine control group had not existed and all claimants had been involved. Part of the evaluation therefore had involved feeding in findings as they occured. Wisconsin had also been unusual in that it had been increasingly under a spotlight with great interest in the outcomes.

There were four major elements of evaluation:

concept:

- design: how were the specific elements of the reform working e.g. change in caseload numbers, the 12 week old child requirements to work, child care, career developments, effects on labour supply and wage levels?

- management: how was the administrative structure changing, coping, delivering?

- effectiveness: what were the effects on the claimants, public expenditure, the wider community?

The methods of administration were being evaluated; in Milwaukee, of the six services providers, all are non-governmental, two were profit-making, four non-profit making so that comparisons could be made. A national study by the Urban Institute of Washington would provide this and Wisconsin had purchased a large part of their research to look particularly at Wisconsin's reforms.



© Parliamentary copyright 1998	Prepared 18 February 1998