1996 Welfare Reform has Helped Businesses, Hurt Taxpayers

Monday, 04 Nov 2013 11:25 AM

By Lisa Barron

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Nearly two decades after the welfare-reform law of 1996 was implemented, evidence shows that while it encouraged many more Americans to go back to work, it also increased the incentive for employers to pay the bare minimum and for employees to rely on taxpayer-funded federal benefits to make ends meet.

That's because the law included provisions allowing people who earn wages near the poverty level to supplement their incomes with food stamps, Medicaid, child care, and cash wage subsidies from the government.

Since the law was enacted, low-wage jobs without healthcare or other benefits have proliferated, reports The Washington Times.

The increase in low-wage employment accelerated even more after the Great Recession of 2007 to 2009, when millions of higher-paying jobs in finance, manufacturing, and construction were lost, according to the newspaper.

Of the 7.2 million jobs that have opened since the recession, it found, more than half have been in low-wage professions such as retail and restaurants, where workers have to supplement their incomes with federal benefits.

"The taxpayer is unwittingly subsidizing low-wage employers, including retailers such as McDonald's and Wal-Mart, but also many small-business owners" who pay workers the federal minimum wage of $7.25 an hour or a little more, John Slater, a partner at Focus LLC, a Washington-based investment bank, told the Times.

Tommy Thompson, the former secretary of Health and Human Services who pioneered the reforms during the Clinton administration, apparently has acknowledged that the reform program has faced "disappointing challenges."

"It seems like we're going backward," with spending on the working poor now spiraling upward, he reportedly told a National Press Club forum this summer.

That has been a key factor driving federal deficits of more than $1 trillion during and after the recession, according to the Times.

Now, federal benefits are set to expand further under Obamacare, which requires all individuals to have health insurance and provides subsidies to those who don't receive coverage from their employers and can't afford it on their own.

In fact, despite the glitches with the insurance-exchanges websites, more than 330,000 people have managed to find out how much financial assistance they will receive for their healthcare plans, reports The Washington Post.

That figure does not include individuals who were already likely to qualify for Medicaid under the Affordable Care Act.

The law stipulates that Americans who earn less than 400 percent of the federal poverty line, about $45,000 for an individual, can use federal tax credits to buy a private plan. In the 26 states that expanded Medicaid, those below 138 percent of the poverty line, roughly $15,000 for an individual, likely will gain access to the public insurance program.

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