If the economy tips into recession and the jobless rate climbs, America's already frayed social safety net will be sorely tested. Throughout the 1990s, Congress and the states took a much tougher approach to programs such as unemployment insurance, welfare, Medicaid, and food stamps than they did in earlier decades. The new philosophy was intended to end dependency on handouts and prod working-age adults into taking jobs. The tough-love approach worked well enough when the economy ran at full employment. But as layoffs accelerate and hiring dries up, millions of Americans could soon be begging for help.
The result could be sharp policy battles over priorities as advocates for workers demand more government aid. Already, the initial skirmishes are beginning on Capitol Hill over the 1996 welfare reform law, which must be reauthorized when it expires next year. "With the economy deteriorating, there's a growing anxiety that more people will need to rely on food stamps, Medicaid, welfare," says Sanford F. Schram, a professor of social work at Bryn Mawr College. "There will be demands made on the system, and people will say that airlines are not the only ones with a legitimate need."
VULNERABLE TEMPS. The most visible problem is likely to come with unemployment insurance. Already, many part-time and temporary workers go uncovered, because they're often ineligible under the current rules. This has left more employees to fend for themselves, since the ranks of temps have nearly tripled, to 3 million, since the 1991 recession. These workers are more likely to bear the brunt of a job drought because many companies lay them off first.
To make matters worse, many states will be under pressure to tighten up eligibility rules even further. That's because 22 states have allowed their unemployment-insurance reserve funds to run down in recent years, when the good times seemed to make them less urgent. With unemployment rising again, fewer workers are paying into the system just as more former workers need to take money out.
Welfare reform will be another flash point. The 1996 law created the Temporary Assistance for Needy Families, which slapped a five-year lifetime limit on an individual's right to collect benefits. The program is administered by the states, each of which started the five-year clock ticking at slightly different times. But most are starting to run out--just as the job market seems poised for a tailspin. Unless Congress eases the rules, mothers who can't find jobs could wind up with no paycheck--and no welfare check, either.
Cutbacks in the food-stamp program could leave many people with nowhere to turn except soup kitchens. The 1996 welfare law took away the right of most legal immigrants to collect government food aid. Although immigration has jumped sharply in recent years, most newcomers have been able to find work and feed their families. But many are unlikely to leave even in a recession, which would cause hunger to increase.
Plenty of U.S. citizens have lost access to food stamps, too. The problem: Before welfare reform, the coupons were handed out in the welfare office. But the two programs were delinked under the 1996 law, leading to massive confusion among families who wrongly figured they were ineligible for food aid unless they were also on welfare. Since 1996, the number of people collecting food stamps has sunk by one-third, to 17 million. It's not just a stronger economy, either: Fewer than half of the eligible working families get them, studies show.
The best scenario is a short-lived recession and a jobless rate that doesn't rise much above today's still-low levels. Of course, the safety net could still suffer a strain, because a growing glut of low-skilled workers means wages at the bottom are likely to sink no matter what. But the stress would be less severe than it would be if unemployment were to jump to 6% or 7%. Should that come to pass, Congress will have yet another group in need of assistance.
By Aaron Bernstein in Washington
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