By Matt Weidinger, Angela Rachidi
April 21, 2023 - American Enterprise Institute (AEI)
A key component to addressing poverty is to increase employment. One way to increase employment is to lessen the work disincentives in safety net policies by requiring work or other pro-work activities in exchange for government assistance. Some safety net programs already have work requirements for this reason. As part of legislation to extend the debt limit, House Republicans are proposing to apply work requirements to more benefit recipients. Below we outline some key questions and answers about work requirements in US safety net policy.
What are work requirements, exactly?
Work requirements generally mean that adult benefit recipients must work, train, search for work, or engage in other productive activities for a certain number of hours each month to remain eligible for benefits. Thus, despite the name, work requirements do not always require recipients to have a job, but often allow them to search for work, participate in training, or engage in other activities that may lead to work. Some safety net programs in the US already have work requirements, including unemployment insurance, Temporary Assistance for Needy Families (TANF), and the Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps). These work requirements typically cover non-disabled individuals deemed capable of working.
The intention behind work requirements is to counteract work disincentives associated with means-tested benefits. Without work requirements, individuals might choose to work less or not at all, because they can replace earnings with government aid. This can have long-term negative effects on the individual and on the government’s fiscal situation as the need for assistance grows.
What is being proposed?
The draft “Limit, Save, Grow Act” released this week would expand work requirements in three ways. First, it would cover more individuals collecting SNAP benefits under current work requirement policies. Second, it would create new “community engagement requirements” for certain able-bodied adults without dependents who collect Medicaid benefits, generally paralleling those covered under the revised SNAP requirements. Finally, it would strengthen the effect of current TANF work requirements.
What are the policy details?
The proposal would modestly expand the age range of the current SNAP work requirement, which generally expects “able-bodied adults without dependents” (i.e. ABAWDs) to work, train, or participate in other activities for at least 20 hours per week in order to receive SNAP benefits. ABAWDs who fail to satisfy this requirement can collect no more than three months of SNAP benefits in a three-year period. The current requirement covers adults under age 50, and the proposed expansion would expand this to age 55. The proposal would also eliminate states’ ability to carry over exemptions to the work requirement from year to year, starting in fiscal year 2025.
The proposed legislation also includes a new Medicaid “community engagement requirement” that is designed to generally parallel SNAP’s ABAWD work requirement. Under this policy, states would not be eligible for federal Medicaid payments unless able-bodied adult recipients age 19 through 55 without dependent children engaged in at least 80 hours per month of work, community service, or participation in a work program. States would be ineligible for federal payments for ABAWDs who failed to satisfy this requirement during more than three months in a calendar year.
The TANF changes close several loopholes in how states apply current work requirements, generally expecting a greater share of adult recipients to engage in work or productive activities. Currently, states must engage at least 50 percent of the adult TANF caseload in work or a work activity for at least 30 hours per week or face financial penalties. But current law allows reductions to the work participation rate based on caseload declines since 2005, excess state spending, and other loopholes. The proposal updates the first policy for current caseload levels and eliminates the other loopholes.
Who exactly would this proposal affect?
For SNAP, this proposal will affect only SNAP recipients age 50・5 without dependents who are not disabled and work-capable. In Medicaid, the new community engagement requirement would apply only to childless non-disabled adults under age 56, essentially applying a work requirement to the same population in Medicaid as in SNAP.
The TANF proposal strengthens current work participation requirements on states. This means that, ultimately, states will decide how to meet the strengthened work participation requirement. However, most likely states will choose to engage more work-capable adults receiving TANF to achieve the work participation requirement, or help more adults leave the rolls in favor of work.
Earlier today we reviewed details about a proposal to expand work requirements in safety net programs. Below we outline some additional questions and answers about work requirements in US safety net policy.
Why is requiring work good for low-income adults?
Higher labor-force participation translates to less poverty, and employment correlates to many other nonfinancial benefits, such as better physical and mental health. Encouraging work among benefit recipients gives them an opportunity to escape poverty and achieve upward mobility without depending on government assistance.
Research has shown that work requirements can increase employment levels, which benefits individuals and families. For example, research on TANF shows that work requirements increased employment levels on average, although the verdict is still out when it comes to examining work requirements in SNAP and Medicaid, mainly due to data limitations. However, TANF’s impact on employment and the overall well-being among single-mother families suggests that the same positive effects could result from taking a similar approach in SNAP and Medicaid.
What are the expected impacts on low-income adults?
The proposed SNAP changes would expect more able-bodied adults without dependents (that is, those ages 50 through 55) to work or prepare for work in exchange for SNAP benefits. The Medicaid policies in the proposal would reinforce this with an expectation of at least community service by able-bodied adults under age 56 who are without dependents and collecting only Medicaid benefits (and thus not otherwise covered by the SNAP policy). When similar policies were included in the 1996 welfare reforms, work and earnings by individuals in affected groups (including those at risk of going on benefits) rose while dependence on benefits and poverty declined.
How would this affect spending on benefits?
Details are pending, but more work and greater earnings among participants will reduce or in some cases eliminate some recipients’ eligibility for benefits, with the result being smaller caseloads and less dependence. Experience with TANF suggests that other current recipients who are working under the table or who fail to comply with work requirements may also lose eligibility for benefits.
For these reasons, work requirements tend to slow the growth in spending on welfare benefits, which is scored as budget savings. Historical context is important in judging the effects of these policies, as SNAP and Medicaid spending have grown rapidly in recent years. For example, federal SNAP spending was $69.8 billion in FY2019 (in 2022 dollars) and rose to $119 billion in FY 2022 due to benefit increases and emergency pandemic measures; a 70 percent increase in three years. Similarly, Medicaid spending (which includes both state and federal funds) was $669.8 billion in 2019 (in 2021 dollars) and rose to $734 in FY2021, a 9.6 percent increase in constant dollars over just two years.
Even with the application of these proposed work requirements, spending on key means-tested benefit programs will be significantly greater than pre-pandemic levels and is expected to continue to grow significantly in the coming years, albeit at a slightly slower pace.
Do voters support work requirements?
Voters broadly support work requirements, contributing to bipartisan efforts in the past. For example, a Republican Congress drafted the 1996 welfare reforms creating TANF work requirements, which Democratic President Bill Clinton signed into law. More than half of congressional Democrats joined nearly all Republicans in supporting that legislation.
This is because polls regularly find large majorities support work requirements for welfare benefits（ncluding a majority of Democrats. For example, a 2016 AEI and Los Angeles Times survey found that 87% of respondents favored a work requirement, including strong support among the poor (81%).
More recently, a February 2023 YouGov poll found “Two-thirds of Americans (68%) say that people who receive assistance from welfare programs in the U.S. should be required to work or participate in job training programs if they are able to. Republicans (83%) are more likely than Democrats (64%) and Independents (61%) to say work participation should be required.” Additionally, an April 4, 2023 ballot measure showed that almost 80 percent of Wisconsin voters said able-bodied childless adults should be expected to look for work to receive taxpayer-funded welfare benefits.
Why are House Republicans proposing this now?
While the need to raise the debt ceiling provides a legislative opportunity, the work requirements proposed by House Republicans have a long history. In 2018, the House passed a Farm Bill that included expansions to SNAP’s work requirements that went even further than the current proposal. In 2018, the House Ways and Means Committee approved legislation that included the pro-work TANF provisions in this proposal. And the Trump administration approved waivers allowing states to create Medicaid work requirements. Policymakers are reviving these proposals as part of the debt ceiling legislation, arguing they will grow the economy by helping more low-income adults enter work and obtain higher earnings, addressing current labor shortages along the way.