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36–663 2007

WELFARE AND WORK DATA 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

JULY 14, 2005 

Serial No. 109–25 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

BILL THOMAS, California, Chairman 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

BOB BEAUPREZ, Colorado 

MELISSA A. HART, Pennsylvania 

CHRIS CHOCOLA, Indiana 

DEVIN NUNES, California 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

ALLISON H. GILES, Chief of Staff 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HUMAN RESOURCES 

WALLY HERGER, California, Chairman 

NANCY L. JOHNSON, Connecticut 

BOB BEAUPREZ, Colorado 

MELISSA A. HART, Pennsylvania 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

PHIL ENGLISH, Pennsylvania 

DEVIN NUNES, California 

JIM MCDERMOTT, Washington 

BENJAMIN L. CARDIN, Maryland 

FORTNEY PETE STARK, California 

XAVIER BECERRA, California 

RAHM EMANUEL, Illinois 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of July 7, 2005, announcing the hearing ................................................ 2 

WITNESS 

U.S. Department of Health and Human Services, Hon. Wade F. Horn, Ph.D., 

Assistant Secretary for Children and Families ................................................. 8 

SUBMISSION FOR THE RECORD 

Community Voices Heard, Sandra Youdelman, New York, NY, letter ............... 22 


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WELFARE AND WORK DATA 

THURSDAY, JULY 14, 2005 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HUMAN RESOURCES, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

room B–318, Rayburn House Office Building, Hon. Wally Herger 

(Chairman of the Subcommittee) presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HUMAN RESOURCES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1025 

July 14, 2005 

No. HR–5 

Herger Announces Hearing on 

Welfare and Work Data 

Congressman Wally Herger (R–CA), Chairman, Subcommittee on Human Resources of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on welfare and work data. The hearing will take 

place on Thursday, July 14, 2005, in room B–318 Rayburn House Office 

Building, beginning at 10:00 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from an invited witness only. The witness will be an official from 

the U.S. Department of Health and Human Services (HHS). However, any individual or organization not scheduled for an oral appearance may submit a written 

statement for consideration by the Subcommittee for inclusion in the printed record 

of the hearing. 

BACKGROUND: 

The 1996 welfare reform law (P.L. 104–193) made significant changes to the Federal-State welfare system designed to aid low-income American families. The law repealed the individual entitlement to cash welfare benefits and created the Temporary Assistance for Needy Families (TANF) block grant program. The TANF program provides fixed funding to States to operate programs that provide time-limited 

aid to recipients while encouraging work and self-sufficiency. In large part due to 

the TANF program’s emphasis on promoting work and self-sufficiency, the number 

of families receiving cash assistance has fallen by more than 60 percent since 1996. 

The 1996 law also included provisions allowing State TANF programs access to 

certain information on newly hired employees. Under the 1996 law, employers are 

required to report new hire data within 20 days of hiring to a State Directory of 

New Hires (SDNH). This information is then forwarded by all States and combined 

with Federal new hire information to comprise the National Directory of New Hires 

(NDNH). States are authorized to use information in their SDNH and the NDNH 

to verify eligibility for certain programs, including TANF. 

During the past several months, HHS has been involved in pilot tests with the 

District of Columbia and certain States to match welfare caseload data with information in the NDNH to better understand how many welfare recipients are working. At the hearing, HHS will discuss initial findings from these pilot tests, which 

suggest that work rates among welfare recipients are underreported. 

In announcing the hearing, Chairman Herger stated, ‘‘One of the goals of welfare 

reform is to encourage and support more low-income parents in work. While welfare 

reform increased the share of working recipients, current data suggest a majority 

of parents on welfare still are not working,’’ stated Chairman Herger. ‘‘Using data 

from the NDNH, HHS has produced material that suggests there are thousands 

more current and former welfare recipients working than States have been reporting. This new information has important implications for the next stage of welfare 

reform, and suggests that policies that expect and support more work among parents on welfare make sense.’’ 


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FOCUS OF THE HEARING: 

The hearing will review a HHS analysis of welfare and work data. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘109th Congress’’ from the menu entitled, 

‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Thursday, July 

28, 2005. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman HERGER. Good morning, and welcome to today’s 

hearing, ‘‘Providing New Insights on Welfare and Work Data.’’ This 

hearing involves a central focus of the 1996 Welfare Reform law 

(P.L. 104–93). The 1996 law expected parents on welfare to work 

or engage in other activities in exchange for welfare checks. Rising 

to this challenge, literally millions of parents and families have 

gone to work and moved off welfare. Many parents—about 1.4 milVerDate Aug 31 2005 04:20 Aug 09, 2007 Jkt 036663 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 E:\HR\OC\36663.XXX 36663

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lion—remain on welfare. We will learn today that significantly 

more of those parents are working than was previously reported. 

As Assistant Secretary Wade Horn of the U.S. Department of 

Health and Human Services (HHS) will report, in a sample of ten 

States, 34 percent of welfare recipients appear to be working. That 

compares with only about 25 percent of recipients working using 

the data sources relied on today. That means that about 125,000 

more parents on welfare are working than we knew about before. 

An earlier match run by HHS and District of Columbia officials 

found the average hourly wage for parents on welfare who were 

working in D.C. was $9 an hour. At least in D.C.—and hopefully, 

elsewhere—those previously unknown workers are earning well 

above the minimum wage. All of that is welcome news. 

The specific issue before us is the use of what is called the National Directory of New Hires (NDNH). This database was first created in the 1996 welfare law to help collect more child support. It 

has since been tapped for other uses, including to ensure that unemployment benefits are not paid to people who have gone back to 

work. States are authorized to use this national new hire information in operating their welfare programs, but none do. Many States 

use information in their State directories of new hires to determine 

whether welfare recipients are working. The additional information 

in the national directory, including about workers hired by multiState employers and the Federal Government, adds important 

pieces to the welfare-to-work puzzle. 

As Secretary Horn will explain, States support HHS’s efforts to 

help them tap into the NDNH, as they should. This is a simple and 

available tool that will help States improve TANF’s performance in 

encouraging and supporting work. For example, States can use the 

new hire information to help those who just got a job keep it, or 

get a better one. Or States could more effectively target child care 

and job training services to parents on welfare, starting with the 

increased numbers who are working. As the District of Columbia 

has shown, they can achieve savings by ensuring only those eligible 

for welfare remain on the rolls. 

What are the policymakers to make of this, especially as we consider the next steps in welfare reform? I would argue that it backs 

up our efforts to expect and support more parents in work. All 

sides—the Administration, House and Senate, Republicans and 

Democrats—have proposed raising the target work rates for welfare recipients. This new data confirms that States can satisfy 

higher work rates, since there already is more work going on than 

we previously knew. 

While that is encouraging news, more must be done. I am very 

interested in hearing Secretary Horn’s testimony and discussing its 

implications. This hearing, like other reauthorization legislation, 

should help States increase the share of welfare recipients who are 

working and moving up the career ladder. I look forward to the testimony and our discussion this morning. Without objection, each 

Member will have the opportunity to submit a written statement 

and have it included in the record at this point. Mr. McDermott, 

would you care to make a statement? 

[The opening statement of Chairman Herger follows:] 


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Opening Statement of The Honorable Wally Herger, Chairman, and a 

Representative in Congress from the State of California 

Good morning and welcome to today’s hearing providing new insights on welfare 

and work data. 

This hearing involves a central focus of the 1996 welfare reform law—work. The 

1996 law expected parents on welfare to work or engage in other activities in exchange for welfare checks. Rising to this challenge, literally millions of parents and 

families have gone to work and moved off welfare. But many parents—about 1.4 

million—remain on welfare. 

We will learn today that significantly more of those parents are working than was 

previously reported. As Assistant Secretary Wade Horn of the Department of Health 

and Human Services will report, in a sample of 10 states 34 percent of welfare recipients appear to be working. That compares with only about 25 percent of recipients working using the data sources relied on today. That means that about 125,000 

more parents on welfare are working than we knew about before. 

An earlier match run by HHS and District of Columbia officials found the average 

hourly wage for parents on welfare who were working in DC was 9 dollars an hour. 

So at least in DC and hopefully elsewhere those previously unknown workers are 

earning well above the minimum wage. All of that is welcome news. 

The specific issue before us is the use of what is called the National Directory 

of New Hires. This database was first created in the 1996 welfare law to help collect 

more child support. It has since been tapped for other uses, including to ensure that 

unemployment benefits are not paid to people who have gone back to work. States 

are authorized to use this national new hire information in operating their welfare 

programs, but none do. 

Many States use information in their State directories of new hires to determine 

whether welfare recipients are working. But the additional information in the national directory—including about workers hired by multi-state employers and the 

federal government—adds important pieces to the welfare-to-work puzzle. 

As Secretary Horn will explain, States support HHS’s efforts to help them tap into 

the National Directory of New Hires, as they should. This is a simple and available 

tool that will help States improve TANF’s performance in encouraging and supporting work. For example, States can use the new hire information to help those 

who just got a job keep it, or get a better one. Or, states could more effectively target child care and job training services to parents on welfare, starting with the increased numbers who are working. And as the District of Columbia has shown, they 

can achieve savings by ensuring only those eligible for welfare remain on the rolls. 

So what are policymakers to make of this, especially as we consider the next steps 

in welfare reform? I would argue that it backs up our efforts to expect and support 

more parents in work. 

All sides—the Administration, House and Senate, Republican and Democrat— 

have proposed raising the target work rates for welfare recipients. 

This new data confirms that states can satisfy higher work rates, since there ALREADY is more work going on than we previously knew. While that is encouraging 

news, more must be done. 

I am very interested in hearing Secretary Horn’s testimony and discussing its implications. This hearing, like our reauthorization legislation, should help States increase the share of welfare recipients who are working and moving up the career 

ladder. 

f 

Mr. MCDERMOTT. Thank you, Mr. Chairman. We want Temporary Assistance to Needy Families (TANF) to help those in need. 

We want every available TANF dollar to reach those who qualify. 

It is not unreasonable—in fact, it is prudent—to have appropriate 

checks and balances in place to safeguard TANF from possible 

abuse. However, the experts tell us that no large program in the 

public or private sector is immune from some abuse, and that our 

goal should be to make sensible steps to prevent it. I want to work 

together with you to safeguard TANF. 

With that in mind, I look forward to hearing the suggestions 

from HHS on a tool that may help verify the employment status 

of TANF recipients. I am open to hearing about an electronic dataVerDate Aug 31 2005 04:20 Aug 09, 2007 Jkt 036663 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\36663.XXX 36663

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base called the National Directory of New Hires, which already collects employment data for the purposes of collecting delinquent 

child support and may provide earnings information that is not 

necessarily reflected in a state’s TANF data. 

However, as we work together to safeguard TANF, we must also 

work together just as diligently to safeguard the rights of the people involved. We cannot, and we must not, permit a shortsighted 

rush to judgment under the guise of fiscal prudence. For instance, 

we should demand that the appropriate safeguards are in place to 

independently verify the employment status of a person before we 

rely on a national database to reduce or eliminate TANF benefits 

for the non-reported work. 

Equally important, while we are safeguarding the system, let’s 

remember that TANF recipients overwhelmingly are decent, honest, hardworking Americans. They just need a little help to find a 

path out of poverty. By and large, they are single mothers and children, not cheats. We can’t forget that. There is more we can and 

should be doing. Our zeal to find people who may be receiving some 

overpayment should be matched by our desire to reach out to the 

countless families who are eligible for TANF but do not receive any 

help from us. Less than half—48 percent—of eligible TANF families actually receive any TANF assistance. Let’s be clear about 

something. TANF is not exactly a cash cow for poor Americans. On 

the contrary, TANF, on average, provides assistance that is a meager 29 percent of the poverty level for a single mother and two children. 

To those Republicans who suggest that a TANF entitlement is an 

enticement not to find work, I suggest you replace the batteries in 

your reality meter. There is simply no truth to that brand of cruel 

and insensitive rhetoric. Here is a fact we ought to have stenciled 

on the wall: a full-time worker in a minimum wage job with two 

children at home will receive 69 percent of the poverty level this 

year. That is the lowest level on record going back all the way to 

1959. Even if you add the earned income tax credit, this family still 

remains below the poverty level. Regrettably, minimum wage work 

is not a guaranteed exit from poverty. 

As far as I am concerned, TANF is an investment by Americans 

in Americans. It is a helping hand; not a handout. It is a commitment to the future and to the people who will shape it. I don’t mind 

saying that I am worried about the purposes of today’s hearing. If 

we are here to consider ways to safeguard the system and the people in it, that is fine. If we are here to consider ways to reach out 

to those who we aren’t reaching, that is even better. If this is a 

smoke screen to undermine the ongoing debate about TANF work 

requirements, then we do a disservice to the process, program, and 

people involved. 

In fact, I think we are way off base, and here is why. First, the 

new hire wage information used in the HHS ten-State statistical 

analysis is based on quarterly data; and it is, therefore, not directly 

comparable to TANF administrative data, which is monthly. It is 

an apples-to-oranges comparison that perhaps misleads, and that 

may not illuminate this debate. 


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Secondly, the new hires data does not provide any information on 

the number of hours worked. That is relevant to the determining 

participation rates under TANF. 

Finally, those individuals which the new hire data shows to be 

working with earnings in excess of a state’s TANF eligible level 

would not even be counted toward a state’s work participation rate 

under the Republican welfare bill which passed out of this Committee several weeks ago. Lest we forget, that legislation does not 

include an employment credit to reward States for people who actually leave welfare for work. 

If we are really after data—not safeguards—then we ought to 

consult with organizations that can address the real question, not 

the smoke screen. One such organization is the Manpower Demonstration Research Corporation, or MDRC, which has conducted 

comprehensive reviews of welfare programs across the country. 

Here is what the MDRC has said about the Republican welfare bill 

when it was proposed in 2002—and it is really not much different 

today: 

‘‘To meet the standards being proposed, the most successful State 

welfare programs that have been evaluated would have to be restructured radically. This restructuring could have the unintended 

effect of distorting priorities, diverting resources, and driving up 

the costs for child care and work experience slots, with the potential consequence of undermining the very success that is now being 

celebrated.’’ 

Those closest to the issue know it best. For instance, the Governor of my State said that the Republican TANF proposal will require Washington State to move its caseload toward lower-cost, 

lower-return work experience programs. These are make-work programs that Washington State recently discontinued, because they 

demonstrated a low rate of success in moving the recipients to private employment. 

Mr. Chairman, governors, local officials, agency caseworkers, and 

intervention organizations overwhelmingly agree that the Administration’s proposals are way outside the mainstream. It has been 

this way for 3 years, but the Administration keeps trying to sell 

the same bottle of snake oil as an elixir that will cure everything 

and anything. It is our job to see TANF for what it is: the faces, 

the hopes, and the aspirations of countless numbers of disadvantaged Americans who are trying to escape poverty. We should 

reach out with a hand, not a stick. We strengthen and safeguard 

TANF best by strengthening its ability to help those who need 

help. It is time to stop acting like TANF is nothing but a handout. 

TANF is nothing less than an investment in America’s future, and 

we ought to act like it and make decisions on that basis. I look forward to Mr. Horn’s testimony. Thank you. 

Chairman HERGER. Thank you, Mr. McDermott. Before we 

move on to our testimony today, I want to remind our witness to 

limit his oral statement to 5 minutes. However, without objection, 

all of the written testimony will be made a part of the permanent 

record. Our witness this morning is the Honorable Wade F. Horn, 

Assistant Secretary for Children and Families at the HHS. Dr. 

Horn, it is good to see you again. Please proceed with your testimony. 


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STATEMENT OF THE HONORABLE WADE F. HORN, PH.D., 

ASSISTANT SECRETARY FOR CHILDREN AND FAMILIES, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Dr. HORN. Thank you, Mr. Chairman and Members of the Subcommittee. I am very pleased to appear before you today. As I don’t 

have to tell Members of this Subcommittee, the Personal Responsibility and Work Opportunity Reconciliation Act has had profoundly 

positive effects. Since 1996, welfare caseloads have declined by 55 

percent. Even more importantly, today 1.6 million fewer children 

live in poverty than in the final year of the Aid to Families with 

Dependent Children program. 

The information I am providing to the Committee today builds 

on these achievements, and suggests that more TANF recipients 

may be working than many believe. More specifically, our recent 

work suggests that the NDNH, which the Administration for Children and Families (ACF) has used to boost child support collections 

to $21.9 billion in fiscal year 2004, has additional possible applications that will make it possible for States to further reduce TANF 

caseloads by helping to identify individuals who are employed 

while receiving TANF benefits. 

We began our investigation of the use of the NDNH with a pilot 

test in the District of Columbia. For this pilot study, the D.C. Department of Human Services submitted the unduplicated Social Security numbers of 20,096 TANF adults to the Office of Child Support Enforcement, to match against information contained within 

the NDNH. The results of those matches are shown on the first 

chart that is displayed on the easel. 

[The information was not received at time of printing.] 

Of this number, 6,681 individuals, or 33 percent of the total, 

were matched with information contained with the NDNH. Of 

these, the District independently verified that 5,410, or 81 percent 

of the matches, were actually employed; of which only 226 had 

verified wages reflected in the D.C. TANF case record. Of the 5,184 

clients verified as employed, but who had not reported their earnings to the D.C. TANF agency, 2,436, or 47 percent, were closed because their earnings exceeded the income threshold for receipt of 

TANF cash benefits; while 2,748 cases, or 53 percent, earned 

enough to have their cash benefits reduced. The estimated savings 

from the case closures and reduced benefits was nearly $10 million, 

an amount just over 10 percent of the District’s annual TANF block 

grant. 

Building on the D.C. pilot, ACF began working with ten States, 

representing nearly half of the Nation’s caseload, to compare what 

was reflected about employment in the State TANF caseload information with what is known from the NDNH. The results of that 

analysis are shown on the second chart. A total of 552,033 valid Social Security numbers for TANF adults in the ten States, for the 

month of October 2004, were matched against the NDNH. The 

findings indicate that in every single State, more TANF adults 

were involved in jobs than was reflected in the employment rates 

of the TANF data reporting system. 

Based on the D.C. pilot and the ten-State findings, we believe 

there are practical benefits of using the NDNH for State TANF 

agencies. First, the NDNH can help States identify potential emVerDate Aug 31 2005 04:20 Aug 09, 2007 Jkt 036663 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\36663.XXX 36663

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ployment leads within days, rather than months, by providing new 

hire information for those who go to work for a multi-State employer, the Federal Government, or across State lines. This information is a critical starting point to good case work. 

Second, regular and timely matching of TANF caseloads with the 

NDNH can help States learn how recipients are faring; whether 

they need help, and whether they don’t need help. This information 

can help States better plan agency resources for helping those employed maintain and advance in employment and overcome obstacles that could otherwise result in a family returning to assistance. 

Third, the NDNH can identify individuals who are working and 

earning too much to qualify for cash assistance. This can help those 

families preserve their time-limited assistance, and better target 

TANF dollars to those most in need. 

Further, we also can use this information to help working families obtain other income supports, such as the earned income tax 

credit and child support. 

We believe the use of the NDNH is so promising that we are 

sharing this information with States and inviting them to partner 

with us in a regularly scheduled computer matching process. In addition to the practical benefits available to State TANF agencies 

through the NDNH, we believe there are a number of implications 

for welfare reform, as well. First, many more TANF recipients are 

capable of finding work than some believe. That is because they are 

working. They are just not known to be working to the local TANF 

agency. Consequently, TANF must continue to be focused on an expectation of work and on moving TANF beneficiaries into work. 

Second, given that many more current TANF recipients may be 

working than is known to State TANF agencies, higher work participation rates may not be as much of a challenge to meet as some 

believe. 

Third, securing child care may be less of a challenge than some 

believe; since nearly all of this otherwise unreported employment 

is occurring among single moms with children. 

Finally, to the extent that the NDNH can identify TANF clients 

who are receiving cash benefits to which they are not entitled, this 

would free up funding which could then be used to provide services 

to more TANF families, or enhance services for those already being 

served. 

Mr. Chairman, the dramatic reductions in welfare caseloads and 

child poverty since 1996 are among the most positive social developments of the last 30 years. The need for welfare reform didn’t 

end with the implementation of the 1996 Act. More remains to be 

done, including the enactment of H.R. 240. While we work toward 

that passage, initiatives like the NDNH can do much more to spur 

State TANF agencies to further reduce caseloads and move the 

TANF families of today toward work and self-sufficiency. The Secretary and I stand ready to work with you now and in the future 

to bring economic independence within the reach of all of America’s 

most needy families. Thank you. I will be happy to answer any 

questions you might have. 

[The prepared statement of Dr. Horn follows:] 


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Statement of The Honorable Wade F. Horn, Ph.D., Assistant Secretary for 

Children and Families, U.S. Department of Health and Human Services 

Mr. Chairman, and members of the subcommittee, I am pleased to appear before 

you today to share new information about employment levels of Temporary Assistance for Needy Families (TANF) families. Recent work by the Administration for 

Children and Families offers some exciting insights on the number of working families that may be helpful as the Congress moves forward to reauthorize the TANF 

program and other critical programs included in welfare reform. 

First, I want to express my gratitude to the Chairman and members of the subcommittee for your efforts to move legislation patterned on the President’s proposal, 

‘‘Working Toward Independence.’’ Since I appeared before you in February to testify 

on welfare reform results and TANF reauthorization you have reported a reauthorization bill, H.R. 240, to the Full Committee. We look forward to the Congress reauthorizing TANF soon to help even more of America’s TANF families realize the 

dream of economic independence. 

I would like to use my time today to briefly reiterate key results from the first 

phase of welfare reform as a springboard for discussing the information we have 

gathered most recently on employment of TANF families. 

Background 

The enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) has had a profound, positive impact on some of our 

nation’s most vulnerable families. Congress granted States flexibility to change welfare from a system that paid people to stay out of the workforce and remain dependent on government, to one that encourages—insists, actually—that those who can, 

go to work as quickly as possible. 

Since enactment, welfare caseloads declined by 55 percent—from 4.4 million families to just under 2 million families, the lowest number since 1970. Not only did single-parent labor-force participation reach historic levels, but the earnings of those 

households made significant gains as well. The child poverty rate declined from 20.5 

percent in 1996 to 17.6 percent in 2003. Today, there are 1.6 million fewer children 

living in poverty than in 1996. 

I believe there are three primary reasons why these results were achieved: 

• First, welfare reform stressed reciprocal responsibility. Rather than guaranteeing a lifetime entitlement to cash so long as a recipient did not go to work 

or marry someone who worked, the new system offered recipients a cash benefit 

but with the expectation that the recipient would work or take steps to go to 

work in return for that benefit. 

• Second, welfare reform incorporated a ‘‘work-focused’’ strategy. This does not 

mean that the challenges TANF recipients often face, including workplace skill 

deficiencies, life challenges, and logistical hurdles, were neglected. What ‘‘work 

focused’’ does mean is that the TANF agency provides supportive services so 

that the poor can focus on finding, and keeping, gainful employment. 

• Third, and perhaps more important, the architects of welfare reform believed 

that welfare recipients were capable of work. They did not consider welfare recipients to be helpless ‘‘clients’’ forever in need of government assistance. Rather, they believed that welfare recipients could compete in the labor market and 

succeed. 

Evidence of More Employment 

Now there is even better news related to employment and TANF from a growing 

body of evidence suggesting more TANF recipients may be working than many believe. First, TANF data on reasons for case closure have persistently understated 

the role of employment. We alluded to this problem in the Sixth Annual TANF Report to Congress, where we said, ‘‘understanding the reasons for case closure is limited by the fact that States reported 26.4 percent of all cases as closed due to ‘other’ 

unspecified reasons. For example, while independent studies of the reason for families leaving welfare typically find that somewhat over half leave as a result of employment, States reported only 17.2 percent of cases closing due to employment, 

clearly an understatement of the true rate. Many closures due to employment are 

coded as failure to cooperate or as some other category because at the point of closure, the agency often is unaware that the client became employed.’’ 

This undercount in administrative data may occur because some recipients obtain 

employment, but do not immediately notify the TANF agency, and when it comes 

time to recertify eligibility, they simply do not keep the appointment. The TANF 

agency then closes the case, but because it does not know the reason, it simply classifies the exit due to ‘‘failure to comply,’’ ‘‘other,’’ or ‘‘voluntary closure.’’ In some 


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States, adults who work but do not report their employment may appear to be out 

of compliance with work requirements and are listed as closed due to a ‘‘work-related sanction.’’ Researchers at the Urban Institute have found differences between 

the administrative data reported by States and research survey data that indicate 

that work-related reasons are substantially more important to case closure than the 

administrative data would indicate. 

Further, leaver studies from 20 States and the District of Columbia indicate that 

48 percent of former recipients, on average, left cash assistance for employment or 

because of increased earnings, about three times the percentage reflected in TANF 

administrative data reported by the States. 

In addition to these numerous studies supporting higher than reported employment, I would like to share a new source of evidence showing that more recipients 

(both on and off the TANF caseload) are working than one might infer from TANF 

administrative data alone. But first I’d like to provide a brief overview of the current data collection mechanisms. 

There are several ways States determine whether recipients are working. The 

first is recipient self reporting. Recipients report that information to the State and 

the State in turn, reports it through TANF administrative data to us. We know that 

some recipients, for whatever reason—they are too busy, they cannot get through 

to the agency, or they just forget—neglect to inform the State agency that they have 

started working. 

The second source of information is the ‘‘Income and Eligibility Verification System’’ (IEVS) for public assistance programs mandated by Congress in 1984 in recognition of the need for information to supplement recipient reporting. IEVS is a 

battery of computer matches that includes State Quarterly Wage data, Unemployment Insurance data, Social Security data, and unearned income data from the Internal Revenue Service (IRS). While IEVS is a great tool for correcting overpayments, it does not provide access to a national quarterly wage data base or access 

to timely new hire data. 

States do have access to new hire data in their State Directory of New Hires 

(SDNH) maintained by the child support enforcement agency but as with IEVS, 

these data are limited to in-State data only. Additionally, employers with workers 

and businesses in more than one State are given the option to select one State from 

which to report all new-hire information for its operations throughout the country. 

So, when Wal-Mart reports all of its ‘‘new hires’’ to Colorado, neither Maryland’s 

IEVS nor its SDNH would be able to find out about those ‘‘new hires’’ in a timely 

manner. Many employers like Wal-Mart, hotel and food service chains, banks, hospitals, and retail outlets report ‘‘new hires’’ through a single State. Currently, over 

22,000 multi-State companies and another 46,000 multi-State subsidiaries report to 

a single State. Whether we are talking about the Bank of America or the Postal 

Service, many of these companies employ TANF recipients. A TANF recipient could 

literally be working next door to a TANF agency and not show up in a State ‘‘new 

hires’’ match. 

The National Directory of New Hires (NDNH) 

The National Directory of New Hires (NDNH) offers solutions to these problems. 

The NDNH was authorized under welfare reform to provide a national database of 

employment information for the purpose of collecting child support payments. Managed by ACF’s Office of Child Support Enforcement, the NDNH has played a role 

in raising child support collections to $21.9 billion in fiscal year 2004. The NDNH 

has three components: 

• New Hires information tells us that a potential employee filled out new hire paperwork including a W–4 form which is the form employees use to report tax 

withholding information to employers. The employer forwards that information 

to the SDNH which then submits the W–4 data to the NDNH. It provides timely information—the new hire information is generally made available for matching purposes within 30 days of the date of its filing. The NDNH provides another advantage in that it is, by definition, national data. It provides out-ofState information, including companies that report elsewhere and new hires 

that work in other States. 

• Quarterly Wage (QW) data in the NDNH is about six months old, similar to 

IEVS quarterly wage data, and most sources of wage information. However, the 

added benefit of the NDNH quarterly wage data is that it is national data, 

which provides some additional information on employment in other States. 

• Unemployment Insurance (UI) information tells us whether a recipient has applied for or is receiving unemployment benefits. 


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Another advantage of the NDNH is that it provides Federal employment information, which is not available with State-based matching sources. Through the NDNH, 

we can get information on possible employment, for example, at the Social Security 

Administration in Baltimore, civilian employment at military facilities, or Yosemite 

National Park in California. These are all places where the Federal government employs workers, some of whom may be TANF recipients. 

Of course, not everyone who is employed is in the NDNH. Individuals would not 

be included if they are self-employed or are working the cash economy. And, of 

course, the NDNH would not pick up illegal activity. Even when there is a match, 

it does not necessarily mean the person is actually working. An individual could 

have been offered a job and filled out a W–4, but later accepted another job and 

filled out a second W–4. Or, the individual may have failed to show up for work 

or left a job shortly after starting. 

Nevertheless, the NDNH information is available on a nationwide basis and offers 

more comprehensive data than IEVS or SDNH. With these advantages we sought 

to find out what would happen if we ran the Social Security numbers of the TANF 

caseload against the NDNH. 

We began our investigation of the potential to match NDNH and TANF data with 

a pilot test in the District of Columbia. D.C. was an important test case, because 

many residents of D.C. work outside the District—in Virginia and Maryland—and 

many work for the Federal government. TANF officials in D.C. believed that matching with the NDNH could yield valuable new information about their caseload that 

would enable them to improve services and identify work participation they were 

missing. 

For this pilot study, the D.C. Department of Human Services submitted the 

unduplicated Social Security numbers of 20,096 TANF adults to the Office of Child 

Support Enforcement in four matches conducted between June 2003 and September 

2004. For each match, the District obtained information on earnings and W–4 reports over the preceding 15 months. The total combined period extended from April 

2002 to September 2004. 

The NDNH matched 6,681 individuals, or 33 percent of the cumulative, non-duplicated Social Security numbers submitted. Of these, the District independently 

verified the employment information in one of three ways. First, it checked against 

its own records. Second, if no record of employment was found, then attempts were 

made to verify employment with the listed employer. Finally, if unsuccessful at 

those two attempts, the recipient was contacted. The District verified that 5,410 or 

81 percent of the matches were actually employed, of which only 226 had verified 

wages reflected in the D.C. TANF case record. An additional 578 cases, or nine percent of matches, are still pending verification. And, for 10 percent of the matches, 

the verified information showed that the client was not employed. 

Of the 5,184 clients verified as employed but who had not reported their earnings, 

2,436 (47 percent) were closed because their earnings exceeded the income threshold. The cash benefits of the remaining 2,748 cases (53 percent) were reduced. Stated another way, of the 20,096 unduplicated Social Security numbers, 12 percent of 

these cases were closed for excess earnings and 14 percent had their benefits reduced as a result of the NDNH match. The estimated savings from the case closures 

and reduced benefits are nearly $10 million, an amount just over 10 percent of the 

District’s annual TANF block grant. 

We have built on these efforts by working with 10 States, representing nearly half 

of the nation’s caseload. In this expanded effort, we conducted a preliminary match 

of the TANF caseloads against both the NDNH new hires data and the Quarterly 

Wage data for a single month—October of last year. We compared what was reflected about employment in the TANF data reported to us, with what is known 

from the NDNH. 

A total of 552,033 valid Social Security numbers for TANF adults in the 10 States 

for the month of October 2004 were matched against the NDNH. The findings suggest that in every single State more TANF adults were involved in jobs than reflected in the employment rates of the TANF data reporting system. A comparison 

of employment rates using average monthly TANF data for the first quarter of FY 

2005 to the percent of those reporting any quarterly earnings from the NDNH Quarterly Wage data for the same time period shows a 9.3 percentage point differential 

between the two data sources (25.1 percent vs. 34.4 percent). Across the 10 States, 

the employment rate differences ranged from 2 to 22 percentage points. Although 

the two rates are not measured in exactly the same way, there are important differences between employment reported by the TANF agency and the employment 

information available in the NDNH. 

One reason for the large differences in employment between what TANF agencies 

report and what is found in the NDNH may be explained by the fact that TANF 


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agencies may not have timely access to all data on new hires. Across the 10 States 

for the month of October 2004, adding the ‘‘out-of-State’’ and ‘‘Federal agency’’ 

matches increased the total number of matches by nearly 50 percent—with increases ranging from 36 percent to 114 percent. The large number of W–4 matches 

from many of these States is an indication of the multi-State employers who do 

business in one State, but report their new hire data to other States, or of crossborder employment. Even assuming that many of these matches would eventually 

show up in Quarterly Wage matches, the full complement of new hires matches 

found only in the NDNH gives TANF agencies the ability to ‘‘locate’’ new employment after about 30 days, rather than finding the recipient six months after they 

receive their first paycheck. 

Implications for Using the NDNH 

Based on the D.C. pilot and the 10-State findings, we believe there are practical 

benefits of using the NDNH for State TANF agencies. First, the NDNH can help 

States identify potential employment leads within days, rather than months, by providing new hire information for those who go to work for a multi-State employer, 

the Federal government, or across State lines. This information is a critical starting 

point to good casework. 

Second, regular and timely matching of TANF caseloads with the NDNH can help 

States learn how recipients are faring—whether they need help, and whether they 

don’t need help. This information can help States better plan agency resources for 

helping those employed maintain and advance in employment, and overcome obstacles that could otherwise result in a family returning to assistance. 

Third, the NDNH can identify individuals who are working and earning too much 

to qualify for cash assistance. This can help these families preserve their time-limited assistance, and better target TANF dollars to those most in need. 

Finally, we also can use this information to help working families obtain other 

income supports, such as the EITC and child support. 

We believe the use of the NDNH is so promising that we want to give every State 

a chance to determine the benefits. We are sharing this information with States and 

inviting them to partner with us in a regularly scheduled computer matching process. Further, in order to facilitate State use of the NDNH in the first year so they 

can test the benefits of these matches, we are exploring whether there are ways to 

provide some financial support to states where needed. 

Implications for Welfare Reform 

Aside from the practical benefits that the NDNH delivers to the local agencies, 

we believe that there are a number of implications for welfare reform as well: 

1. More welfare recipients are working than many believe. TANF was created to 

help families prepare and pursue work. Part of the success of these efforts is 

that many recipients understand this and get jobs on their own—and far more 

often than our agencies are able to track. That is, many more TANF recipients 

are capable of finding work than some believe, and consequently TANF must 

continue to be focused on an expectation of work for individuals and on helping 

each of them make that step and succeed. 

2. Meeting higher work participation rates may not be as difficult as some believe. If the true rate of employment is higher than reported, reaching a 50 

percent work participation rate, with an employment credit and/or an updated 

caseload reduction credit, is not nearly as difficult as some would portray. With 

the NDNH as a tool to enhance effective case management, the proposed new 

requirements are achievable. 

3. There appears to be a greater capacity for TANF recipients who work to secure 

child care than many think, as nearly all of this otherwise unreported employment is occurring among single moms with children. This finding, however, 

should not be surprising. Studies of former TANF recipients consistently show 

that most leavers, even those with young children, do not use child care subsidies, even when they are eligible for them. 

4. The NDNH information can lead to savings in the form of avoided costs by 

identifying those who are capable of self-support and who have found child care 

on their own. This frees up funding, which can then be used to provide services 

to more TANF families or enhance services for those already being served. The 

District, for example, saved nearly $10 million, or 10 percent of its TANF 

grant. If similar results are found as we make access available to all States, 

significant resources would be available to States to use for child care or other 

services for those currently employed and to assist those not engaged in work 

to move into the workforce. 


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Conclusion 

When properly used, the NDNH will advance the underlying goals of welfare reform: helping move even more recipients off welfare dependency; breaking the cycle 

of intergenerational dependency; and promoting self-sufficiency through full-time, 

stable employment. 

As President Bush has remarked on the reauthorization of welfare reform, ‘‘This 

compassionate approach will help many more Americans realize a better life of independence, hope and dignity that comes with having a job. It will also promote strong 

families . . . while freeing States to seek innovative ways to improve services to 

those who are transitioning from the welfare rolls to the workforce.’’ 

Mr. Chairman, the information and plans I have shared with you today represents a next step that we and States are taking in welfare reform. But, the fundamental program changes that are embodied in the President’s proposal and H.R. 240 

await the action of Congress. The Secretary and I stand ready to work with you on 

reauthorization to make economic independence within the reach of all America’s 

neediest families. I would be happy to answer any questions. 

f 

Chairman HERGER. Thank you, Dr. Horn, for your testimony. 

I appreciate the work that you have done in this incredibly important area, and the Administration, and the overwhelmingly successful results we have seen. I believe, as you have mentioned, our 

goal and the purpose of this hearing today—one of many hearings 

on this issue—is to continue to improve the system and help those 

individuals who most need help in our society. With that, we will 

turn to questions. For the first question, would the gentlelady from 

Pennsylvania, Ms. Hart, care to inquire? 

Ms. HART. Yes, I would. Thank you, Mr. Chairman. First, I am 

really pleased to see that we did a pilot program and we have gotten some really useful information from it. A couple of things. I am 

interested in the child support collections issue, and I noticed in 

your testimony you mentioned that there is $21.9 billion as the 

total collected in 2004. Maybe I missed it, but is there some evidence of a significant increase? Could you expand on that a little 

bit? 

Dr. HORN. We have certainly seen increases, particularly since 

the passage of the Personal Responsibility and Work Opportunity 

Reconciliation Act (PRWORA) in 1996. As you are aware, PRWORA 

provided a lot of new tools to the Office of Child Support Enforcement and local child support enforcement agencies, to ensure that 

the child support that children need and deserve is, in fact, provided to them. 

Ms. HART. Okay. I appreciate that. Obviously, I am familiar 

with a number of the other resources that are at hand, and that 

is a huge issue, I think, for a lot of families, obviously. I am also 

interested in the cost of running the data match. Will States be 

paying for that? Will HHS pay for that? Is there an estimate of 

how much that might cost? 

Dr. HORN. We believe that simply doing a monthly caseload 

match for all 50 States and territories of the NDNH W–4 information alone would cost about $700,000. If States were to match not 

only against the W–4 data included in the NDNH, but also the 

quarterly wage information, and the UI information, then that figure goes up to about $1.5 million. Now, I want to emphasize, the 

total cost of doing a complete match, on a monthly basis, for every 

State and every territory is $1.5 million in a program with a total 

budget of $16.7 billion. 


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Ms. HART. Wow. 

Dr. HORN. It is a relatively low-cost item. 

Ms. HART. It is. It is a lot of bang for the buck. The other question I had, when you talk about comparing the lists and some of 

the welfare recipients who were working, I am always concerned 

about working officially—under the table, that sort of thing. Are all 

of the people who are found to be working actually working at jobs 

where they were reported and paying—well, probably not paying 

taxes, if they were under a certain income. Were they actually officially working; or were some of these folks found to be working 

under the table, for example? 

Dr. HORN. Anyone who is working in the cash economy, or who 

is self-employed, or is an independent contractor, or is engaging in 

illegal activities for earnings—— 

Ms. HART. They are not going to be in the NDNH. 

Dr. HORN. They are not going to be in the NDNH. 

Ms. HART. We have a lot of official hired people who we just 

weren’t matching, databases that just weren’t mixing. This is really 

something that really should have been at our disposal a long time 

ago. 

Dr. HORN. If you look at the D.C. pilot study, 26 percent of their 

caseload were employed for wages, and there is information about 

them in the NDNH. Those cases were not known to be working to 

the D.C. TANF agency. 

Ms. HART. Wow. Okay. Plus, probably, a significant number who 

may be working in the underground economy. We will work on that 

another time. What is the schedule? Is there an estimate for when 

States are going to really be able to start accessing this information 

and moving forward? 

Dr. HORN. We have been working with States for the last 6 or 

7 months to develop memorandums of understanding, so that we 

can get going with this effort. Some States may start as early as 

this month. We hope to have as many as 48 States on board by October of 2005. We are moving pretty quickly with this. To answer 

more fully one of your previous questions, we are exploring with 

the Department our authority to be able to help for the first year, 

to offset some of the costs associated with doing this match, so that 

States can determine for themselves how useful this matching 

process is. 

Ms. HART. Okay. It sounds to me like we are making some 

progress in the right direction, and I appreciate your work on this. 

I yield back, Mr. Chairman. 

Chairman HERGER. I thank the gentlelady. Would the gentleman from Washington, Mr. McDermott, like to inquire? 

Mr. MCDERMOTT. Mr. Horn, when I look at this ten-State 

thing, it looks like there are a lot of people who are cheating out 

there. Is that right? 

Dr. HORN. I wouldn’t say that. 

Mr. MCDERMOTT. You wouldn’t say that? 

Dr. HORN. No, I wouldn’t. 

Mr. MCDERMOTT. I am glad you wouldn’t say that. Have you 

brought the States in and asked them why they have these discrepancies? 


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Dr. HORN. They don’t have the information available to them, 

let me, first of all—— 

Mr. MCDERMOTT. Well, wait a minute. We are talking caseworkers now. If I am working, and I am getting welfare, and I get 

a job, I go in and I am supposed to report my new information, 

right? 

Dr. HORN. If you are a welfare recipient, you are supposed to, 

yes. 

Mr. MCDERMOTT. Yes. Now, I have given it to you. If you don’t 

report it, am I the cheat? 

Dr. HORN. Let me be very clear. We don’t think that the NDNH 

match is primarily a tool to find welfare cheats. 

Mr. MCDERMOTT. Ah. Okay. 

Dr. HORN. We think it is primarily a tool to help TANF agencies 

work their caseload. If you are a TANF recipient, and you go to the 

TANF office, what do they tell you? They say, ‘‘Get a job.’’ You go 

out there; you are looking for a job; you get a job. After you have 

gotten a job, you get a letter that says, ‘‘Hey, we haven’t seen you 

in a couple of weeks. Come into the office to continue your job 

search.’’ Well, if you are a TANF recipient that is now employed, 

you say, ‘‘I don’t have to do that; I have a job,’’ and so you throw 

the letter away. You get another letter that says, ‘‘If you don’t come 

in, we are going to reduce your benefits.’’ You go, ‘‘Well, fine. I am 

already working.’’ 

There are a lot of reasons why a TANF recipient might not report the fact that they are working; not because they are trying to 

cheat, but because they are busy, they neglect to tell the TANF 

agency. This is a tool for the local agency to be able to work their 

cases. The reason this is so important is not simply in order to generate savings, but because for as long as that person, who is now 

working, is officially on the rolls of the TANF agency, their time 

clock is ticking. We are not doing that recipient any favor by allowing their time clock to tick while they are working. There are a lot 

of different purposes for this, but it is mostly a starting point for 

local agencies to work their cases. 

Mr. MCDERMOTT. Tell me about these States. You said one of 

them is about ready to implement. What are they implementing, 

this State? You don’t give us any names. I don’t know who they 

are. Could you tell us the name of this State that is implementing? 

Dr. HORN. That is thinking about implementing in July? 

Mr. MCDERMOTT. Yes. 

Dr. HORN. I have a chart here. 

Mr. MCDERMOTT. I would like to have them come in to the 

Congress and testify on what they are doing, how they are doing 

this all of a sudden, when they haven’t been doing it before. 

Dr. HORN. Well, it is interesting. The way that it is set up is 

that since 1984 the local TANF agencies are supposed to match 

against a system called the Income and Eligibility Verification System (IEVS), which is at the State level. They are mandated, in fact, 

we impose penalties on States that don’t match against the IEVS 

database. The problem with the IEVS database is it only includes 

quarterly wage data from an employer reporting in that State. If 

you are living in D.C. but working in Virginia, that quarterly wage 

data does not go to D.C.’s IEVS; it goes to Virginia’s IEVS. 


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In addition to that, if you are working in the State of Washington, but you are working for a multi-State corporation like WalMart, multi-State corporations can choose where to file both their 

quarterly wage data and their W–4 information. Generally, what 

they do is they pick a single State. They don’t do it in every single 

State. If you are working for a Wal-Mart in Washington State, that 

information may be processed in Colorado; not in Washington 

State. 

A person may be working in Washington, and yet if a State 

matches against the IEVS data in that State, you are not going to 

pick up multi-State corporations; you are not going to pick up outof-State employment; and you are not going to pick up Federal employment. There are limitations to current matches. 

Mr. MCDERMOTT. Let me stop you, though. One of the issues 

here is that you have got data that is quarterly. If I am this recipient, and I go to work for a month, and then I am off, I am counted 

in the quarterly data, right? 

Dr. HORN. Right. 

Mr. MCDERMOTT. I may not show up in the monthly data for 

the next couple of months. I am not going to be shown as working; 

although you will be shown as working in the quarterly data. 

Dr. HORN. You are exactly correct. If you look at the ten-State 

match, we took the October 2004 caseload. We matched against the 

quarterly wage information we had for that quarter. Well, it is not 

only possible, my guess is it happened a number of times, that 

somebody after October, they get hired, because of the holiday season. They get some part-time employment, and they have some 

wage data in that quarter. 

It is not that they are cheating. In fact, all this says is, ‘‘Here 

is a starting place.’’ This is a starting place for you to start to work 

your case. If you don’t know somebody is employed part-time, or if 

you don’t know they are employed, then you have a different perspective on how to help them. If they stop showing up, you may 

close their case, you may put them in sanction status; when in fact 

it is not because they are being uncooperative, it is because they 

went and did exactly what you told them to do, which is to get a 

job. 

Mr. MCDERMOTT. Could you tell us the name of the State? 

Dr. HORN. Yes. I will list the States who have indicated they are 

interested in starting in July: Arizona, California, Delaware, District of Columbia, Maryland, Massachusetts, Mississippi, Missouri, 

Montana, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, and Wisconsin. 

Mr. MCDERMOTT. I hope the Chairman will have a representative sample of those people come in and tell us what this is going 

to mean to them, to integrate your systems. I think it is going to 

take people. 

Dr. HORN. It is going to take people, it is going to take a lot of 

case work on the local level, absolutely. 

Mr. MCDERMOTT. Yes, a lot of case work. 

Dr. HORN. You bet. That is what they are supposed to do. 

Mr. MCDERMOTT. If your caseload is a hundred; somebody tells 

you something; you don’t write it down, and it doesn’t get into the 

database. It shows up as an error. I really think that that is why 


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we ought to have some States in here to testify. Thank you, Mr. 

Chairman. 

Chairman HERGER. The gentleman is welcome. I would encourage these States to submit testimony for the record, as is requested 

by the gentleman from Washington. Now to the gentleman from 

Louisiana, Mr. McCrery, to inquire. 

Mr. MCCRERY. Thank you, Mr. Chairman. My good friend from 

Washington, Dr. McDermott, in his opening statement made a 

point about a minimum wage worker with a family of three only 

getting 68.9 percent of poverty level for his work. That is true. If 

it were a fact that the minimum wage workers, as a percent of our 

total workforce, remained constant, then that statistic might be 

more relevant. If you look at another piece of data, you see that 

it is not so relevant. In 2004, only 2.7 percent of hourly workers 

in this country were making minimum wage or less. That is less 

than half of what it was just 10 years ago, and about a third of 

what it was 20 years ago. 

There are all kinds of ways to make progress. The market seems 

to be working to pay people what they are worth, as evidenced by 

the data that I have just shared with you. Now, that is not to say 

that the minimum wage is not relevant. I think it is. There is more 

data out there that indicates that the picture is not as bleak as the 

gentleman from Washington might have implied. 

Now, Dr. Horn, I think the same gentleman did make a good 

point with respect to the costs that States might be looking at 

when they shift to this system. Looking at the pilot programs that 

you have some evidence from, would you say that States net, after 

this system might be implemented, would be a coster or a saver for 

the States? 

Dr. HORN. It is hard to take a look at our pilot test in Washington, D.C., and not conclude that it would be a saver. As I indicated in my testimony, the savings to the D.C. TANF agency was 

$10 million, representing about 10 percent of their entire TANF 

block grant. That $10 million doesn’t go back to the Federal Treasury. That $10 million stays in Washington, D.C., for the use of the 

TANF agency to do lots of things, like provide more child care subsidies, more employment training, more work supports. This is not 

about taking money and putting it back in the Federal Treasury. 

It is about ensuring that we use the TANF dollars that are available to the most effective and efficient manner possible. In D.C. 

this clearly saved them a lot of money that they could then use for 

other kinds of work supports. 

Mr. MCCRERY. That is a great statistic. The question is, would 

that $10 million be eaten up in increased administrative costs because of the factors that Dr. McDermott pointed out, based on your 

experience working with the States? 

Dr. HORN. If every State matched their entire caseload for every 

month of a calendar year, or a fiscal year, the total cost nationally 

to match not just against the W–4 data but the quarterly wage 

earned and UI data would be $1.5 million, nationally. There were 

$10 million in savings in Washington, D.C., alone. It is hard to see 

how the additional cost of matching against the NDNH would not 

be overwhelmed by the amount of money that would be freed up 


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when you are able to determine that some people are getting benefits to which they are not entitled. 

Yes, would they also have to work the case, like D.C. did, in 

order to verify whether the match indicated that there was employment? Yes, but that is what caseworkers are supposed to do. If 

TANF caseworkers are not working their caseload, what are they 

doing? If they are not in contact with the people who are on their 

TANF caseload, what are they doing? That is their job. 

Mr. MCCRERY. If the States in fact realized savings, net savings, from the implementation of this program, then they don’t 

send that money back to Washington; they keep the money as part 

of their TANF grant. They can use that for authorized purposes 

under TANF, like child care, job search, all those things that are 

authorized uses of the TANF money. Is that right? 

Dr. HORN. Absolutely. 

Mr. MCCRERY. Now, States have tried something like this before, in using other data systems such as the IEVS, the Public Assistance Reporting Information System (PARIS), to try to help 

them with case work, try to help them learn more about the individuals that are on their welfare caseload. What is the difference 

between this new program and those systems? 

Dr. HORN. You could theoretically get all the information you 

wanted from the match with the NDNH by doing the following: you 

could match all your caseload against the IEVS, and you get quarterly wage data. You could then do another match against your 

State directory of new hires, and get your W–4 data for companies 

that file W–4s in your State. You could then match against the 

PARIS information system and get Federal employment. You could 

then call up the Child Support Enforcement Agency and ask for a 

list of the 60,000 multi-State corporations and subsidiaries that file 

in some other State; figure out how many of those 60,000 companies and subsidiaries operate in your State; contact every single 

State where they are filing their W–4 on wages outside of your 

state; do matches against all those States. Or you could do one 

match against the NDNH. Now, if you are a State, and you wanted 

that information, which one would get you all that information 

with the least amount of effort and expense? 

Mr. MCCRERY. In other words, they might actually save administratively. 

Dr. HORN. Oh, I think they would save a lot of money. 

Chairman HERGER. The gentleman’s time has expired. To the 

gentleman from California, Mr. Becerra, to inquire. I might mention that we are in a vote, so as soon as we conclude this question, 

we will recess and return. 

Mr. BECERRA. Thank you, Mr. Chairman. Secretary Horn, 

thank you very much for the testimony. Let me explore a couple 

of things with you, because I think you are trying to drive us in 

the direction where we are able to ascertain who should and who 

shouldn’t be on, and that way we can direct our resources where 

we really need them. You mentioned a couple of things in response 

to Mr. McDermott’s questioning that I think are important. You 

mentioned this is a starting place; that we don’t necessarily know 

if this information is going to give us the full answer, but it might 

lead us somewhere. 


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Dr. HORN. Right. Exactly. 

Mr. BECERRA. Mr. Chairman, at some point I really think it is 

worthwhile, given the Secretary’s testimony, that we have some of 

those States come before us, because I think the Secretary hit 

something on the nose very importantly. That is, what are some of 

these caseload workers doing? If they are not reporting the data, 

if somebody on welfare, who has tried to get herself off of welfare, 

is doing what she can, and she reports herself as working, but it 

doesn’t get reported by the caseload worker—because the caseload 

worker is very busy, or whatever—she may pay the consequences 

because of policy decisions we make that will affect her ability, or 

someone else like her in the future, to actually get that job or have 

the child care she needs. 

I think it is important, Mr. Chairman, that we try to follow up 

with some of those State agencies or county agencies that actually 

administer the TANF laws, to make sure we understand why there 

is a discrepancy between what you found with the NDNH data, and 

the TANF administrative data that you received that shows in one 

case maybe more people are working than are reporting. 

I think it is extremely important because you are right, there are 

dollars here that we should be spending for folks who really need 

it. There aren’t enough dollars to go around, especially in child 

care, and we really desperately need to concentrate those moneys 

where we can. 

I do have a concern with one of your statements. I think it was 

more in your written testimony, Secretary Horn, than perhaps 

what you said. That is with regard to child care, and to extrapolate 

from this initial starting-place study that perhaps welfare recipients don’t need as much child care as we may think. Most of the 

studies that we have seen—studies by non-partisan institutions— 

have shown that the more that there is adequate, decent child care 

available to a welfare mother, the more likely she is to stay on a 

job, versus come back on the welfare rolls. 

I would just urge if we could make sure that your agency, along 

with the State agencies and county agencies, who are doing most 

of this administrative work, if we could follow up to find out what 

really happens to women who have children, who are trying to get 

off, and their ability to secure child care. I would hate to see us 

move forward on data that goes after those who really are cheating 

the system, and find that we ultimately affect women who are desperately working hard or getting themselves trained, and looking 

for decent child care and may not find it. Mr. Chairman, I don’t 

really have any questions. Secretary, let me give you an opportunity to respond to anything I may have said. 

Dr. HORN. Well, one of the advantages of doing this match is 

you can locate people who are working. If you don’t know they are 

working, you don’t know that they may need a child care subsidy. 

They may have gone to work; found an informal child care arrangement, which may or may not be stable. You don’t know that. You 

don’t have any information about that. 

The advantage of this match is it gets you down a road where 

you can ask questions. You may find somebody who has got a job, 

and you may ask, ‘‘What is your child care arrangement?’’ They 

may say, ‘‘Oh, it is very good. It is my mother, it is very stable, 


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blah-blah-blah.’’ Or they might say, ‘‘Well, you know, we are kind 

of—you know, my neighbor does it here.’’ Then you say, ‘‘Do you 

know that you are eligible for a child care subsidy?’’ They may go, 

‘‘No.’’ ‘‘Well, let me help you get a child care subsidy, then, to get 

a more stable child care arrangement.’’ 

Mr. BECERRA. Well, the more we could do that, where we can 

actually direct folks to the right sources, versus having them do the 

fly-by-nights because they have no choice, I think the better off we 

all are. I hope, Mr. Chairman, what we can do is take this information and have other folks who can help us. Somehow, we have to 

understand why there are these discrepancies. You mentioned before, Mr. Secretary, in conversation with Mr. McDermott, that you 

are not implying that everybody is a welfare cheat. 

Dr. HORN. No, not at all. 

Mr. BECERRA. What we have to do, Mr. Chairman, I think, is 

take this information and, as the Secretary said, it is a good starting place, and then let’s figure out, let’s understand these discrepancies. Then we can make some real tough but good decisions on 

where to go. 

Dr. HORN. I agree. 

Mr. BECERRA. I appreciate your testimony. 

Dr. HORN. Thank you. 

Chairman HERGER. I thank the gentleman. I believe the will of 

the Committee is that we will have one more question, from the 

gentlelady from Connecticut, Mrs. Johnson, and then we will adjourn. I might mention that any Members who have questions can 

submit them for Dr. Horn to respond in writing to the Committee, 

and it will be part of the record. With that, to the gentlelady from 

Connecticut, Mrs. Johnson, to inquire. 

Mrs. JOHNSON. We have 4 minutes left, so those who want to 

go, go ahead. I just wanted to make this comment. First of all, you 

made a very important point that I think we are missing. There 

is a lifetime limit on how long you can be on welfare. These people 

don’t realize that the clock keeps running. At the very least, I think 

you need to recommend that States change their process, so that 

in that first letter they send out to say, ‘‘We haven’t heard from 

you,’’ they say, ‘‘If you have got a job, it is in your interest to let 

us know, because we don’t want you to use up your lifetime bank 

if you are already working’’; and then the second point that, ‘‘You 

could still be eligible for daycare subsidies and whatever. So please 

contact us.’’ 

We have got to make it a lot easier, because you are right, they 

need to be able to leave a message on the phone, they need to be 

able to deal with this through a computer message. I hope States 

will take seriously sending a different kind of letter in that first notification. I really want to congratulate you and your staff for the 

energy and creativity you put into your roles as leaders and managers of our TANF program. We have known about these banks. 

This could have been run a long time ago. The fact that you decided to do this really is going to make a difference, not only to 

States and the money they have available to provide daycare and 

support services, but also to the position each woman on welfare 

holds in regard to her lifetime bank. Also, to the sort of dignity and 

recognition she deserves for getting a job. 


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I think this is a very exciting development. I am very glad you 

don’t see this as proving that you are a cheat, or you are anything 

at all. It is just communication; it is just, ‘‘Can we make the system 

serve you right?’’ I think we forget about how many support services there are. If this were a question I would ask you to run 

through all the support services that a woman who is leaving welfare but working could be eligible for. They kind of don’t know that. 

In the old program, you were either on or off; it was black or white. 

We have a far better system, both for supports and career development, than we have ever had. I think we can make use of this information to improve the quality of our service. I really thank you 

for your initiative and your leadership as an administrator. Wade, 

you are doing a fine job. 

Dr. HORN. I thank you. 

Mrs. JOHNSON. Your staff, too. 

Dr. HORN. I would like recognize two of my staff in particular, 

who have been really leading this effort. That is Grant Collins, who 

is the Deputy Director of the Office of Family Assistance, and 

David Siegel, who is the Acting Commissioner for the Office of 

Child Support Enforcement. If we don’t use our expertise more in 

the service of the recipients, there is no way the States can help 

the recipients better. It is really a team sport. 

Mrs. JOHNSON. I have honestly never seen such creative leadership from the Federal level as I have seen in your Department 

in the last few years, and I just wanted to acknowledge that on the 

record. 

Dr. HORN. Thank you. 

Mrs. JOHNSON. I had better go vote. 

Chairman HERGER. I think we have about a minute on the 

vote. I would like to ditto what the gentlelady from Connecticut 

said, Dr. Horn. This is probably one of the most successful programs, the TANF program, that we have ever seen in this area to 

assist and help, again, these families and children who most need 

it. I want to thank you. I want to thank you for your testimony, 

and the team that you have assembled and the Administration. 

Again, thank you for providing this information as we consider 

ways to continue working to improve TANF’s programs. With that, 

the Committee stands adjourned. 

[Whereupon, at 10:49 a.m., the hearing was adjourned.] 

[Submission for the record follows:] 

Community Voices Heard 

New York, New York 10029 

July 29, 2005 

To Whom It May Concern: 

We believe that the attached recently released report, The Revolving Door, highlights some of the problems with the way the work-first approach is being implemented in states and localities. As you will see, the program in New York City has 

not been a success. We fear that increased work hours and work requirements are 

based on a faulty assumption that the type of program we evaluate in the attached 

document are far more successful than they actually are. We hope that our findings 

will be of use to the Committee as it moves forward on Welfare and Work policy 

planning. 


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iMark Levitan and Robin Gluck, Job Market Realities and Federal Welfare Policy (New York: 

Community Service Society, September 2003), p. 14. iiMark Levitan, Unemployment and Joblessness in New York City, 2004: Better, But Still a 

Long Way to Go (New York: Community Service Society, February 2005), p. 7. 

We have a 10-page designed and printed version of the attached Executive Summary (also attached for viewing as a pdf). If the Committee would like us to forward 

hard copies of this, please let us know. The Executive Summary is based on a 140 

page report that can be downloaded off of our website: www.cvhaction.org. Additionally, hard copies of the larger report are available from us upon request. 

Thank You, 

Sondra Youdelman 

Policy & Research Director 

Executive Summary 

The Revolving Door: Research Findings on NYC’s Employment Services 

and Placement System and Its Effectiveness in Moving People 

from Welfare to Work 

By Sondra Youdelman with Paul Getsos 

A Research Project by 

Community Voices Heard 

Copyright  2005 

Funded by JPMorgan Chase, the New York Community Trust, the 

Robert Sterling Clark Foundation, and the Rockefeller Foundation. 

Executive Summary 

INTRODUCTION: The Failure of a Work-First Approach in Challenging 

Times 

In August 1996, President Clinton signed the Personal Responsibility and Work 

Opportunity Reconciliation Act (PRWORA) into law, eliminating the federal entitlement to public assistance, imposing time limits on the provision of assistance to 

poor families, and requiring states to impose strict work participation requirements. 

At the same time in New York City, Mayor Giuliani moved aggressively to dismantle one of the country’s strongest social safety nets—placing primary emphasis 

on work and diversion. At both the local and national levels, a strong work-first approach was the philosophy that guided the development of new policies and programs associated with welfare reform. 

In New York City, the Human Resources Administration (HRA) instituted a comprehensive work-first policy—transforming welfare centers into job centers, expanding the local unpaid Work Experience Program (WEP) to cover tens of thousands 

of single mothers, instituting intensive job search activities for people on welfare, 

and aggressively sanctioning non-participating welfare recipients. The NYC welfare 

system was hailed as a national model. Indeed, city welfare rolls dropped an eyeopening 50 percent between 1996 and 2000, and the percentage of single mothers 

with jobs rose in the city as it did nationwide. 

The rapid economic growth and robust job creation of the late 1990s presented 

ideal labor conditions for welfare-to-work programs. A growing economy provided 

jobs for many who were forced away from public assistance. Unemployment rates 

fell to 30-year lows and wage rates for less skilled workers rose briskly.i When recession hit in 2001, however, higher unemployment rates signaled that competition 

for available jobs would become much sharper. 

In New York City, the impact of the recession was severe. Unemployment rates 

peaked in 2003 with an average overall rate of 8.5 percent. Higher still were the 

unemployment rates for people of color in NYC: 12.9 percent for African-Americans 

and 9.6 percent for Latinos. While the economy slowly began to show signs of recovery in 2004, unemployment rates have yet to return to their 2000 levels.ii

With the change in circumstances, the many flaws of the New York City approach—and the strict national work-first model—have become evident. The hardest 

to employ have not benefited from ‘‘work-first.’’ Those with significant barriers to 

employment—including low levels of education, limited English proficiency, physical 

and mental disabilities, inadequate access to childcare and supportive services—are 

still stuck in a welfare system that pushes them to move to work, even if they do 


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not yet possess what they need to get and keep a job and move beyond the public 

assistance system. 

This report documents the results of a comprehensive examination of the Employment Services and Placement (ESP) System, a key program developed and administered by the Human Resources Administration (HRA) to further its work-first approach. The research set out to uncover whether or not currently operating job readiness and job placement programs accomplish their intended goals, what stands in 

their way, and how they might be improved to better serve the needs of the clients, 

the providers, and the system at large. Our findings point to a failure of this workfirst model in achieving its main goal—moving people from welfare to work, into 

jobs and toward economic independence. 

The Employment Services and Placement (ESP) System 

Since 1999, New York City’s main strategy for moving work-ready welfare recipients to employment and self-sufficiency has been ‘‘Full Engagement’’—job readiness 

and job search activities two days a week, coupled with unpaid work experience the 

other three. 

Employment services for welfare recipients are provided by two main contracts: 

Employment Services and Placement (ESP) contracts for the ‘‘general population’’ and Special Populations contracts for recipients with particular needs due 

to specialized circumstances such as homelessness and a history of drug abuse. 

Skills Assessment and Job Placement (SAP) contracts were also set up to serve 

applicants to public assistance, as they wait for their cases to open. 

This report focuses on the services provided by the Employment Services and 

Placement System. The renewal contracts, established by the start of 2003, allocated 

up to $130 million for program services over three years—estimating that the program would service almost 80,000 people in that time period. 

From the beginning, ESP contracts were solely performance-based. Vendors only 

got paid for results: job placement, 3-month retention, and 6-month retention. Most 

contractors can receive a maximum payment of $5,500 per client when someone 

they place in a job remains employed at 6 months. 

There are currently 9 vendors that hold ESP contracts. Collectively, the vendors 

now operate 26 sites throughout the city. Current vendors include a combination of 

for-profit corporations, large not-for-profit agencies, community-based organizations, 

and the City University of New York (CUNY). 

Each vendor is referred a different percentage of the overall ESP population, 

based on their original contract and current capacity (see Table above). According 

to HRA’s December 2004 figures, an average of 4,100 individuals are referred across 

the 26 sites each month, or close to 50,000 per year. 

ESP vendors are contracted to move people from welfare to work. At each ESP 

site, a combination of job readiness, job skills training, and job search assistance is 

offered to prepare individuals for and connect them to jobs; services are then provided to help participants retain jobs. 

Finding 1: The ESP System has Failed to Meet its Primary Goal of Connecting Welfare Recipients to Long-Term Employment 

While the primary goal of the ESP System is to move people into jobs and 

off of welfare, less than 1 in 10 welfare recipients referred to the ESP System are placed in jobs within six months. Within another six months, almost 1 in 3 of those individuals return to public assistance. 


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The primary goal of the Human Resources Administration is moving people off 

of welfare and into employment. The ESP System is one of the strategies used for 

accomplishing this goal. ESP vendors are held accountable for both job placement 

and job retention. They receive their first payment when they place people into jobs, 

and subsequent payments as people retain those jobs for three and six months. 

Unfortunately, research findings show that the ESP System is doing an inadequate job of connecting welfare recipients to jobs and achieving retention within 

the six-month period vendors are allotted. 

Client Outcomes 

Based on three-month average figures reported in HRA’s December 2004 

VendorStat Reports: 

• Only 8 percent of those referred to the ESP System are placed in jobs within 

six months (see Figure below). 

• Of those placed in jobs: 

• 35 percent still hold those jobs six months later. 

• 29 percent return to public assistance. 

• 36 percent remain unaccounted for. 

Systemic Problems 

Research indicates that certain program dynamics contribute to the low placement and retention rates: 

• Conflicts with the Work Experience Program: Problem inherent in the 

Work Experience Program (WEP), as well as a lack of coordination between 

WEP and ESP Sites, impede program success. Some vendors criticized the Work 

Experience Program (WEP) for interfering with their ability to accomplish their 


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iiiGayle Hamilton, Moving People from Welfare to Work: Lessons from the National Evaluation 

of Welfare-to-Work Strategies (New York: MDRC, July 2002). 

programmatic goal of job placement. The client survey showed that 83 percent 

of ESP clients are engaged in WEP. Vendors spoke of challenges that emerged 

because clients were granted permission to leave their work assignments for 

interviews, and clients who were more loyal to WEP sites than to job searching. 

They also identified the false hopes of long-term employment in WEP assignments as discouraging some clients from looking for work. 

• Lack of a Strategic Approach to Workforce Development for Welfare 

Recipients: The absence of a strategic approach to workforce development for 

welfare recipients impairs program effectiveness. Clients spoke of job developers 

that lacked connections to good employers and pushed them toward jobs limited 

in scope and quality. Vendor interviews pointed to the challenges faced by job 

developers left to make connections with little city support. HRA-sponsored employment services are developed on a site-by-site basis and have no strategic 

linkage to labor market realities. 

• No Coordination between HRA and the Department of Small Business 

Services (SBS): A lack of coordination between the city agency that focuses on 

linking workforce development to economic development, and the Human Resources Administration that services welfare recipients and the ESP System, 

was evident. Clients either knew nothing about SBS’ One Stop Centers or criticized not being able to choose to use their services rather than those of their 

ESP. Vendors mentioned that their job developers and those of the One Stop 

Centers operated completely independently. ESP sites are at times marginalized 

from economic development initiatives that could offer jobs for their clients. 

Finding 2: The ESP System Fails to Offer Individuals the Training and 

Education Critical for Long-Term Self-Sufficiency 

Even though a lack of education and training was identified as a major barrier 

for a vast majority of ESP clients, only 18 percent of clients were able to access education and training programs; 1 in 3 clients did not know that education and training might satisfy a portion of their work requirements and that vouchers were available to cover the costs of these programs. 

Within the ESP program context, preparing individuals for work includes two key 

components: providing job readiness support on-site and connecting people to vocational training off-site when appropriate. Past studies have demonstrated that a 

programmatic mix of job search and adult basic education is more effective in promoting sustained employment than programs that focus exclusively on job search 

or work experience.iii Unfortunately, research findings from this study show that 

most individuals are not being provided with the training and education they need 

to move toward self-sufficiency. 


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27 

Client Access 

The representative client survey revealed high levels of educational challenges 

among ESP clients: 

• 43 percent of ESP clients have less than a high school diploma and 50 percent 

only have a high school diploma or GED. 

However, despite the fact that many ESP clients could benefit from education and 

training, the client survey also showed that few who want it are able to access it 

through the system: 

• Only 18 percent of ESP clients were able to access vocational education and 

training to better prepare them for work. 

• 71 percent of those not participating in education and training said they would 

like to do so. 

Many clients did not know about their rights to education and training and funds 

to support them: 

• 39 percent were not told that attending Adult Basic Education and/or vocational 

education could partially or entirely satisfy their work requirements. 

• 36 percent did not know that vouchers were available to cover costs of such 

training. 

Certain vendors were more likely to inform clients about their rights to education 

and training than others (see Figure below). 


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Systemic Problems 

Research revealed two particular program design issues that seemed to discourage 

vendors from referring people to education and training: 

• Limitations of the ITA Voucher System: Though there appears to be no 

limit on the availability of ITA Vouchers for client training, the slow and difficult process for obtaining them, as well as the lack of information regarding 

the variety of training programs that exist and the quality of them, appears to 

discourage vendors from encouraging client enrollment. Clients and vendors 

considered the application system for ITA Vouchers tedious, and the delay in 

approval for vouchers often leads to lost clients and/or lost interest. The fact 

that the processing of a client’s voucher application is instantly canceled when 

a client receives a sanction is yet another reason why vendors hesitate to invest 

energy in assisting clients to apply for them. Additionally, vendors and clients 

alike criticized the prioritization of short-term training over quality training. 

• Performance-Based Contracts Undermine Education and Training: The 

structure of the ESP contracts provides no incentive for connecting clients to 

education and training. With payment contingent on placement within six 

months, vendors with short-term cash flow concerns have more incentive to 

push participants into quick employment than to promote choices that might be 

better for clients in the long run. 

Finding 3: The ESP System Does Not Support the Provision of Services 

Needed by a Large Proportion of Individuals Referred to It 

According to the representative sample of clients we surveyed, over half 

(55 percent) had been through multiple HRA job readiness/job search programs. HRA VendorStat Reports confirmed that 92 percent of those referred to the ESP System do not have their needs met by it—instead, clients are perpetually recycled through a system that fails to address their 

needs. 

The ESP System was designed under a work-first philosophy. Clients referred to 

it are considered ready to work, and the assumption is that the system simply needs 

to help connect them to jobs. The reality, however, appears quite different. Some 

clients never arrive, some arrive wrongly assessed, and some come with multiple 

barriers. Unfortunately, we found that the ESP System does not meet the real needs 

of large numbers of participants—and that the great majority of individuals find 

themselves going around and around in circles instead of heading forward on a path 

toward self-sufficiency and long-term employment. 


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Client Status 

Based on figures from HRA’s December 2004 VendorStat Reports, 8 percent of 

those referred to the ESP System are placed in jobs. The large majority of those 

referred, however, never receive the services intended (see Figure on next page): 

• 30 percent of those referred to the ESPs each month Fail to Report. 

• 14 percent are sent back to HRA each month due to a wrong initial referral. 

• 46 percent end up in receipt of a Failure to Comply (FTC). 

All of these individuals are taken off the roster of the ESP site, are made to report 

to an HRA Job Center to discuss their situation, and are then re-assigned to the 

same site or a different site (or program) to begin the process again. According to 

the client survey, 55 percent of those in the ESP system had already been through 

other HRA job readiness/job search programs. Not served by one, they were cycled 

on to the next. 


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Systemic Problems 

Research uncovered three particular program design problems that contribute to 

the continuous cycling of clients and the ineffectiveness in meeting their needs: 

• Poor Assessment and Referral Processes: HRA’s assessment and referral 

system fails to connect people to appropriate services. Assessments done at the 

SAP Sites prior to ESP referral are often either inadequate or are ignored at 

the next step along the line, leading to inappropriate referrals. Even if a thorough assessment is performed, ESP sites rarely gain full access to the assessment. ESP Sites must fill in and begin again. Since the assessment process was 

not supposed to be core to the ESP System, little has been done to develop it 

adequately. Vendors are each left to figure out the appropriate way to assess 

on their own, beyond HRA’s standardized check list, and great variation exists 

in how thoroughly it is done. Nearly half (44 percent) of the random sample surveyed said they did not feel that the assessment effectively captured their background and interests, and whether or not the subsequent Employment Plan was 

linked to the assessment was in question. 

• High Propensity to Sanction: The ESP System focuses on sanctioning those 

that do not comply, rather than addressing barriers and working to engage client problems and issues. The system’s work-first prioritization over barrier removal is a likely contributing factor to the high rates of no-shows and FTCs. 

The system focuses on sanctioning those that do not comply, rather than figuring out the reasoning behind their non-compliance and working with people 

to help address their barriers and become engaged. While 77 percent of clients 

that identified barriers to employment said that workers at their ESP site are 

aware of the barriers they face, only 52 percent felt the ESP program is able 

to help them deal with the barriers. Vendors are quick to explain that they are 

discouraged from working with clients for the long amount of time often necessary to address barriers and are instead encouraged to sanction them. Clients 

spoke of their perpetual problems with being FTCed, or nearly FTCed. They 

often spoke of bad communication and bad record keeping, by HRA and the contracted programs, which led to unjust sanctioning. 

• Contract Incentives Discourage Service Provision: Contract incentives 

contribute to the lack of provision of services critical to moving people off welfare and into work. While it is expected that ESPs will need to provide comprehensive services in order to achieve high levels of placement and retention, 

there are neither incentives nor additional resources provided to truly address 

the barriers that people face in finding and keeping jobs or to tackle problems 

underlying non-compliance. The incentives are structured in a way that encourages vendors to work with those easiest to place quickly, and leave behind those 

that need more support and more time for initial placement. Clients realize this 

and grow wary of a system that is failing to meet their needs. 


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CONCLUSION: 

Systemic Failure and A Revolving Door 

Based on the above findings, we conclude that the Employment Services 

and Placement (ESP) System has failed to achieve its goals of moving people from welfare to work, and instead maintains people in a continuous 

cycle—in and out of the doors of different HRA offices and programs—destined never to have their real needs addressed. 

The Employment Services and Placement (ESP) System emerges in the research 

as a program that fails to move people from welfare to work. Perhaps at one time, 

in a more robust economy and when there were more work-ready individuals in the 

system, it met the needs of individuals referred to it. However, this is not the context within which it currently operates. Our research finds that systemic problems 

cause the program to fail to meet the needs of those it currently is meant to service. 

These systemic problems include the following: 

• NYC lacks a strategic coordinated workforce development approach for welfare 

recipients, 

• WEP fails to prepare people for work and sets up a paradigm that discourages 

job searching or sends people in circles for non-compliance, 

• The ITA voucher system is structured in a way that discourages enrollment in 

training, 

• Education and training providers are neither monitored nor evaluated, 

• HRA’s assessment process fails to refer the right people to the right services, 

• The welfare system prioritizes sanctioning of clients over addressing their barriers, and 

• The contracting system rewards placement and retention without supporting 

working with those that face more challenges to employment. 

We recognize that a small percentage of individuals find success with this approach. However, we have found that the great majority seem stuck in a procedural 

maze—scrambling from one vendor to the next, from one set of services to another, 

but ultimately getting nowhere, except recycled into another employment program. 

Given the amount of federal, state, and local funding that is being spent on this 

system, we must ask if this is the best use of limited governmental resources. This 

criticism is magnified when one factors in the additional good will, energy, and 

countless hours of people power that is invested by government agencies and employees, the private sector, and community based organizations—not to mention the 

personal investment of hopes and aspirations that the clients themselves put into 

getting a job and off of welfare—we must question the efficacy of a system in which 

so many are invested, and yet produces so few results. Many vendors are doing 

what they can given the constraints under which they operate. However, a focus on 

designing a system wherein vendors can be more effective, and more clients can 

have their needs addressed, is critical. It is based on our findings, specifically the 

lack of results of the current system, that we put forward the following list of recommendations. 

MOVING FORWARD: Recommendations to Improve Employment Services 

for Welfare Recipients 

At the close of 2005, HRA’s ESP contracts will come to an end after two, threeyear cycles. HRA has just collected proposals from agencies interested in being contracted for its new employment services program—HRA Works!—which collapses 

three current employment services contracts into one. HRA deserves credit for the 


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time and effort it has put into reflecting on what worked and what failed to work 

in their last contracting cycle as they structured their new RFP. However, they have 

not gone far enough. 

The time for correcting both the program design and the program contracting is 

now. This research points to a number of recommendations that will help get at the 

root of the programmatic challenges uncovered. For purposes of this Executive Summary, a few such recommendations are presented here. More information on these 

recommendations, as well as some additional ones, can be found at the end of this 

report. 

To meet the goal of connecting more welfare recipients to long-term employment, 

city government should: 

1. Coordinate HRA and SBS in Crafting a Single Workforce Development 

Strategy 

One strategic approach should drive workforce development efforts for all of 

NYC’s unemployed and underemployed. HRA and SBS should work together to develop a common analysis of the labor sector growth areas in the city and the pathways and programs individuals must use to advance within them. 

2. Develop Career-Ladder Programs that Reflect Real Labor Market 

Needs 

Targeted training programs can prepare individuals for entry into and advancement within the economic sectors with the most potential for future growth. NYC 

should expand a number of initiatives that have begun to do this, broadening participation to include welfare recipients. 

3. Create Industry and/or Occupation Employment Services Hubs for 

Welfare Recipients 

Career-oriented employment services hubs should be created in addition to the 

geographically based hubs that HRA is proposing for its next round of contracts. 

Staff at industry hubs could focus their employer connections and training knowledge on particular industries and occupations. Clients would benefit from more targeted placement assistance connected to their interests. 

To facilitate access to education and training among welfare recipients, city government should: 

4. Eliminate Sanctions and FTCs as Barriers to ITA Voucher Applications 

Once a vendor helps a client apply for an ITA Voucher, it should not be bumped 

out of the system due to an FTC or sanction status. This discourages vendors from 

assisting clients with voucher applications and distances clients from the training 

they need to exit the system. 

5. Monitor and Identify Effective Training Programs 

Clients will continue to be denied access to education and training if efforts are 

not made to better identify effective training programs and encourage vendors to 

place people in them. The city should conduct a centralized evaluation of approved 

sites and distribute results to vendors. 

6. Add Payment Milestones that Encourage Placement in Training 

HRA should revise performance-based contracts to include incentives that encourage vendors to help people get training and education. Two additional milestones 

should be added to the contracts: one compensated milestone for placing a client in 

training, and one after the client’s completion of it. 

To more adequately meet the needs of a diverse population seeking assistance, the 

city government and the Human Resources Administration should: 

7. Develop an Assessment Process that is Broad in Scope 

The assessment process should include more than completion of a TABE Test and 

a check-box employment plan form. Efforts should be made to learn from more holistic techniques being utilized by some, gather information on additional ones, and 

support vendors in implementing new methods. 

8. Establish a Separate Sanction Trouble-Shooting Program 

HRA should eliminate its current sanctioning approach, with its assumption of 

fault and a need for punishment. In its place, the agency should create a special 

unit (or provide adequate resources to vendors) to reach out to individuals that Fail 

to Comply, find out what prevents their compliance, and work with them toward 

reengagement. 


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9. Create Line Item Funds or Additional Milestones for Service Provision 

So that vendors can have funds to provide the intensive services needed by many 

clients, some line item funding is critical. Alternatively, the agency could set up additional payment milestones to reward assisting people with securing housing, setting up childcare arrangements, special referrals, etc. 

10. Expand Paid Transitional Jobs into Other City Agencies 

For individuals lacking recent work experience, a short-term paid subsidized job 

opportunity can help propel them back into the workforce. The establishment of 

NYC’s Parks Opportunity Program (POP) has replaced WEP and begun to fulfill 

this need. The program should be expanded into other city agencies to provide similar opportunities in a variety of occupations. 

11. Create a Supported Work Program for the Hardest to Employ 

A supported work program provides intensive support and services to hard-to-employ individuals in an accepting work environment: on-site employment supervision, 

case management (addressing personal, family, and vocational needs) and job coaching. Resources should be invested into creating such a program for welfare recipients with the most barriers to employment. 

To ensure that we can really learn what works in moving people from 

welfare-to-work, city government should: 

12. Contract an Outside Entity to Evaluate HRA Works 

With a new program set to kick off in October 2005, now is the perfect moment 

to initiate an evaluation. Learning more about program design and implementation 

at the vendor level, as well as what services work to produce what outcomes, could 

help HRA fine-tune the program along the way and to solicit better results. 

Æ 


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