The Economic Case against Work Requirements

Work requirements—or requiring people to find employment in order to access public benefits—force people to prove that they deserve a social safety net. But where did they come from, and why are they still a central part of economic policy today? This series—Ending Work Requirements—based on a report by the Maven Collaborative, the Center for Social Policy, and Ife Finch Floyd, will explore the truth behind work requirements. The three pieces in this series will explore the racist history of work requirements, the harmful narratives holding them in place, and the economic case for abolishing them.

Work requirements for public benefits programs have roots in the long history of slavery and its afterlife in the United States. But they are not just racist—they are ineffective and bad for the economy. Modern work requirements imposed through welfare reform in 1996 have now been around long enough to bear out what many critics feared: these policies do not increase long-term employment in high-quality jobs, provide stability, or improve economic outcomes. Instead, they harm people who need the support of public benefits programs, increase poverty, and have negative macroeconomic impacts.

Ending work requirements would improve the US economy—not hurt it.

A Solution in Search of a Problem

One of the biggest myths about work requirements is that they put people to work. However, evidence shows that work requirements are more of a solution in search of a problem.

The truth is that work requirements don’t directly affect labor supply. In fact, the overwhelming majority of people who are subject to work requirements for federal assistance are already working. 

Participants of SNAP (Supplemental Nutrition Assistance Program) and Medicaid, for example, are millions of predominantly full-time workers who rely on these programs because of low wages, unpredictable schedules, and lack of benefits. Almost 90 percent of SNAP participants in households with children (and at least one adult without a disability) are employed at some point within the year. More than 60 percent of non-elderly Medicaid participants work at least one job.

Work requirements also do not sustainably increase employment. Studies show that when employment increases among individuals subject to work requirements, the gains are modest and fade over time. Evaluations showed that in nearly all of the programs with work requirements, employment among recipients not subject to work requirements was the same as, or higher than employment among individuals subject to work requirements within five years.

Most recipients with significant barriers to employment—including disability, lack of education, or lack of available jobs—don’t find employment due to work requirements. This remains true even when they participate in employment programs that are particularly “successful” at increasing employment among those facing these barriers.

Crucially, work requirements don’t tend to lead to good jobs. Even where work requirements do lead to increases in employment, they mostly keep people in poverty. Studies show that individuals subject to work requirements might be more likely to be employed in the first two years, but the earnings are insufficient to lift them out of poverty. In some cases, the share of families living in deep poverty increased. 

It’s a vicious circle: losing benefits only makes it harder to find and sustain employment.

Work requirements don’t help people get good jobs or mitigate poverty for marginalized people—especially Black people who already face disproportionate barriers due to structural racism. They also don’t help people gain the necessary education and skills to achieve stable employment. The programs that most successfully improved employment allowed individuals subject to work requirements to improve their education or build their skills. But, of course, education and skill-building support could be offered outside of the context of imposed work requirements.  

In most cases, the main result of work requirements for public benefits programs is a loss of those benefits. Empirical studies of imposed work requirements for some SNAP recipients confirm that the measures led to a 53 percent decline in program participation. In other words, work requirements didn’t increase economic self-sufficiency, and often caused people to exit the programs for other reasons. 

Proponents of work requirements argue that recipients who lose benefits only do so because their earned income puts them over the threshold of safety net programs. Not only is there little evidence to support this idea, but there is plenty pointing to the opposite. For example, one analysis found that most people losing SNAP benefits due to work requirements are those facing the largest barriers to work—such as homelessness or disability—and, therefore, the least likely to be able to earn enough to exceed the income limits.

To make matters worse, work requirements actively punish working people and create conditions where they are less likely to be (continually) employed. Many working people with unpredictable schedules or those temporarily between jobs lose their benefits due to the strict demands of these work requirements. For example, retail workers may have their schedules reduced due to poor sales or other reasons beyond their control. Even though they are employed, they might lose their benefits because their new hours fall short of the relevant work-hour requirements. This increases anxiety, stress, and depression, all conditions that pose barriers to maintaining a job—let alone finding one. It’s a vicious circle: losing benefits only makes it harder to find and sustain employment.

Work requirements also come with a large amount of red tape, or “time tax.” The compliance demands of work requirements themselves impose a significant mental burden on participants. Adhering to the maze-like administrative requirements (paperwork, regular reporting, completion of required hours, training, and other compliance tasks) takes both time and cognitive bandwidth away from people who could otherwise be finding opportunities, gaining skills, or caring for their families.

Finally, the negative effects of work requirements on employment and poverty are felt disproportionately by people of color and further widen existing racial disparities. Black participants in programs like TANF (Temporary Assistance for Needy Families) are far more likely to have their benefits taken away for not demonstrating compliance with work requirements. Programs like TANF, SNAP, and Medicaid play a significant role in reducing the disproportionate levels of poverty in communities of color. The loss of benefits due to implementing work requirements is bad for everyone but especially exacerbates poverty for people of color.

Bad for People, Bad for the Economy

Work requirements are bad for the economy, plain and simple. They undermine the positive impact of benefits programs by shifting costs, worsening economic downturns, and hurting businesses.

The immense (wasteful) spending it takes to run the bureaucracy needed to implement and enforce work requirements is often overlooked.

The loss of benefits, particularly cash benefits such as TANF, comes at an enormous cost to the economy. One analysis by the Center on Poverty and Social Policy at Columbia University shows that every dollar in TANF cash assistance lost to families per year costs the economy $8 in turn. These costs come from increased spending on worsened health, increased child welfare system expenditures, and lost tax revenues due to worse employment outcomes. The study shows the staggering costs to the US economy: if 25 percent of families affected by a work requirement were to lose their benefits, the economic costs could total $7.4 billion per year. Contrast this with $1.6 billion, which is 25 percent of TANF dollars spent on cash assistance. 

These numbers might even be underestimations. Research shows that investing in children through public benefits programs could reduce child poverty rates. Cash support for families leads to better birth outcomes, greater educational attainment, and improved overall health. Assistance also reduces child welfare system involvement, lowering the risk of children being separated from their families. The costs of limiting access to social support is not just a numbers game, but a loss of overall wellbeing of children and long-term family success.

Getting rid of work requirements is a matter of good fiscal policy. The Economic Research Service of the US Department of Agriculture has concluded that SNAP participation not only helps stabilize the economy during recessions but also stimulates the economy during downturns. By supplementing lowered household spending during economic downturns, SNAP augments the incomes and spending of many others, from farmers to retail businesses and food distributors. In effect, SNAP acts as a fiscal stimulus during periods of recession. And since most benefits recipients are likely to immediately spend cash to meet their needs, changes to benefits have a disproportionately strong economic effect. Raising levels of benefits spending during recessions can act as a powerful form of targeted fiscal stimulus.

Waste Not, Want Not

The immense (wasteful) spending it takes to run the bureaucracy needed to implement and enforce work requirements is often overlooked. In 2019, the Government Accountability Office (GAO) analyzed administrative costs in implementing Medicaid work requirements over a three-year period. They found that taxpayers had paid nearly $408 million for implementation—in just five states. These costs did not include the use of non-Medicaid funds to implement work requirements—the painful irony being that TANF dollars were slated to cover some of these costs. The GAO also raised concerns about a lack of oversight and warned of several ways these costs may have violated agency guidance.

The economic argument against work requirements exposes the baselessness of “welfare-to-work” tactics.

Lessons from states’ implementation also show concerning purposes for these appropriations. For example, in implementing Iowa’s work requirements for SNAP, the legislature allowed funding for incentives to remove more Iowans from program participation. Such perverse incentives magnify the social costs of each dollar spent enforcing work requirements.  

Ultimately, the idea that we can save money by reducing enrollment through work requirements is unfounded. Not only, as shown above, do those estimates rarely account for the shifted social costs, but direct costs often go unaccounted for. Programs like Medicaid often offset uncompensated care costs that state budgets would otherwise end up assuming (if they opt out of Medicaid, as several states still do). Savings come solely off the backs of eligible recipients who have been unjustly denied benefits.

The economic argument against work requirements exposes the baselessness of “welfare-to-work” tactics. Such requirements actively work against the economic objectives that stakeholders supposedly care about: helping people get jobs and keep them, increasing racial income equity, reducing poverty among children and people with disabilities, adding cushion to all Americans during our worst economic downturns, and cutting down wasteful government spending. 

To move past this harmful and impractical social policy, we must debunk and abandon the deep-seated myths that sell work requirements as a political solution. Only then can we rework social public benefits programs to be supportive rather than punitive, and use government resources to mitigate rather than reinforce inequality.