How Mandatory E&T Can Boost the Economy and Help Solve the Worker Shortage

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KEY FINDINGS

Overview

The lingering effects of the COVID-19 pandemic still weigh heavily on the economy. States continue to deal with the effects of economic shutdowns, business closures, and expansive federal COVID-19- related policies.1 Indeed, the economy actually shrank in the first quarter of 2022, the first economic decline since the pandemic initially hit.2 Unfortunately, businesses currently face an unprecedented worker shortage that is driving up inflation, slowing economic growth, and could even lead to a recession.3-4

Employers have more than 11.5 million jobs open nationwide—a record high—but not enough workers to fill them.5-6 Employers remain desperate for workers, with nearly two open jobs for every unemployed person looking for work.7-9 Labor force participation now sits near a 45-year low, with recent data suggesting that nearly three million workers are still missing from the labor force as compared to before the pandemic began.10

In short, the nation is facing one of the most severe worker shortages in modern history. If lawmakers do not act quickly, the situation can only get worse. Thankfully, states have tools available to help address this crisis. By better utilizing employment and training programs, they can move more able- bodied adults from welfare to work and boost economic growth by an estimated $160 billion.

The labor force has plummeted while food stamp enrollment has skyrocketed

Although the labor force has been steadily declining for years, the pandemic and recent federal welfare policies have only exacerbated the worker shortage. In 2000, labor force participation sat at just above 67 percent.11 Today, it sits near a 45-year low.12 The American economy would have nearly 13 million more workers had labor force participation remained constant over the last two decades.13

During that same time, food stamp enrollment has skyrocketed. The number of people collecting food stamps has more than doubled since 2000, and now sits at more than 41 million enrollees.14 Shockingly, this growth has primarily been fueled by able-bodied adults.15

Worse yet, the vast majority of these able-bodied adults do not work at all.16

Able-bodied adults on food stamps are not working

Federal lawmakers made numerous COVID-19-related changes to the food stamp program that discouraged work and trapped people in dependency.17 This included “temporarily” suspending the work requirement for able-bodied adults without dependents (ABAWDs), reopening loopholes and reauthorizing gimmicks that had been closed by the Trump administration, and permanently implementing the largest increase in food stamp benefits in program history.18 Unsurprisingly, most able-bodied adults are simply choosing to stay on the sidelines.

This data reveals an alarming trend but does not paint the full picture. The latest available data is from fiscal year 2019—before the pandemic, shutdowns, increased welfare benefits, and suspension of the ABAWD work requirement.19 More recent data will surely show the situation has gotten much worse.

While there has never been a better time to return to work, employers are still facing one of the worst worker shortages in modern history. Fortunately, states have a simple solution to help move people from welfare to work.

The solution: Mandatory E&T for able-bodied adults on food stamps

Despite the temporary suspension of the ABAWD work requirement, states are not without options to get people off the sidelines. States can require work registrants—able-bodied adults aged 18 to 59 without young children—to participate in employment and training (E&T) programs. E&T programs provide work-related skills like job search training, career coaching, and work readiness training.20 Participants may also simply work or volunteer part-time to meet program requirements.21

E&T programs across the country are well-funded, but few states make participation mandatory, despite the well-documented success of work requirements in moving able-bodied adults from welfare to work.22

Mandatory E&T would increase the labor force and bolster the economy

When work requirements were first adopted in 1996, millions of able-bodied adults moved from welfare to work, spurring rapid economic growth.23 In the mid-2000s, the United States Department of Agriculture (USDA) built an economic model to measure the impact of welfare reform on the economy.24 That economic model found that moving 2.4 million able-bodied adults from welfare to work in the 1990s increased real gross domestic product (GDP) by 1.6 percentage points.25

Analyses of state-level implementation of work requirements have reached similar conclusions. When work requirements were implemented at the state level, able-bodied adults left welfare in record numbers.26-31 Those able-bodied adults went back to work in more than 1,000 diverse industries, touching virtually every corner of the economy.32-33 Their incomes more than doubled within a year and tripled within two years.34-38 Better still, those higher incomes more than offset lost welfare benefits, leaving them much better off financially.39-43

An updated model, similar to the one used by USDA economists, finds that nationwide implementation of mandatory E&T requirements will increase the labor force and boost the national economy. Altogether, these changes could increase GDP by an estimated nearly $160 billion.44-80

States are in dire need of workers and requiring participation in E&T programs is a simple way to boost the labor force. Implementing mandatory E&T would help bolster the economy and kick start a full recovery by moving able-bodied workers off the sidelines and back to work.

THE BOTTOM LINE: States should require able-bodied adults to participate in E&T to increase the labor force and boost the economy.

States cannot count on the Biden administration and federal lawmakers to properly address the worker shortage that is plaguing the nation. Fortunately, states have a simple tool at their disposal to help solve the labor shortage crisis.

Lawmakers should require able-bodied adults on food stamps to participate in E&T programs. Moving able-bodied adults from welfare to work will help address the country’s labor force woes, boost the economy, and set states back on the path to prosperity.

APPENDIX: REQUIRING ABLE-BODIED ADULTS TO PARTICIPATE IN EMPLOYMENT AND TRAINING PROGRAMS WOULD BOOST THE ECONOMY BY NEARLY $160 BILLION

Estimated GDP impact of implementing mandatory E&T requirements, by state

REFERENCES

1 Jonathan Bain, “Help wanted: How assigning able-bodied adults to employment and training programs can help solve the labor shortage,” Foundation for Government Accountability (2022), https://thefga.org/paper/employment-and-training-can-solve-the-labor-shortage.

2 Bureau of Economic Analysis, “Gross Domestic Product: First quarter 2022 – Advance estimate,” U.S. Department of Commerce (2022), https://www.bea.gov/sites/default/files/2022-04/gdp1q22_adv.pdf.

3 Hayden Dublois and Jonathan Ingram, “The ‘Bidenflation’ crisis: How expanded welfare benefits and labor shortages are driving up prices,” Foundation for Government Accountability (2022), https://thefga.org/paper/bidenflation-crisis.

4 Gad Levanon, “The labor shortage could lead to a recession next year,” CNN Business Perspectives (2022), https://www.cnn.com/2022/02/25/perspectives/inflation-labor-shortage-economy-recession/index.html.

5 Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey – March 2022,” U.S. Department of Labor (2022), https://www.bls.gov/news.release/jolts.nr0.htm.

6 Jonathan Bain, “Help wanted: How assigning able-bodied adults to employment and training programs can help solve the labor shortage,” Foundation for Government Accountability (2022), https://thefga.org/paper/employment-and-training-can-solve-the-labor-shortage.

7 Authors’ calculations based upon data provided by the U.S. Department of Labor on the number of open jobs and number of unemployed workers in February 2022. 

8 There were nearly 11.5 million open jobs nationwide in March 2022. Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey: Job openings,” U.S. Department of Labor (2022), https://data.bls.gov/timeseries/JTS000000000000000JOL.

9 There were fewer than 6 million unemployed workers in March 2022. See, e.g., Bureau of Labor Statistics, “Labor force statistics from the Current Population Survey: Unemployment level,” U.S. Department of Labor (2022), https://data.bls.gov/timeseries/LNS13000000.

10 Jonathan Bain, “Help wanted: How assigning able-bodied adults to employment and training programs can help solve the labor shortage,” Foundation for Government Accountability (2022), https://thefga.org/paper/employment-and-training-can-solve-the-labor-shortage.

11 Ibid. 

12 Ibid. 

13 Ibid. 

14 Ibid.

15 Ibid.

16 Ibid. 

17 Hayden Dublois and Jonathan Ingram, “How the new era of expanded welfare programs is keeping Americans from working,” Foundation for Government Accountability (2021), https://thefga.org/paper/expanded-welfare-keeping-americans-from-working.

18 Ibid. 

19 Jonathan Bain, “Help wanted: How assigning able-bodied adults to employment and training programs can help solve the labor shortage,” Foundation for Government Accountability (2022), https://thefga.org/paper/employment-and-training-can-solve-the-labor-shortage.

20 Hayden Dublois, “Employment and training programs are within reach of all Americans,” Foundation for Government Accountability (2022), https://thefga.org/paper/employment-training-within-reach.

21 Hayden Dublois, “State employment and training programs are well funded—They just need participants,” Foundation for Government Accountability (2022), https://thefga.org/paper/state-employment-and-training-programs-are-well-funded.

22 Ibid.

23 Kenneth Hanson and Karen S. Hamrick, “Moving public assistance recipients into the labor force, 1996-2000,” U.S. Department of Agriculture (2004), https://www.ers.usda.gov/webdocs/publications/46832/49356_fanrr40.pdf?v=42075.

24 Ibid.

25 Ibid.

26 Jonathan Ingram and Nicholas Horton, “The power of work: How Kansas’ welfare reform is lifting Americans out of poverty,” Foundation for Government Accountability (2016), https://thefga.org/paper/report-the-power-of-work-how-kansas-welfare-reform-is-lifting-americans-out-of-poverty.  

27 Jonathan Ingram and Josh Archambault, “New report proves Maine’s welfare reforms are working,” Forbes (2016), https://www.forbes.com/sites/theapothecary/2016/05/19/new-report-proves-maines-welfare-reforms-are-working.

28 Nicholas Horton and Jonathan Ingram, “Work requirements are working in Arkansas: How commonsense welfare reform is improving Arkansans’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/work-requirements-arkansas.

29 Nicholas Horton and Jonathan Ingram, “Commonsense welfare reform has transformed Floridians’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/commonsense-welfare-reform-has-transformed-floridians-lives.

30 Nicholas Horton and Jonathan Ingram, “Welfare reform is moving Mississippians back to work,” Foundation for Government Accountability (2019), https://thefga.org/paper/mississippi-food-stamps-work-requirement.

31 Jonathan Bain et al., “Food stamp work requirements worked for Missourians,” Foundation for Government Accountability (2020), https://thefga.org/paper/missouri-food-stamp-work-requirements.

32 Nicholas Horton and Jonathan Ingram, “Commonsense welfare reform has transformed Floridians’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/commonsense-welfare-reform-has-transformed-floridians-lives.

33 Nicholas Horton and Jonathan Ingram, “Welfare reform is moving Mississippians back to work,” Foundation for Government Accountability (2019), https://thefga.org/paper/mississippi-food-stamps-work-requirement.

34 Jonathan Ingram and Nicholas Horton, “The power of work: How Kansas’ welfare reform is lifting Americans out of poverty,” Foundation for Government Accountability (2016), https://thefga.org/paper/report-the-power-of-work-how-kansas-welfare-reform-is-lifting-americans-out-of-poverty.  

35 Jonathan Ingram and Josh Archambault, “New report proves Maine’s welfare reforms are working,” Forbes (2016), https://www.forbes.com/sites/theapothecary/2016/05/19/new-report-proves-maines-welfare-reforms-are-working.

36 Nicholas Horton and Jonathan Ingram, “Work requirements are working in Arkansas: How commonsense welfare reform is improving Arkansans’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/work-requirements-arkansas.

37 Nicholas Horton and Jonathan Ingram, “Welfare reform is moving Mississippians back to work,” Foundation for Government Accountability (2019), https://thefga.org/paper/mississippi-food-stamps-work-requirement.

38 Jonathan Bain et al., “Food stamp work requirements worked for Missourians,” Foundation for Government Accountability (2020), https://thefga.org/paper/missouri-food-stamp-work-requirements.

39 Jonathan Ingram and Nicholas Horton, “The power of work: How Kansas’ welfare reform is lifting Americans out of poverty,” Foundation for Government Accountability (2016), https://thefga.org/paper/report-the-power-of-work-how-kansas-welfare-reform-is-lifting-americans-out-of-poverty.  

40 Jonathan Ingram and Josh Archambault, “New report proves Maine’s welfare reforms are working,” Forbes (2016), https://www.forbes.com/sites/theapothecary/2016/05/19/new-report-proves-maines-welfare-reforms-are-working.

41 Nicholas Horton and Jonathan Ingram, “Work requirements are working in Arkansas: How commonsense welfare reform is improving Arkansans’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/work-requirements-arkansas.

42 Nicholas Horton and Jonathan Ingram, “Welfare reform is moving Mississippians back to work,” Foundation for Government Accountability (2019), https://thefga.org/paper/mississippi-food-stamps-work-requirement.

43 Jonathan Bain et al., “Food stamp work requirements worked for Missourians,” Foundation for Government Accountability (2020), https://thefga.org/paper/missouri-food-stamp-work-requirements.

44 Authors’ calculations based upon the results of a proprietary computable general equilibrium model calculating the long-run economic impact of moving able-bodied adults from welfare to work, adjusted for changes to the capital stock and labor supply caused by increasing the labor force.

45 Authors calculated the baseline enrollment of work registrants who could become subject to mandatory E&T requirements from state plans for employment and training programs, adjusted to correct data errors, as filed with the U.S. Department of Agriculture for fiscal year 2022.

46 Florida’s fiscal year 2022 state plan was unavailable. This analysis utilizes data from the state’s fiscal year 2021 state plan.

47 Idaho’s state plan indicated that 98.5 percent of work registrants are subject to mandatory E&T requirements, but effective October 2021, the state began giving blanket “good cause” exemptions to E&T referrals. This analysis assumes all work registrants are currently exempt.

48 Maryland’s state plan indicated that 40 percent of work registrants are subject to mandatory E&T requirements, but actually operates a completely voluntary program. This analysis assumes all work registrants are currently exempt.

49 New York’s state plan indicated that 100 percent of work registrants are subject to mandatory E&T requirements. Quality control data from the U.S. Department of Agriculture reveals that less than five percent of New York’s work registrants are subject to mandatory E&T requirements. This analysis assumes 95 percent of work registrants are currently exempt.

50 North Dakota’s state plan indicated that 91 percent of work registrants are subject to mandatory E&T requirements, but actually operates a mandatory program in only two counties. In 2021, the state operated the same programs and indicated that only 31 percent of work registrants were subject to mandatory E&T requirements. This analysis assumes 69 percent of work registrants are currently exempt.

51 Ohio’s state plan indicated that 27 percent of work registrants are subject to mandatory E&T requirements, reflecting able-bodied adults without dependents. Ohio administrative code indicates that only able-bodied adults without dependents who do not live in counties operating under a waiver are subject to mandatory E&T requirements. All counties in Ohio are currently operating under a waiver. This analysis assumes all work registrants are currently exempt.

52 Oregon’s state plan indicated that 66 percent of work registrants are subject to mandatory E&T requirements, but actually operates a completely voluntary program. This analysis assumes all work registrants are currently exempt.

53 Virginia’s state plan indicated that 76 percent of work registrants are subject to mandatory E&T requirements, but actually operates a completely voluntary program. This analysis assumes all work registrants are currently exempt.

54 Washington’s state plan indicated that it had approximately 2 million work registrants. Washington’s entire food stamp program has only 850,000 enrollees—including children, seniors, individuals with disabilities, and other adults not subject to work registration—making this an impossibility. This analysis utilizes data from the state’s fiscal year 2021 state plan.

55 Authors projected each state’s enrollment decline as the share of potential work registrants in each state not working at all, as reported by the U.S. Department of Agriculture in its fiscal year 2019 quality control database. Authors defined potential work registrants as non-disabled adults between the ages of 18 and 64, who lived in households without children under the age of six, who reported working fewer than 30 hours per week. This projected decline is consistent with actual experiences in states that have implemented work requirements for able-bodied adults without dependents.

56 In fiscal year 2019, nearly 79 percent of potential work registrants did not work at all. See, e.g., Food and Nutrition Service, “Supplemental Nutrition Assistance Program quality control database: Fiscal year 2019,” U.S. Department of Agriculture (2021), https://snapqcdata.net/sites/default/files/2020-11/qcfy2019_st.zip.

57 When Kansas implemented work requirements in 2014, the number of able-bodied adults on the program dropped by 75 percent. See, e.g., Jonathan Ingram and Nicholas Horton, “The power of work: How Kansas’ welfare reform is lifting Americans out of poverty,” Foundation for Government Accountability (2016), https://thefga.org/paper/report-the-power-of-work-how-kansas-welfare-reform-is-lifting-americans-out-of-poverty.

58 When Maine implemented work requirements in 2015, the number of able-bodied adults on the program dropped by 91 percent. See, e.g., Jonathan Ingram and Josh Archambault, “New report proves Maine’s welfare reforms are working,” Forbes (2016), https://www.forbes.com/sites/theapothecary/2016/05/19/new-report-proves-maines-welfare-reforms-are-working.

59 When Arkansas implemented work requirements in 2016, the number of able-bodied adults on the program dropped by 70 percent. See, e.g., Nicholas Horton and Jonathan Ingram, “Work requirements are working in Arkansas: How commonsense welfare reform is improving Arkansans’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/work-requirements-arkansas.

60 When Florida implemented work requirements in 2016, the number of able-bodied adults on the program dropped by 94 percent. See, e.g., Nicholas Horton and Jonathan Ingram, “Commonsense welfare reform has transformed Floridians’ lives,” Foundation for Government Accountability (2019), https://thefga.org/paper/commonsense-welfare-reform-has-transformed-floridians-lives.

61 When Mississippi implemented work requirements in 2016, the number of able-bodied adults on the program dropped by 72 percent. See, e.g., Nicholas Horton and Jonathan Ingram, “Welfare reform is moving Mississippians back to work,” Foundation for Government Accountability (2019), https://thefga.org/paper/mississippi-food-stamps-work-requirement.

62 When Missouri implemented work requirements in 2016, the number of able-bodied adults on the program dropped by 85 percent. See, e.g., Jonathan Bain et al., “Food stamp work requirements worked for Missourians,” Foundation for Government Accountability (2020), https://thefga.org/paper/missouri-food-stamp-work-requirements.

63 Authors projected that approximately half of non-working able-bodied adults without dependents and 61 percent of non-working able-bodied parents exiting the program would re-enter the workforce. This is the assumption used by the U.S. Department of Agriculture in measuring the impact of work requirements in the late 1990s. More recent evidence suggests this likely understates the share of non-workers who re-enter the labor force. See, e.g., Kenneth Hanson and Karen S. Hamrick, “Moving public assistance recipients into the labor force, 1996-2000,” U.S. Department of Agriculture (2004), https://www.ers.usda.gov/webdocs/publications/46832/49356_fanrr40.pdf.

64 The proprietary computable general equilibrium model estimates total Gross Domestic Product (GDP) generated by capital and labor using a nested constant elasticity of substitution model.

65 The proprietary computable general equilibrium model disaggregates labor inputs by education, skill level, and gender, based on data provided by the U.S. Department of Commerce, and it assumes labor is paid the value of its marginal product.

66 The proprietary computable general equilibrium model assumes an elasticity of substitution of 0.5 and an elasticity of intrafactor substitution of 1.5, consistent with the economic literature which finds intra-labor elasticity of substitution estimates ranging from 1.34 to 1.7.

67 Pallab K. Ghosh, “A study of the long-run substitutability between men and women,” University of Oklahoma (2018), https://pdfs.semanticscholar.org/6e60/c5a3c6f972283565e5cd75672deb7c240ec5.pdf.

68 David H. Autor et al., “Trends in U.S. wage inequality: Revising the revisionists,” Review of Economics and Statistics (2008), https://www.mitpressjournals.org/doi/pdf/10.1162/rest.90.2.300.

69 Lawrence F. Katz and Kevin M. Murphy, “Changes in relative wages, 1963-1987: Supply and demand factors,” Quarterly Journal of Economics (1992), https://www.jstor.org/stable/2118323.

70 Per Krusell et al., “Capital-skill complementarity and inequality: A macroeconomic analysis,” Econometrica (2000), https://www.jstor.org/stable/2999442.

71 Antonio Ciccone and Giovanni Peri, “Identifying human-capital externalities: Theory with applications,” Review of Economic Studies (2006), https://academic.oup.com/restud/article-abstract/73/2/381/1521393.

72 George E. Johnson, “Changes in earnings inequality: The role of demand shifts,” Journal of Economic Perspectives (1997), https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.11.2.41.

73 The proprietary computable general equilibrium model assumes a displacement effect derived from estimates of the disutility of work, pecuniary benefit when not working, wages, size of adult population, real wage elasticity of labor supply, marginal revenue product of labor, ratio of capital to labor, elasticity of intrafactor substitution, and share of unskilled labor in aggregate labor compensation.

74 The proprietary computable general equilibrium model assumes a wage elasticity of supply of unskilled labor of approximately 0.4, consistent with the economic literature.

75 George E. Johnson, “The impact of immigration on income distribution among minorities,” Russell Sage Foundation (1998), https://www.russellsage.org/publications/help-or-hindrance.

76 Chinhui Juhn et al., “Why has the natural rate of unemployment increased over time?” Brookings Institution (1991), https://www.brookings.edu/wp-content/uploads/1991/06/1991b_bpea_juhn_murphy_topel_yellen_baily.pdf.

77 Timothy J. Bartik, “Displacement and wage effects of welfare reform,” Russell Sage Foundation (2000), https://www.russellsage.org/publications/finding-jobs-1.

78 The proprietary computable general equilibrium model projects a displacement effect of approximately 0.1, consistent with the economic literature.

79 George E. Johnson, “The impact of immigration on income distribution among minorities,” Russel Sage Foundation (1998), https://www.jstor.org/stable/10.7758/9781610442640.

80 The proprietary computable general equilibrium model assumes that over the long-run, increasing labor supply pushes down wages to some degree, inducing employers to hire more workers, experience higher levels of profit, and attracting investment that would not otherwise have been undertaken. As the marginal product of capital rises, the model adds capital until its rate of return goes back to its original level.