No. 6 August 1996
How to Make Sure the New Welfare-to-Work Really Works
Pete Cove and Lee Bowes
Peter Cove and Lee Bowes are, respectively, the Founder and Chief Executive Officer of America Works, a for-profit corporation in the business of finding jobs for welfare recipients.
America Works is a private company in the business of moving welfare recipients into jobs. During our twelve-year history we have helped more than 12,000 people on public assistance get private sector employment in New York City, Albany, NY and Indianapolis, the three cities where we operate. Every year we move about 500 people from welfare to work in New York City alone.
Our philosophy is unique. After 20 years of working in this area we have found that most job training programs aren’t particularly effective in helping people get off welfare. We have concluded, instead, that people need to be attached to the labor force first. Then education and training can help them move up.
We recruit people who are on welfare and give them five or six weeks of training in how to do a resume, how to respond to interview questions and other basic skills, but that’s all. At the same time we have salespeople out banging on doors of potential employers asking if they have any openings.
If they do, we send over one of our people for an interview. If the employer likes him or her, they agree to hire them for a minimum of four months at a somewhat reduced salary. So they save a little bit of money in return for hiring one of our people.
Our philosophy is also based on the belief that a company like us should only be paid when we actually get someone off welfare. The reason most welfare-to-work programs are not successful, conversely, is that they are not paid to succeed. Most programs get funded just for operating, and they continue to get funded regardless of their results.
Depending on our contract, we are usually fully paid only after a six-month trial period. If the person does not get a job, we are paid nothing. Like a temp agency, the employer actually pays us, we take a portion of the income, and then we pay a fee to the worker.
During the four-month probationary period, a member of our staff visits the employee weekly to assure that no outside problems—including a sick child, an abusive mate, or transportation difficulties—are getting in the way of their work. We understand that these complications are far more likely to stand in the way of someone working than a lack of education and training.
We also understand that the internal labor markets of companies are very idiosyncratic; often it’s not poor skills but failing to fit in that costs people their jobs. But workplace norms are very hard to understand for people who have spent only limited time in a workplace. So our monitoring and support system is also designed to coach people on how to get along once they start working.
Let us give you an example of somebody that we have placed. Her name is Brenda, she was 28 and had been on welfare for seven years.
Her schedule was very flexible and, although she had a child, we documented that she had child care in place. We got her work at the Chock Full O’Nuts down at the Chelsea Piers. After three days on the job she called to say her babysitter was in an accident and she couldn’t go to work. We located three different child care centers and a provider who lived in her neighborhood and we were able to quickly get her new child care.
A month later she called to say she had no hot water or heat, could not stay in her apartment and could not go to work. We were able to find her a new apartment, and worked with the welfare department to get her a housing subsidy and to get her moving expenses paid.
There were other problems as well, including the fact that Brenda had three supervisors. Two thought she was terrific but one said she had a bad attitude and was horrible with customers. So we coached her on techniques for dealing with the public, like looking customers in the eye and smiling more. We also talked about how she could be more responsive to her supervisor.
Brenda is now a supervisor, herself, and is studying culinary arts in the evening. But she wouldn’t have been able to do any of this without our service, because any of the problems I mentioned could have knocked her out of the job.
We have been successful. Still, our approach has not been discussed as part of the national debate over welfare reform. There are probably many reasons for that, including the opposition of the social welfare industrial complex. We were invited to Indianapolis by Mayor Stephen Goldsmith, who is also Chairman of the Manhattan Institute’s Center for Civic Innovation, to make a presentation. After we left town many local organizations told the Mayor that they would object to our presence in Indianapolis in the strongest possible terms. “We can do the job,” they said. But the mayor answered, “If you could do it, you would have done it already.” He had to fight for nine months to get us in, and now we’re on good terms with everyone. But they opposed us because we introduced accountability, which is very threatening to organizations that are paid regardless of their results.
There’s also the question of patronage. Politicians can gain politically by controlling who gets certain contracts. A member of the New York State Assembly told us she believed our program worked but would not support any legislation to support us. The reason, she said, is that there is an employment program in her district that over the past fifteen years has been very helpful in getting out the vote for her. And even though she believes America Works was better, she is going to protect the people who have helped her get elected.
Still another issue that is raised about America Works is that we are expensive. We charge the government approximately $5000 to get someone off the welfare rolls. That’s more expensive than some other programs. But our retention rate is much higher than others’. When we get someone off welfare, they’re not back in six months; they stay off. Judged in this light, America Works is actually very inexpensive.
This conclusion was supported by a study recently completed by Columbia University’s School of International and Public Affairs. The study compared America Works with New York City’s job training program as well as with a highly praised Massachusetts program. According to the study, the average cost per participant in the New York City Department of Employment’s program was $2,600, while America Works charged $5,490 for a successful placement. However, given comparative levels of success, “the job placement strategy of America Works is nearly four times as cost-effective as New York’s job training strategy,” the report said.
The report also noted that while the cost of the Massachusetts job training program was $4,126 per person, the actual average cost per person who kept a job for a year was $28,923. “In terms of successful and long-term placement, the clear indication is that America Works is significantly more cost effective,” the report said.
We also receive criticism for only working with welfare recipients who are easy to place. But our statistics show that’s wrong. Here in New York the people we’ve helped get jobs have been on welfare for an average of five years, while 50 percent do not have high school degrees. And in Albany we work with a population which is sent to us, and they have an average of nine years on welfare. Yet, after 15 months, 94 percent of those we have placed are still off welfare and working.
Clearly, the social welfare policies in this country have encouraged dependency. Hopefully, with the passage of welfare reform, that will begin to change. We believe it is not enough to say to welfare recipients you must now all go get jobs and hold them on your own. They clearly need the kind of assistance we provide. But we have shown that given a good job opportunity people considered unemployable can and will go to work.