Chapter 5: Profits and Perverse Incentives

Krissy Clark: For a while now, I’ve been listening to shareholder earnings calls from a multinational multibillion dollar for profit welfare company called Maximus.

Maximus: Greetings, and welcome to the Maximus fiscal 2018 First Quarter conference call. At this time all participants are in listen only mode.

Krissy Clark: Maximus is one of a few for profit companies that operate welfare offices in Wisconsin and throughout the country. It’s the company I visited at the start of this season, as shareholder earnings calls are not the most edge of your seat listening. Unless you know what to listen for human biology made like this earnings call from 2018. It started with the normal stuff, a lot of numbers, the CFO talking about their revenue projections.

Maximus Earnings Call: We now expect revenue for fiscal 2018 to range between 2.4 billion and 2.44 billion dollars.

Krissy Clark: But then the mic goes to Maximus’ CEO, a man named Bruce Caswel, he earned more than $6 million in compensation last year. And here’s where my ears start to perk up. I knew Maximus was already making a lot of money managing and enforcing work requirements in certain welfare programs around the country. But on this call, Bruce wants to tell investors get ready to make even more money, because they’re at the vanguard of what he calls a movement.

Speaker: If you think about what’s being called welfare reform 2.0 domestically, and the movement to add work requirements not just to the Medicaid program, but other programs like SNAP, which is the food stamp program, and other other similar programs. It’s a competency that no other company in the market has like Maximus.

Krissy Clark: Work requirements for welfare programs. They’re not just a competency for Maximus. They’re a policy the company was largely built on it went public the year after welfare reform 1.0 was passed in 1996. And since then, work requirements are a policy that the company has tried to shape, perpetuate and grow by spending millions of dollars in lobbying and political donations to both Democratic and Republican parties and elected officials. Like I said, this investor call I just played you a bit of it happened in 2018 momentum for adding work requirements to more government benefit programs. It’s only kept building since then.

Darin LaHood: Good afternoon. I want to thank everyone for joining us today on this important hearing and how we can restore work requirements to lift more Americans out of poverty.

Krissy Clark: In recent months, House Republicans have held hearings on work requirements sent letters to the White House about it taking to the airwaves sounding the card.

Matt Gaetz: I actually think we should have work requirements. If we impose work requirements on SNAP and on Medicaid, we would have the ability to save $1 trillion.

Krissy Clark: Across the country from Georgia to Iowa to Wisconsin, state lawmakers are pushing for more work requirements in their states.

Speaker: What happens when you pay people to stay home? They stay home. Get those people back to work, work requirements, requirements, work requirements.

Krissy Clark: And a few years ago back when this welfare reform 2.0 movement was just beginning to bubble up. Maximus the for profit welfare company was already starting to see new business rolling in. Here’s CEO Bruce Caswel again on that 2018 shareholders call.

Bruce Caswel: In fact, I’m thrilled that we were recently awarded I won’t name the state but we had recently awarded some business to provide employment and training services to the Food Stamp population, which has been a requirement under federal law for I think 33 states.

Krissy Clark: And an earnings calls over the next several months and years. Bruce is back on the phone with investors hyped about how things are unfolding. Well hyped by corporate CEO standards. Maximus is in the process of launching a new contract in Wisconsin, a new Welfare to Work contract where Maximus will be assigning and enforcing work rules for even more people enrolled in the food stamp program and Wisconsin.

Bruce Caswel: So they can gain employment, avoid reliance on benefits, and meet federally mandated work requirements.

Krissy Clark: But as I’ve been listening to these maximum earnings calls over the last few years, I’ve also been listening to people on the other side of that equation. people on welfare who are subject to work requirements, who for profit companies like Maximus, are ultimately earning money off of.

Mya Miller: Oh I’m a big dollar sign for them.

Krissy Clark: This is Mya Miller, like a lot of women I’ve talked to who’ve been on welfare. She first turned to the system right after she’d had a baby. The daycare job she’d had for years until then didn’t pay much and didn’t have paid maternity leave. So welfare helped her make ends meet in those early newborn days. And like A lot of women I’ve talked to when the programs work requirements kicked in on her case, she didn’t feel like they helped her get the kind of training she needed to actually advance her career. After a few months, she left welfare for another low paying daycare job she found on her own, and she felt trapped.

Mya Miller: She don’t have enough to survive, you’re you’re penny pinching all over again, you’re living paycheck to paycheck, you’re basically worse off, you know, than from where you came.

Krissy Clark: But even though Mya had found her new job on her own, even though it was barely enough to support her son on the for profit Welfare to Work company where she was enrolled, got 1000s of dollars from the government as a reward for the fact that Mya had gotten that job. And when Mya found that out, she was mad.

Mya Miller: I’m making your company money, and I need somebody to assist me and I wasn’t receiving that. It really got under my skin to know that they would get allocated more money based upon my participation, versus actually me getting the services or something that I really could gain from, honestly, quite frankly, I feel like all the money that they received off me I should have gotten big bonuses. You get the bonus not the company gets Yes, that’s what should be offered you keep the job for 90 days, we’re gonna give you $1,000.

INTRO

Krissy Clark: Welcome to The Uncertain Hour. I’m Krissy Clark. This season, the Welfare to Work industrial complex, who had profits, like really profits, and who pays the price? On today’s episode, we’re diving deep into the opaque business models of for profit companies to better understand how they actually make money off the Welfare to Work system and have taken in hundreds of millions of dollars in revenue. It’s a model that hasn’t gotten a lot of notice since it was implemented almost 30 years ago as part of welfare reform. Back then, there were a few articles written about the specter of what might happen if private companies started taking over. How would the goals of a government program meant to help poor people fare in the hands of corporations duty bound to make money for their shareholders. The journalist Barbara Ehrenreich warned of perverse incentives. She wrote that the question of how welfare privatization will work, quote, hinges ultimately on that great mathematical mystery. Where will the profits come from? Her fear? We might never know, because the answers might be deep and contracts and subcontracts kept hidden from view by private companies. Decades later, through our reporting, we’re trying to get to the bottom of this mathematical mystery. We’ve talked to company insiders, watchdog groups and welfare participants combed through government contracts to try and answer how do these companies make money and at whose expense. Chapter 5: Profits and Perverse Incentives. Antoine Dukes is a natural born salesman, he sold mortgages.

Antoine Dukes: Second mortgages, car loans, aluminum siding, I was a manager over a Salesforce Sales Team pretty much most of my life I did sales.

Krissy Clark: Back in 2015, Antoine pivoted to doing sales for a whole new industry, welfare, and one became a quote job developer for a couple of for profit companies that run welfare to work programs in Wisconsin. First, a company called Res-care where Mya Miller who we heard from at the top of the show was enrolled. Then Antoine worked at Maximus, that company whose shareholder earnings calls I’ve been listening to, and one’s task at Res-care and Maximus was basically to sell local employers on the idea that they could fill some of their positions with people on welfare, and to sell people on welfare on the idea that they could climb out of poverty if they took one of those jobs. And for Antoine, this wasn’t just another sales pitch. It was a calling.

Antoine Dukes: I thought I could put more effort in helping people it was a good feeling you know to help people and people come back to say hey, you know, I appreciate you give me the job. You don’t get the software opportunities a lot, especially for black and brown people they don’t get those type of opportunities a lot wages man who’s truly trying to help you not play games and then they just your number. No, you weren’t a number to me. I wanted to make sure you get the job and make sure it was sustainable.

Krissy Clark: Over the years at Res-care and Maximus, Antoine says he worked to develop relationships with local employers, invited them to job fairs, he’d organized at the welfare office where they would set up tables and try to recruit. One company he worked with was General Mills. They have a cereal factory in Milwaukee, and Antoine says, they seem to constantly have openings.

Antoine Dukes: They needed bodies. They were desperate because they because they had high turnover. They had a real they explained listen. We need help. We need to help because we got to pump out cereal, we got to get boxes stacked, create stuff out. But we don’t have the manpower and I kept telling him, hey, come to my job fairs, and I’ll fill all your positions.

Krissy Clark: It wasn’t always easy. A lot of people on welfare face real barriers to employment, didn’t finish high school had criminal records. But Antoine is a believer in second and third chances. Like this one guy who worked with, a war vet who’d struggled with addiction.

Antoine Dukes: He said, what happened was, he got shot, always an army in the US. I take it. I think it was Vicodin or one of those drugs he got hooked on.

Krissy Clark: He’d served time in jail. And with that, on his record, he was having trouble finding a job. Antoine immediately thought of General Mills,

Antoine Dukes: Because they need a body. They not concerned with your background.

Krissy Clark: The job Antoine could get him only paid $10 an hour. But he told the guy, if you can prove yourself and hold on to the job for six months, I’ll get you something better. Six months later, the Army vet still had his job. So Antoine made good on his promise. He called up another company, FedEx.

Antoine Dukes: They hired him at 50 bucks and hour. And then about five months and he came back to me and said Hey, guess what? They made me supervisor. They made him supervisor! But hey, I want to thank you. He gave me a card. He gave me a Walmart gift card for 100 bucks. He said, listen, you saved me.

Krissy Clark: This is the best case scenario. Someone on welfare gets an entry level job that leads to a higher paying job down the road. An employer looking to hire finds a worker to help their company meet its bottom line. And the state has one less person on its welfare rolls. Everybody wins, including Antoine. He says Maximus and Res-care offered bonuses to their staff for getting people jobs. After Antoine got 30 people hired in one month, he says Maximus gave him a $500 bonus.

Antoine Dukes: Then after I got a hundred people hired, I got $1,000 Bonus.

Krissy Clark: But as Antoine got people into jobs and made his bonuses, he started to realize something the system rewarded people like him for the number of jobs, they were getting welfare recipients. But the quality of those jobs was another thing altogether. Antoine says he came to this realization about four or five years ago, when he got a call from the owner of a local McDonald’s franchise.

Antoine Dukes: He called me first and says you know I’m looking forward to come to your job fairs, heard you guys get people hired. I said well, what’s your pay? And he said, well, my pay is minimum wage from my employees, my managers make $9.50.

Krissy Clark: This did not meet Antoine standards for a sustainable job.

Antoine Dukes: And I said no I’m not working with you for that. Because if I get a person a job at McDonald’s, then they gotta get another job just to sustain, you know, you can’t who can live off that, you know, you’re gonna have to have two jobs. And I said, you know, it’s just not worth it sending anybody to you because I still got to give him a job. So he hung up on me.

Krissy Clark: About a month later, and one says his boss told him to come into our office. She said that after Antoine had told the McDonald’s franchise owner, he wasn’t going to send people to fill his jobs. The franchise owner had called her.

Antoine Dukes: She was like he said that you won’t work with him. He says you were really rude to us. And I wasn’t rude to him. I explained to him him that I cannot send him people to work for him making minimum wage, I wouldn’t work with them. Because their their their pay was horrible. And she was like I understand that term. But we have to use them. Because he’s a pillar in the community. And I said no, no, like I understand that. So my boss says well I’ll tell you what, anybody that has a really bad background that you can’t place. We’ll just use McDonald’s for that.

Krissy Clark: As far as Antoine can tell, what Antoine’s manager seemed to be telling him was that for some people on welfare, his role was just to get them into jobs, not to get picky about what kind of jobs they were. Antoine wasn’t really in a position to argue.

Antoine Dukes: I said, Okay, but I was never gonna send anybody there.

Krissy Clark: We asked Maximus about this conversation. They had no comment. The McDonald’s franchise owner told us he doesn’t remember the calls Antoine is describing but that even a few years back those wages Antoine quoted would have been for entry level positions, often for high schoolers. He said McDonald’s can be a great first step in a career gives adults opportunities to work their way up to better pay, and that his franchises currently have no formal relationship with Maximus. But plenty of people that Maximus have gotten sent to McDonald’s in the last few years. According to data we got from the state, McDonald’s has been one of the top 10 employers of people who are enrolled in welfare through Maximus and Milwaukee since 2019. And across the state of Wisconsin among people enrolled in welfare through any private agency. McDonald’s is the fourth top employer When Antoine came home from work the day his manager talked to him about McDonald’s, he was upset. But he also had a pretty clear idea why his manager was pushing him to work with companies, even if they were low paying. Because even if a near minimum wage job at McDonald’s wasn’t enough to bring a person above the poverty line, or support a family, even if it wasn’t enough to get them off welfare, that Job was valuable in other ways, not just for individual job developers like Antoine, who got bonuses if they got people into a certain number of jobs. But these jobs were also valuable to Maximus, the company as a whole. Because of the way the state of Wisconsin has structured its contracts with private companies who run welfare offices.

Antoine Dukes: They get paid based on how many got hired for the month, they had to get a paying job in order to get paid. That’s what a performance was.

Krissy Clark: Remember, those “performance outcome payments” that I mentioned earlier in the series, those special rewards I learned about payments from the state that contractors like Maximus can claim when someone on their caseload gets a job. Well, connecting people with low paying but often plentiful jobs at places like McDonald’s, that has over the years, brought Maximus and other private welfare contractors 10s of millions of dollars collectively from the state of Wisconsin. And again, those jobs didn’t have to keep you out of poverty, they just had to last more than one month, and earn you at least $870 in that month, or involve at least 110 hours of work at a yearly salary. That would equate to about a $10,000 a year job. If the job even lasted that long. Antoine says when he was working at Maximum and Res-care, the for profit welfare companies, management kept close tabs on these payments.

Antoine Dukes: They had to make a profit. That’s what it’s about, you know, you got to get so many people hired. So it was all a numbers game. it is it’s a numbers game.

Krissy Clark: These performance outcome payments are not something that private welfare companies or the state of Wisconsin, talk about much to the general public. They’re not something that’s mentioned on the website, you go to if you’re signing up for welfare. But if you file a public records request for all the contracts that private welfare companies have with the state of Wisconsin, which we did, and if you dig deep into their clauses and tables and appendices, you will find a few paragraphs that get into them. And these incentives make some sense in theory, Ric Ybarra, Senior Manager for business services and Maximus in Milwaukee. He says even jobs that are low paying entry level jobs can help build employment skills for a person who doesn’t have much job history. Rick says these performance outcome payments, or what he calls by their fun sounding acronym, Pops, they incentivize his company in the right direction.

Ric Ybarra: We are always working to get as many pop claims as we possibly can. It is about the incentive. But more importantly, it’s about the success on a participant side. So you know, when you’re getting a pop claimant, that means that you have done something very good right for the program participants that you’re working with. If you get the pop claim, that means that your program participants have have done well.

Krissy Clark: But based on what I’ve been told by company insiders like Antoine and participants like Mya, and based on the state data we obtained, we found that just because a company is making money from performance outcome incentives, it does not mean that their participants have necessarily done well. In the last couple of years, the median wage for people who found jobs while enrolled in welfare in Wisconsin has hovered around $11 an hour, which even if you’re working full time, would put you below the poverty line for a family of three. All the same. In the last 10 years, the state has paid companies like Maximus and Res-care and other for profit and nonprofit companies 10s of millions of dollars in these kinds of 30 day job attainment payments. This is not to cover the costs of any work that contractors are doing or overhead, it’s extra money to reward them like a bonus. To be clear, private companies aren’t the only ones that have struggled to use the Welfare to Work system to get people into jobs that help them become economically self sufficient or lift them out of poverty. In other states where governments run welfare to work programs, they don’t have a great track record either. But with governments in charge, there’s no explicit profit motive. When for profit companies get involved. There’s an extra layer of management, a profit seeking middleman. And Maximus is explicit in its annual reports to the Securities and Exchange Commission about how important performance outcome payments are to With bottom line.

Pat DeLessio: Poverty is a big business. We have privatized so many of these programs, there’s money to be made regulating poor people.

Krissy Clark: Pat Alessio is a legal aid attorney in Milwaukee. She’s long worked with low-income families, many on welfare. She says more government money should go directly to families rather than for profit welfare companies. And she questions how much this privatized Welfare to Work system actually helps people.

Pat DeLessio: It doesn’t get them out of poverty, they’re still caught and low wage jobs. In general, people aren’t getting the opportunity for long term success. And most people, you know, they can get these low wage jobs on the road.

Krissy Clark: I’ve talked to other welfare experts who’ve studied the privatized system in Wisconsin, who’ve told me there’s this larger challenge with privatizing welfare. No matter how you write the contracts, companies with a profit motive are going to prioritize finding ways to make money off those contracts above all else. That’s also the conclusion Antoine Dukes came to, the guy who’s worked for two of the biggest for-profit welfare contractors that operate in Wisconsin Maximus and Res-care. And yet he says these performance outcome payments were a driving force among the companies he worked for, in terms of how they ran the welfare programs, not just because of the money they got out of them, but because it was part of how the state measured the company’s success.

Antoine Dukes: Because the state we used to do immediately to state and maximums, they wanted to know results. They would always say, if you don’t hit numbers, you will lose contract to another agency, they would say that they were threatened that Hey, guys, when keep contract is the only key number you don’t have a contract. We say that every meeting, so then the managers will go back to surprises. Hey, want to make sure we keep the contract. Now’s the main goal keep contract.

Krissy Clark: Antoine says he eventually got tired of playing what felt to him like a numbers game. As much of a Salesman as he is making money off low wage jobs for welfare participants. It didn’t feel like a sale worth making. He got out of the Welfare to Work industry. Near the beginning of 2020. A few years after his boss at Maximus told him he had to send people to McDonald’s. Antoine quit his job. He started his own job placement company, not through any welfare program. He just helps local employers, that he gets to choose, fill jobs. To find recruits, he still looks to communities where people might be on welfare.

Antoine Dukes: I posted this on Facebook in 2021. If you know anyone tired of being on programs like W-2, i.e. welfare, and is frustrated about filling out tons of paperwork, to get a job and still can’t work, have them contact me. I will put them to work without sending all that paperwork or filling out job logs for job. It’s now time to move away from programs like W-2.

Krissy Clark: If the goal of a program or an agency like Maximus a program like W-2 if the goal is to help parents who are struggling financially, if the goal is to help them get out of poverty get a better life. Was Maximus succeeding at that?

Antoine Dukes: Nope. I’m gonna say no to that. I’m gonna say because of the fact that they really don’t want to help everybody. You know, and over the years that we’re working in rescue and Maximus, they didn’t want me to help everybody. They just did.

Krissy Clark: Something for profit companies do seem to want when you listen in to their investor calls like this one for Maximus is more work requirements which could get them even more business.

Maximus Earnings Call: There’s obviously a lot of energy right now at the federal level on the topic of work requirements and what they call consumer engagement and personal responsibility as it relates not just to the Medicaid program, but to the SNAP program, and even extending into the housing programs administered by us.

Krissy Clark: Private companies have a vested interest in perpetuating the Welfare to Work work requirements system. They’ve spent many millions of dollars in lobbying and campaign contributions over the years trying to influence policy. We asked the state of Wisconsin to comment on these private companies track records. A spokesperson from the agency that oversees welfare, wrote that performance outcome payments aren’t just to reward a private company for a job a participant gets, but to recognize services the company provides that might improve a person’s employability. And in recent years, the state has added a new category of performance payments to incentivize companies to connect people with higher paying jobs, though, to qualify for those payments, the job only needs to pay $16.40 an hour in Milwaukee. Still not a living wage for a parent with one child. And it’s pretty rare for companies to claim one of these payments. I got a more blunt assessment of Wisconsin’s Welfare to Work program. In a brief phone call I had with Maggie Renno, the director of analytics and research at the state agency that oversees welfare. She says there are clear challenges facing the program, which again, the state calls W-2. We’re Keenly aware that a lot of folks end up back on W-2 and that’s something that we’re really keyed into. We know our participants land in low wage jobs. It’s a little hard to hear, but she’s saying they’re keenly aware that a lot of folks who go through the Welfare to Work program end up back on welfare, or in low wage jobs. And what do these for profit Welfare to Work companies have to say for themselves about their track record. Maximus told us in a statement that they’re proud of the work they do in Wisconsin, and then on top of helping people find jobs. They often help people on welfare, secure childcare, transportation and other services. We also reached out to Res-care. One of the other places Antoine worked, which recently changed its name to Equus. In a statement, that company said that they’re dedicated to assisting welfare participants gain access to employment based on their experience and available training opportunities. Of course, written comments from company spokespeople can only communicate so much. After the break, I finally get to talk to the founder of one of these companies who helped shape this whole privatized model built his wealth off of it. And he is surprisingly frank about it all. That’s after a break. I really wanted to talk with someone high up in one of these major for profit welfare companies to ask them more about their business models and these performance outcome payments and what they had to show for their welfare to work programs. I spoke with a maximum vice president early on, but the company declined my requests for a follow up interview with him. Res care also declined my interview requests. I had better luck with America Works. It’s a privately held for profit Welfare to Work company that operates in Milwaukee and altogether runs about 30 welfare offices in 17 states. The founder of America Works a guy named Peter Cove agreed to talk to me over zoom.

Peter Cove: Oh, there you are. Nice to meet you, Krissy. Oh, you’re such a pretty face.

Krissy Clark: Well, before we go any further I caught a glimpse of you before you turned off your video. Tell me about the mustache.

Peter Cove: Well, I’ve had it for about 60 years.

Krissy Clark: 60 years. Peter Cove has long been a firm believer in the power of work and the power of facial hair. He’s got quite a prominent mustache of the handlebar variety, kind of a salt and pepper version of the monopoly man. He’s also fond of bow ties. Today. Peter lives in a quaint town in Connecticut in a big white house neatly landscaped, a vintage British motor car sits in the three car garage. It’s a lifestyle he’s funded by founding the company America Works.

Peter Cove: Which is the first for profit Welfare to Work company in the United States.

Krissy Clark: And you put the for profit, right right in that sentence. Why is that important to highlight?

Peter Cove: Because number one, we were the first to do that. And number two, we are the best.

Krissy Clark: The mission statement of America Works. It, quote changes people’s lives by lifting them from government dependence into the productive world of employment.

Peter Cove: Pope John Paul the second had an encyclical on work that if you deny a man, a job, you deny them part of this spirituality. work really does allow you to prepare and present who you are to the world.

Krissy Clark: You’re quoting the Pope, are you? Are you religious?

Peter Cove: I’m Jewish. That doesn’t mean I can’t quote the Pope. I mean, no, I mean, they don’t make Jews like Jesus any longer. I mean…

Krissy Clark: Peter started America works in the 1980s. Before cash assistance had mandatory work requirements, or was allowed to be run by private companies. At first, America Works helped government welfare offices find jobs for participants who were looking. But then that idea started bubbling up early on in Wisconsin soon and other parts of the country that work should be required to get welfare, and that private companies could land contracts, administering and enforcing welfare to work programs. Peter liked this idea. It reflected his ideology. And as a businessman, he smelled a business opportunity. He was eager to be at the table, influencing policymakers to lean into the thing he’d already made a business out of. In the mid 1990s. Peter got that chance. Vice President Al Gore invited Peter to the White House to sit on a panel about reforming welfare across America. At the time, the culture was rampant with fears about so called welfare queens and unshakeable government dependency. The Clinton administration was on a mission to quote, end welfare as we know it.

Peter Cove: And Donna Shalala, who was then Secretary of Health and Human Services, said, You know, we can’t have welfare reform in this country until we solve transportation and daycare and education and health. And I said, can I speak? And I said, Madam Secretary, have you noticed that we have for the last 40 years said, we need all these things and nothing’s happened. What we need to be doing is moving people into jobs. Work was really the key in the cornerstone of what we should be doing in our country as a policy.

Krissy Clark: In an early example of private welfare companies trying to influence welfare policy, Peter evangelized, this idea to folks in the Clinton administration and people and Republican Speaker of the House Newt Gingrich’s camp.

Peter Cove: At that point, Republicans didn’t really believe that people on welfare wanted to work. And Democrats liberals didn’t believe that they could work that there were too many barriers they had to be able to go to work.

Krissy Clark: When politicians from across the aisle came together for a full-blown retooling of welfare in America, in the form of new legislation passed in 1996. Peter says he was right there helping shape policy.

Peter Cove: So, you’d see our fingerprints in the bill, on the fact that training programs were not what we’re going to be supported, they’re going to support getting people into jobs. And you would also see our fingerprints on the work requirements. That meant that if you were able bodied, and you were on welfare, you had to go to work.

Krissy Clark: Under this brand new version of national welfare policy, welfare recipients would generally be required to start searching for work right away, and private business could be enlisted to run the Welfare to Work program.

Peter Cove: So to me, that’s how we changed the whole dynamic of welfare to work in this country.

Krissy Clark: And so began a wave of privatizing government welfare offices.

Chicago Tonight (1996): The new welfare reform law allows states to contract with private for profit companies to run their welfare systems.

Claudia Lanqquth: We can speak to the business community because we’re a private company ourselves.

Chicago Tonight (1996): The push for privatizing welfare systems has already spread across the country. Here in Texas, private companies are competing for a contract, which could be as much as $2 billion to run the state’s welfare services.

Krissy Clark: As one speaker at a welfare privatization conference put it at the time. Yes, they had one of those privatizing welfare offices was probably the, quote, hottest privatization trend in the country. Companies that already had other contracts with the government started eyeing welfare as a new money making venture big companies like the weapons manufacturer or Lockheed Martin, the computing giant IBM, and smaller fries like America Works. I asked Peter Cove, what his elevator pitch was to lower governments to contract with him.

Peter Cove: All right, going up on an elevator and I got a minute. What we basically say to government is, we will charge you for getting someone off welfare and keeping them off welfare for, let’s say, six months, in which time, you’re going to make back much of what would have been put out for keeping them on welfare. And to the private sector, we say, we’re going to bring you a worker who’s going to save you a lot of money.

Krissy Clark: Right. And so do you think of yourself as serving? Like, who is your customer? Is it government is it employers.

Peter Cove: Both. Both government and employers, we need the government to give us the money at some point, we just said, the way you pay us as you pay us for getting the person off of welfare and a job and staying in a job. And we say to the company, here’s somebody you can you can take, who more likely than not is going to make it and we’re going to help you with our corporate representatives and others to be sure that the person stays in the job.

Krissy Clark: Government is one of your customers, businesses are another. What about the welfare recipients? Are they-

Peter Cove: I think of them more as the product of our company, rather than customers?

Krissy Clark: So people are the products?

Peter Cove: Well, there are, I mean, yeah, of course. I mean, their inventory for us. They’re our raw raw product, our inventory, they come in, and we have to do something with them. It terminology may bother some people. But that’s in fact, what we do.

Krissy Clark: And how much do you make off your inventory? Of your products?

Peter Cove: We make enough to stay in business, our revenue runs between 40 and $50 million a year.

Krissy Clark: It’s all part of the pitch that America Works brings to state and local governments whose welfare offices it wants to run.

Peter Cove: For us as a private for profit company, we had a bottom line. And so we said, if we don’t succeed, we go out of business. That’s not true of government. If government doesn’t succeed, it just gets funded at a higher level. We don’t succeed, we go out of business.

Krissy Clark: But how do you measure that success? I ran Peter through some of the results we found in our analysis of data from the state of Wisconsin, from 2016 to 2021. America works, the company he founded got on average $6.3 million each year from Wisconsin, that includes the money the company gets in exchange for managing various parts of the welfare program in the eastern central part of Milwaukee. And all the performance outcome payments it gets. During that time, America works had an average of 2700 people enrolled in their cash welfare program each year. And based on our analysis of state data, an average of about 1700 of those enrollees were considered job ready, according to the state. What’s realistic, or what’s a good number for how many people would actually be getting jobs through America works?

Peter Cove: I would say about two thirds.

Krissy Clark: So two thirds is almost 70%. I’ll do a little quick math for you. That would be about 1100 people. But according to state data, in that time, America Works claimed a job attainments for way less people than that, an average of just 450 people each year. That means that at America Works roughly just 27% of the number of people deemed job ready, got jobs that lasted more than 30 days. 27%. So much less than two thirds, not even 1/3. What do you how, what do you make of that?

Peter Cove: What do I make of that? That we’re not doing as well as I would hope we would be doing, that I would hope that we would be getting more people into jobs. And that it’s not easy in Milwaukee. We have a very entrenched welfare population there and moving them from the rolls and off is not easy. And all I would say to you is we’ve got to do a better job there.

Krissy Clark: And don’t forget those jobs that America Works did claim an average of 450 people God each year, none of them are necessarily even jobs you can support yourself or a family on. In order for a company to make a claim on these jobs. It only needs to earn you about $800 for a month. Meanwhile, America Works earned an average of a million dollars a year in rewards from the state for the fact that people on their caseload got those jobs. I should say other private contractors besides America Works fared just about the same in terms of the number of job ready people who actually got jobs from 2016 to 2021. Not a single welfare company for profit or nonprofit in Milwaukee County claimed more than a third of job ready welfare participants got a job that lasted more than 30 days. We also looked at how many people contractors claimed had gotten jobs that lasted longer, at least 90 days. According to our analysis of state data, America Works claimed that on average, only 16% of job ready people on their caseload got those longer lasting jobs, other private contractors in Milwaukee fared about the same.

Krissy Clark: And then the kinds of jobs what how do you approach that? How do you think about? Like, should it just be literally the first job that somebody can get? And then that sort of a ideally a ladder from there?

Krissy Clark: At this point, you can hear Peter fidgeting a bit, clicking his pen over and over.

Krissy Clark: Or is it? Does it make sense? In some cases to okay, you got this McDonald’s job, but don’t take it? Let’s see if we can get you a job with a slightly higher wage. How do you? How did the programs approach that question?

Peter Cove: What was your first job?

Krissy Clark: My first job was babysitting.

Peter Cove: What would you think as a company that I should have told you don’t take that you can get a better job than that?

Krissy Clark  Well, when I was 12, well, because I probably couldn’t have gotten any other jobs.

Peter Cove: The my I’m trying to make a point. My point is that I believe in the dignity of work. And I believe that you get into the job, and then you move up from that job. A lot of the people that we please don’t even know how to present themselves in a job. That first job gives them the opportunity to learn what the work work is like how to behave in the job. What do you do when someone asks you to do something you don’t want to do? How do you handle coming in late? What do you say to the person? What are you there, there are all kinds of work issues that people don’t really understand, because they haven’t really worked. And consequently, I want to see people take any job they can get, and then we’ll help them move up.

Krissy Clark: We reached out to current management at America works about how many jobs people on their caseload have gotten, they didn’t respond to repeated requests for comment. We asked the state of Wisconsin about it to a spokesperson told us that the company has, quote, met or exceeded the required number of performance outcomes. But are those requirements good enough? If the company has in many recent years, according to our analysis, been making claims that on average, less than a third of the number of job ready people in their caseload got jobs that lasted more than 30 days. To be fair, not all jobs may turn into one of those claims. There’s lots of documentation needed to submit a claim and some jobs don’t pay enough or give people enough hours to count. But the state also keeps track of a broader metric with a lower standard, how many quote full time jobs meaning at least 30 hours per week to people in America Works get. This includes jobs that don’t even last a month. According to that much lower standard. Data still shows that less than a third of job ready people got those kinds of jobs that America works. And we know from studies of welfare to work programs more broadly, that people do not usually end up getting jobs that help them climb out of poverty in the long run. But the thing is, even if America Works, and other private companies aren’t showing huge results in Wisconsin for getting people into jobs, let alone jobs that last very long or get them out of poverty. Most of their money comes from all the other stuff they get paid to do to run a welfare to work system, like enforcing time limits for welfare and enforcing work requirements. All the job searches, job fairs, job training classes that welfare recipients are required to document they’ve actually done. All the stuff that was so aggravating to Darnetta, Mya and so many other people I’ve talked to on welfare.

Krissy Clark: I’ve heard people tell me that they felt that the requirement part felt demeaning or condescending that they have said, you know, of course, I know that work is important, and I want to work and I’ve worked in my life, but actually the bureaucracy and kind of enforcement around the work requirements, the job logs and the whole paper trail around it. I have heard some people say that starts to feel like it’s getting in the way-

Peter Cove: They are right. They are absolutely right. I would not disagree with that. My wife calls it administrivia and there’s a lot of it. And sometimes the work required Humans are done in a very onerous way, which is wrong. That’s wrong. But the idea that in any way it’s demeaning to ask a person to work in in, in order to get benefits, to me is not the meaning what’s the meaning is to keep the person from working.

Krissy Clark: Just to play devil’s advocate with that, I mean, doesn’t have a system that is requiring work. As soon as you bring in the requirement piece, aren’t you ensuring that there’s going to be a lot of that what did your wife call it?

Peter Cove: Administrivia.

Krissy Clark: Administrivia, you know, like, isn’t that necessary, if you’re going to say, this is a requirement and we’re going to enforce it, you’re opening up the floodgates to a lot of paperwork and a lot of monetary stuff that has to be done.

Peter Cove: Absolutely. And you agree that that can happen. But what what also can happen is the people can go to work.

Krissy Clark: Some critics say with all of these private companies, dependent on welfare to work programs, have we started a new welfare industrial complex these for profit companies that are dependent upon these work these work programs.

Peter Cove: The fact is, it’s not the providers that need the government, it’s the government that needs the providers, because they have not been good at getting people into jobs. So I see it not as a welfare industrial complex. I see it as a marketplace, where people can buy to do things for the government, that the government is not capable of doing itself.

Krissy Clark: But like I said, even if private companies are not that good at getting people into jobs, or good jobs, these companies still get paid by the state. For every person that just walks into an America Works office in Wisconsin and says hi, I need help and gets enrolled in welfare. For every one of those cases that America Works manages. The company takes in money, regardless of whether that person actually gets a job, or gets out of poverty. For profit, contractors love to say that they only get paid for how well they perform. But a lot of the money these companies get is for administrativia. Last year, in 2022, the state paid America Works almost $5 million for managing about 2000 welfare cases, assigning participants required work activities, making sure they were doing them for the required number of hours, providing them with required motivational classes and work placements, monitoring and sanctioning them one way or another. These agencies are earning money. Many of them are for profit companies. Their goal is to make money. There’s that old joke about the couple who complains about a restaurant, the wife says the food is horrible, and the husband adds, and they have such small portions. If you look at the track record of the Welfare to Work model, private contractors seem to be getting people into pretty bad jobs. And not that many of them. But if we’re paying these companies, millions of dollars in taxpayer money to help people climb out of poverty, shouldn’t what’s being served up, be good and plentiful. That’s it for this episode of The Uncertain Hour. Next week, we look at how the privatized Welfare to Work System shapes jobs everywhere, even for people who aren’t on welfare.

Tracy Jones: I didn’t want to get on W-2 because of all these three use stuff they were sending people through just to get a check. So, I didn’t even bother to apply. I was like, work for the temp agency. I probably come out better than 6.73 a month anyway, so.

Krissy Clark: How many different temp agencies do you think you’ve worked for?

Tracy Jones: At least 15 to 20.

Krissy Clark: How many different temp assignments?

Tracy Jones: Oh, more than I care to count.

OUTRO

Krissy Clark: That’s in the next chapter of this season of The Uncertain Hour. This episode was reported by me, Krissy Clark. It was written and produced by me, Grace Rubin, and Peter Balonon-Rosen. Michael May is our editor. Data wrangling by Elisabeth Gawthrop and Ben Clary from APM Research Lab. If you want to read more about Maximus, ResCare and other for-profit welfare companies – check out some great articles by Tracie Mcmillan in Mother Jones, and H. Claire Brown at The Counter. Research and production assistance from Marque Greene and Tiffany Bui. Betsy Towner Levine provided fact-check support. Scoring and sound design by Chris Julin. Jayk Cherry mixed our episode. Caitlin Esch is our Senior Producer. Bridget Bodnar is Director of Podcasts at Marketplace. Francesca Levy is the Executive Director of Digital. Neal Scarbrough is Marketplace’s VP and General Manager.