Replacing welfare with jobs: most people want it, but
Middlebury, VT. — Almost everyone wants to see the welfare system in the United States reformed. But progress toward that goal will come slowly, experts feel. And the emphasis is on finding work for welfare recipients.
"The work issue dominates every discussion of welfare reform," Larry L. Orr of the US Department of Labor told a recent conference of economists debating the subject at Middlebury College.
With a mood of fiscal conservatism abroad in the US and the heat on for a balanced budget, resentment against those on welfare is growing. Former Secretary of Commerce Juanita Kreps told the Conference that she has heard more of the "cliche arguments" about "lazy and shiftless freeloaders" recently than at any time since the New Deal.
President Carter's two-part welfare reform package, stalled in Congress, calls for a national minimum level of AFDC (Aid to FAmilies with Dependent Children) payments and jobs program including training and subsidized employment , under the authority of CETA, the Comprehensive Employment and Training Act. But with defense rising on the national priorities list, and expenditures for many social programs linked to inflation, welfare reform is thought likely to be sacrificed for a balanced budget.
In any case, no one should expect welfare recipients to return to the work force in large numbers any time soon, experts warn.
Bradley Schiller of American University says that of the nearly 11 million recipients of AFDC (administered by the states, with federal matching money), 8 million are children and almost all the rest are single mothers or other relatives caring for them. Most of these could not be reasonably expected to work.
The government has come to feel that manpower training programs intended to make the unemployed more attractive in the job market are not cost-effective. And so the emphasis has shifted to direct job creation -- public service jobs and also subsidiries for private employers.
Experience with direct job creation gives "a basis for cautious optimism," says Robert H. Haveman of the Institute for Research on Poverty at the University of Wisconsin. Currently an employer can claim a 50 percent tax credit on the first $6,000 of wages paid a newly hired worker from a designated set of categories, including youth from low-income families, the handicapped, and Vietnam-era veterans. And since the subsidy is only partial, the employer is sure to get his money's worth out of the employee.
Public-sector subsidized employment doesn't have any such guarantee of productivity, he points out. Moreover, public sector jobs tend to replace private jobs, and creating a public service job can cost up to $10,000. But Mr. Haveman cites a Congressional Budget Office report estimating the cost of creating jobs indirectly, through the traditional fiscal stimuli of deficit spending and tax cuts, at $20,000.
Mr. Haveman urges support for employee- based subsidies. The employee is subsidized at a given percentage rate up to a certain target wage rate. Suppose the target wage were $4 an hour, and his skills worth just the minimum wage of $ 3.10, and the subsidy rate were 50 percent. The employer would pay $3.10, and the government would subsidize this with 45 cents -- 50 percent of the difference between the market wage and the target wage. Because the subsidy is only partial, the employee has an incentive to earn raises, and the government's share phases out as the employee approaches the target wage on his own merits.
An advantage of this proposal over the current Targeted Jobs Tax Credit is that the employee would be able to sell himself as able to give more than minimum effort in return for the minimum wage.
But Mr. Schiller warns that jobs programs can be problematic. If the jobs aren't an attractive alternative to welfare, no one will want them. If jobs are too attactive, people will leave other employment for them.
The National Supported Work Demonstration, a project involving 15 cities and funded by the Ford Foundation and several federal agencies, has attracted attention lately as a way to get people off welfare. AFDC mothers did quite well, experts say, in this five-year program which put them into closely supervised "transition jobs" where they were to learn basic skills including, at first, simply showing up on time. Then they were to "graduate" to regular jobs. Participants got off welfare at a much higher rate than a control group not in the supported jobs.
But Mr. Schiller points out that only 15 percent of all welfare mothers would meet the requirements of that supported work program, which called for mothers with no children under six and no work experience.
The Work Incentive program (WIN) "received publicity out of all proportion to its magnitude," according to Mr. Haveman. It required 2 million welfare mothers to register for jobs during the early 1970s, but only a few thousand got public jobs, and most of those were really just on-the-job training. Bradley Schiller notes that the average reduction in welfare benefits as a result of WIN was $10 per month per family.
A couple of other jobs-creation programs are in the experimental stage around the country. They are like WIN, but without the training programs and services that plan involved. Mr. Schiller warns that help is needed on both the "supply side" and the "demand side" of the labor market. Low-skills workers need to be made more attractive to employers through training and other services, and employers need incentives to hire them. And in any case, progress is going to come slowly.