Excerpts–Fall 1999
Washington’s New Poor Law
Dissecting Our So-Called Full Employment Economy
Back to Austerity? The Scene from Europe
Australia’s Situation
Coalition Goes Global
From the Chair
Coalition Gets Grant for Latino Research
International News
Beyond the 50th Anniversary of the Universal Declaration of Human Rights: Defending the Right to Work
George Brown’s Commitment to Full Employment Policies
Network News

By Sheila D. Collins

Two years after passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), the nation’s policy elites have declared welfare “reform” a resounding success. As evidence they cite dramatically reduced welfare caseloads and increased numbers of welfare recipients taking jobs. But the evidence from numerous state follow up studies paints a far less sanguine picture.

Most states have been using sanctions for rule infractions much more aggressively than they had in the past, and many have been discouraging families from even applying for welfare in the first place. This suggests that a significant proportion of those who left the rolls (or were deterred from them in the first place) may have fallen into deeper poverty.

Economic Growth and Deepening Poverty

Indeed, the first two years of welfare “reform” have been correlated with disturbing rises in several poverty indicators, despite a dip in the overall poverty rate. Here are some of the findings from several different studies:

• average incomes of the poorest 20 percent of female-headed families fell from 1995 to 1997.
• between 1996 and 1997, over 400,000 more children were living in extreme poverty–below one-half of the poverty line.
• 81 percent of 34 cities surveyed reported significant increases in requests for food assistance and emergency shelter.
• Second Harvest, the nation’s largest distributor of donated food to emergency food providers projects a shortfall from 1997 to 2002 of 24.558 billion tons of food or the equivalent of three meals a day for 3.24 million low-income people for an entire year. To make up for this loss, they estimate they will have to expand their collection and distribution activities by more than 425 percent over their 1995 capacity and maintain this expanded level throughout the six-year period. Yet despite this quantum leap in demand, the companies that donate food are now donating less than they were, in part because of streamlined business methods which result in less leftover food.

Working, But Still Poor

Welfare recipients are required to work a minimum of 20 hours a week for the first two years of the law’s operation, rising to 30 hours by the year 2000. In two-parent families, both parents must work–one for 35 hours and the other for at least 20 hours per week. What do we know of those who have been tracked? While the evidence is still spotty, state follow up studies indicate that between 61 and 87 percent of those who left the rolls for work found jobs in 1998 and between 50-70 percent in 1999. The National Governors’ Association hailed this job placement record as “far exceeded[ing] expectations of proponents and skeptics alike.” But again, the glowing rhetoric of policy makers obscures the reality of life after welfare.

• Many of the jobs were part-time and temporary
• Few provided paid vacations, sick leave, or health and retirement benefits
• Despite increased efforts by states to “make work pay,” by March 1998, only 8 percent of the previous year’s recipients had jobs paying weekly wages above the three-person poverty line
• Between 1997 and 1998, the proportion with weekly wages below three-quarters of the poverty line surged upward from 6 to 14.5 percent.
• The percentage who left for work in 1999 was only 5-10 percent higher than the proportion of recipients who left welfare for jobs under the old AFDC program, when general unemployment was higher than it is today.
• Most families continued to rely on other forms of public help like food stamps, Medicaid and transitional childcare subsidies, as well as on family and friends.
• Since welfare repeal, fewer families are receiving Medicaid and food stamps, even though they may be eligible.

The Job Gap: Fact or Fiction?

The lowest unemployment rate in 30 years would appear to indicate that the job gap we have called attention to (see Uncommon Sense #5 ) has been overcome. But several findings belie this assumption:

• in 1998, 163 cities and 670 counties had unemployment rates that were more than 50 percent higher than the national average.
• 92 percent of 34 cities surveyed in 1997 reported that there were not enough low-skilled jobs to meet the federal work requirements of the welfare reform law.
• at rates of job expansion in New York City at the time of welfare “reform,” it would take 21 years for all adults on public assistance to be absorbed into the economy, even if every newly available job went to a welfare recipient.
• workfare–a program in which welfare recipients work off their welfare checks in jobs that have been carved out of those held by retiring workers or workers whose hours and wages have been cut are operating in at least half the states surveyed. The existence of large workfare programs in cities like New York where welfare recipients are the most numerous, is an indication of the failure of local labor markets to provide enough entry-level jobs.

Sheila D. Collins is Professor and Chair of the Political Science Department at William Paterson University and a member of NJFAC’s Executive Committee.

June Zaccone

With the unemployment rate lower than in decades, the media, many politicos, economists and ordinary folks now talk about our “full employment” economy. So why is the Coalition still talking about unemployment? I will discuss three reasons: 1.We don’t have real full employment; 2. the current “low” rates are accidental, not the result of a policy commitment; and 3. the economy is nowhere close to what real full employment can offer.

Not Real Full employment

We don’t have real full employment: Each month the Coalition’s web site reports the real unemployment rate. In addition to the official jobless, we include part-time workers who want fulltime work, and those who want work but are too discouraged to look, or need some help, like childcare or transportation so they can be available for work. This roughly doubles the official unemployment rate. And even that is an average rate that masks extremes. For example, in September, when the official unemployment rate was 4.2 percent, among 16-19 year-old black men it was at the Depression level of 30.6 percent. And though downsizing is out of the news, more people were laid off in 1998 than in any other year in the 1990’s and laid-off workers often end up with lower paying jobs.

No Policy Commitment

Current “low” unemployment is not the result of a policy commitment, but rather of extraordinarily high consumer spending. Rising income, the stock market boom, and ads galore have encouraged this spending, which has risen even faster than income. Saving has fallen from what mainstream economists considered the perilously low rates 5 percent of the 1980’s to recent negative rates–the first since the Depression.* Household debt has risen in an expanding economy with rising income. This is truly extraordinary since paying off a mortgage and employer-provided pensions are counted as part of household savings. Capital gains from the stock market boom have fueled a spending spree. This euphoria is unlikely to be sustainable. The Federal Reserve, which didn’t interfere with this economic expansion, is always on the lookout for inflation (still invisible), and may soon ruin the party with interest rate increases. The rest of the government is infatuated with budget surpluses, which are potentially very depressing to an economy.

Real Full Employment Means Decent Wages and MORE

Our view of the meaning of full employment is a comprehensive one, and our goals very long-term. It is not just about unemployment but also wages: they are still terrible for many workers. Though rising, real [inflation-adjusted] wages are still considerably below what they were in 1973. Even new college graduates have suffered; their starting wages fell by 7 percent between 1989 and 1997. The good news is that recently, due to declining unemployment and the minimum wage increase, the largest percentage gains have gone to the lowest-paid workers, whose wages have fallen the most.

The problem is not only the level of wages. As average wages have fallen, income inequality has increased so that the many on the down escalator watch the few on a rapidly rising up escalator. The US now has the widest gap between rich and poor in the industrial world. Using an old cliche, the rich have gotten richer and the poor have gotten poorer. This has not always been true, but it is now, and the poorer includes some of the formerly middle class. Wealth inequality, even worse than income inequality, has continued to grow. In 1997, the top 1% of U.S. households owned a larger share of wealth than the bottom 90 percent. Together, just three Americans own more assets than the poorest 50 million. According to Public Citizen, “If the minimum wage had kept pace with CEO pay since 1960, it would now stand at $40.97 an hour.” So we wouldn’t need living wage campaigns!

Finally, it is by no means our ideal to get every last person working fulltime, 50 weeks a year. Clearly, many people work too long and too hard while others are shut out of jobs. The National Jobs for All Coalition advocates shorter workweeks, longer vacations, and sabbaticals for all workers. It is absurd that much of our increased social riches has been used for mega-houses, more prisons, and more Prozac instead of more leisure, meaningful work, environmental protection, national health insurance, smaller classes, and child and elder care.

*Recent government revisions have converted these to very low positive rates.

This article was adapted from a talk given to the Planners Network Conference. June Zaccone is Associate Professor of Economics (Emerita), Hofstra University, and a member of the NJFAC Executive Committee.

Jörg Huffschmid

In 1997 and 1998, the conservative governments of Italy, Great Britain, France and Germany were voted out because of frustration and opposition to the policy of downward wage pressure, social cuts and deregulation, sold as the only way to more employment and European unity. By the end of 1998, 12 out of 15 European Union member states had Social-Democratic-led governments. Hopes were high for new policies, with employment as top priority.

Those hopes have mostly been dashed. Though in some small countries like Denmark and the Netherlands the unemployment rate has fallen, this is largely due to more part-time workers with considerable wage losses. Only France has pursued a macroeconomic policy with public programs for new jobs in services and a law introducing the 35 hour week in the private sector. In two years, the Jospin government created 750, 000 jobs. Though not enough, the direction is right.

The rest of Europe looks bleaker. Persistent unemployment averages about 10%. The really black spot is Germany. After a promising start, the government has increasingly given in to business. Social Democrats and Greens have completely reversed their policy. Before election they insisted again and again that Germany’s biggest scandal was mass unemployment. Now these leaders state that the biggest scandal is public debt, so its reduction must be top priority. And, like their conservative predecessors, their first spending target is social benefits. As a result, unemployment in September 1999 was exactly the same as one year earlier.

Also, the German and the British governments have reinforced the European austerity agenda. The “European Employment Pact,” adopted at the June 1999 summit in Cologne, rejects monetary and fiscal policy as tools for more job creation and relies entirely on lower wages to increase employment. Tony Blair and Gerhard Schroeder also formulated a program for European social democracy, featuring flexibility, low wages and “modernisation” of the social welfare systems–which comes down to large-scale privatisation and deregulation.

However, this slap in the face has led to a sharp drop in votes for Social Democrats in European Parliamentary elections and an even stronger defeat of the German ruling parties in regional elections. The French Socialist Party has refused to take the Schroeder/Blair road and calls for an alternative program to control and regulate the destructive forces of free markets. More European economists are criticizing monetarist polices. Although neoliberal policies have recently made a comeback, albeit with slightly modified rhetoric, public debate is more intense than before and the potential for protest and change is increasing.

Jörg Huffschmid is Professor of Political Economy and Economic Policy at the University of Bremen and co-founder of European Economists for Alternative Economic Policy. He is a member of the Coalition’s Advisory Board.

By Jocelyn Pixley

Australia’s unemployment has deteriorated further as a conservative Federal Government moves into its second term–with a majority of seats but not votes. Since the 1980’s, unemployment has mainly ranged between eight and 10 percent. Yet the unemployed have “universal” rights to an austere, means-tested wage replacement. These Federal unemployment allowances, paid from general revenues, are of indefinite duration and available to all who meet the means test (one can still own a house and car) and are actively seeking work. Disability, old age, and single-parent pensions (until the youngest child turns 16 years) are also comprehensive but less austere forms of means-tested welfare. Thus, anyone unable to obtain gainful employment with little or no access to “unearned income” has a right to welfare. Since 1907, centralized industrial relations courts have set basic minimum wages and conditions (such as the right to paid sick leave and four weeks’ annual vacation pay) for most workers. After Equal Pay decisions in the 1960s, the gender wage-gap nearly rivaled that of Scandinavia. The previous Labor Government also introduced subsidized and accredited child care centers across Australia.

Australia has been called a “wage earners’ welfare state,” with wages decided by industrial relations judges based partly on need, not exclusively on employers’ alleged capacity to pay. In the 1980s, Medicare, universal health coverage for people of all ages, financed from progressive taxes, was introduced. Thus, there was a universal, if austere, system of means-tested payments for everyone not in the labor force, and a more systematic defense of workers’ wages and conditions.

The former Labor Government (1983-1996) undermined some of these provisions, under the slogans of international competition and inflation reduction (via an Accord with unions on wage freezes). But social wages were enhanced and the safety net left in place. Since 1996 the conservative government has cut child-care funding, and the work tests for unemployment benefits now resemble US Workfare, with a ‘Work-for-the-Dole Scheme’ (the actual name) targeted at the young unemployed. This, along with heavily regressive taxes and reductions in wages and collective bargaining rights, comprises the Federal Governments’ “employment” strategy.

Blaming the victim is more common when “the economy” is said to be “healthy.” Thus chronic unemployment is now alleged to be due to a culture of “welfare dependency” and “job-snobs,” not policy obsessions with zero inflation, high profits, and a near-destruction of the public service.

Unemployment now hovers around 7.2 percent, but there are also many “discouraged” workers. The total number of unemployed always vastly exceeds the number of job openings, a rarely stated contradiction. Nor is the alternative of socially useful and fairly-paid jobs put on the agenda. Australia’s unemployment/welfare system is not yet as bad as its US counterpart–which our leaders simply love!

Dr. Jocelyn Pixley teaches in the Sociology Department, University of New South Wales.

Gertrude Schaffner Goldberg
What does a Jobs for All Coalition think and do when unemployment rates are the lowest in 30 years?

• We celebrate the beneficial effects of lower unemployment.
• We say “We told you so,” when both unemployment and inflation rates are low–thereby punching holes in that pseudo-scientific justification of high unemployment rates, the “natural” rate of unemployment.
• We continue to tell the truth about official unemployment statistics that seriously underestimate unemployment, give us the illusion of full employment and retard the development of a full employment movement.
• We point to lousy jobs at lousy wages that, like sweatshop jobs, don’t count toward full employment.
• We expose the paltry wage increases of the economic boom–for all but the already rich. The median wage earner gained 1.9 percent between 1989 and the first half of 1999, and the bottom fifth of wage earners gained 4.8 percent but still remain well below their 1970s level.
• We cheer the increase in the minimum wage since the 1980s but point out that the minimum would have to be $7.50 an hour instead of the present $5.15 to equal its real value in 1968.
• We point our fingers at the gargantuan and growing incomes of the rich, noting that the share of the richest 20 percent is over 13 times that of the poorest.
• We deplore a distribution of wealth that is even more skewed than income.

Political Commitment Needed

If we want to have a world without the economic downturns that shatter dreams and without the chronic underemployment that has besieged workers for centuries, we must exhort Bill Clinton, Alan Greenspan, and Congress to use the abundant measures at their disposal to push unemployment rates even lower and to take additional measures to lower the disparities in income and wealth. And let’s also get our political leaders to make another commitment: to prevent unemployment from rising and shattering dreams and lives in the 21st century.

The Benefits of Lower Unemployment

Consider the consequences of just a few years of lower unemployment. With unemployment well below what most economists thought possible or “natural” only a few years ago, more of the young, the old, and the minorities are employed and paying taxes, and fewer workers are forced to retire early, to collect unemployment insurance, or to go on welfare. As a result, more revenues are flowing into the Social Security and Medicare trust funds. Increased revenues have also helped to lower the federal deficit.

The effects of low unemployment are trickling down. More work has come to some of the once “jobless ghettos,” and more of the unemployed are taking that work–proving that the so-called “underclass” was all along an essentially underemployed working class. With unemployment at a near three-decade low, desperate builders and eager unions in Chicago began an aggressive campaign to court and train women and members of racial minorities. Tight labor markets are bringing more dropouts and low-skilled men and women of color into the workforce. Black and Hispanic unemployment rates are lower than they have been in years, and teenage unemployment has even begun to drop. A quarter century of anti-union, anti-welfare, antiworker policies is not overcome in a flash, but wages have begun a slow rise and poverty rates have fallen. The picture for both indicators is slightly better than a decade ago when the business cycle last peaked.

Persisting Problems

Low unemployment pays, but even fuller employment could pay more because many labor-market problems persist. The Department of Housing and Urban Development reports that one in six cities has “unacceptably high” unemployment rates, and many suburban and rural areas also lag behind. Even when the unemployment rate in October, 1999, was 4.1 percent, 13 million people were un- or under employed. Another severe labor market disadvantage–year-round work for less than the poverty level–afflicts about as many people as the number who suffer some form of joblessness.

This is why we can’t stop at 4.1 percent. We must have lower unemployment rates, livable wages, and more job creation to employ more of our people and at the same time to meet gaping needs for affordable housing, child care, elder care and transportation. Shortly before he died, Martin Luther King, Jr. wrote: “In our society it is murder psychologically to deprive a man [sic] of a job or an income.” Curing inflation by creating more unemployment–as the Fed has often done–is a murderous remedy for a condition that can be treated by more benign means. With political will and an agenda, the Coalition can help build a movement that can make it our reality in the next millenium.

Gertrude Schaffner Goldberg is Professor of Social Policy at Adelphi University) and NJFAC Chair