UNCOMMON SENSE 5 © Sept. 1996 [see also Collins, Washington’s New Poor Law: Welfare”Reform’s” Legacy and Real Welfare Reform, US 23

By Gertrude Schaffner Goldberg, Director, Center for Social Policy, Adelphi University,  Sheila Collins, Associate Professor of Political Science, William Paterson College, Helen Lachs Ginsburg, Professor of Economics, Brooklyn College of the City University of New York, and Philip Harvey, Associate Professor of Law, Rutger University School of Law. All are members of the Coalition’s Executive Committee

Welfare “reform” as enacted by Congress (the Personal Responsibility Act of 1996) enforces stricter work requirements on welfare recipients and overlooks the fact that about 17 million people in the U.S. either want jobs and don’t have them or are forced to work part-time time because they can’t find full-time employment.

MORE JOB SEEKERS THAN JOBS

• Job vacancy data are not regularly collected in the U.S.,  but surveys that have been conducted show that even when unemployment rates are much lower than the current national average there are several times as many job seekers as available jobs. 

Vacancy surveys conducted in the mid-1960s, when the U.S. unemployment rate averaged about 4.5 percent, found that there were approximately 2.5 unemployed persons for every vacant job. With higher unemployment, the ratio of job seekers to jobs rose–to about 4.0 unemployed persons for every vacancy1 in the early 1970s and to 5.0 in the late 1970’s. Another survey of 28 southern and mid-western cities conducted in 1982 found that with unemployment rates averaging 10.1 percent, there were about 9.2 officially unemployed job seekers for every vacancy.2

More recently, job vacancy surveys in the Milwaukee metropolitan area have found that even with an unemployment rate in the 4-5 percent range, there are three to five persons needing work for every available job. Only officially unemployed workers and able-bodied welfare recipients are included in these estimates. If discouraged workers and involuntary part-time workers were counted, the shortage of jobs would be even more severe.3

The ratios are much worse in depressed urban neighborhoods where most welfare recipients live. A recent study of the low-wage labor market in a Harlem neighborhood found that an average of fourteen people had applied for every job opening in the local McDonald’s restaurant during a five-month period in early 1993. Among those who applied but were rejected, 73 percent had not found work of any kind a year later.  The study also found that younger applicants, especially those under the age of 20, had the most difficulty in obtaining entry level employment in the low-wage job market. To get jobs at McDonald’s, most applicants needed substantial prior work experience.4

• Despite such evidence, many still believe there are enough jobs to go around for everyone who wants to work. One way to settle this question would be to have the Department of Labor establish a job vacancy survey that would regularly collect nationwide data on the number, location and quality of job vacancies in the United States. But special interest groups protecting the status quo don’t want the public to know the true state of the nation’s labor markets. They want to perpetuate the myth that there are jobs available for everyone who really wants to work.

CREATING UNEMPLOYMENT

• Welfare reform requires recipients to enter a labor market in which there aren’t enough jobs to go around and in which the job shortage is worsened by policies of the federal government itself. Fighting inflation, even before it actually occurs, the Federal Reserve uses its control over interest rates to slow the economy when unemployment dips significantly below six percent. The result of these preemptive strikes against inflation is to keep unemployment rates from falling further. Even unemployment in the 5.5 percent range translates into about 17 million Americans who want jobs and are either fully or partially without work
• Using the unemployed as involuntary “inflation fighters,” forced to suffer joblessness to hold down prices, is immoral and unfair. At the very least, these “inflation fighters” should be compensated for their sacrifice. Yet only slightly more than one-third of the unemployed receive any unemployment insurance benefits. All jobless individuals should be eligible for unemployment insurance or some other form of government income support for as long as they cannot find work. 
• A democratic society should be able to control inflation without increasing unemployment. Sacrificing the welfare of the unemployed and their families to achieve lower inflation rates is not an acceptable option. It is immoral to impose that kind of suffering on other people.

WELFARE “REFORM” AND LABOR MARKETS

• By driving welfare mothers into a labor market with a chronic shortage of jobs, welfare “reform” will actually create more unemployment.
• With a shortage of jobs–in good times as well as bad–it is dishonest and cruel to blame welfare recipients for being jobless. It is foolish to think that the need for welfare could be eliminated by forcing people to look harder for work. Some state plans would provide welfare benefits only in return for work but would not guarantee jobs for anyone.
• Deficiencies in the labor market–both in the availability of jobs and wages–are major causes of welfare dependency.

A nationally representative sample of single welfare mothers studied over a two-year period by the Institute for Women’s Policy Research found that only a minority (27 percent) were not in the labor market, a figure that includes the seven percent who were disabled. The rest, nearly three-fourths, combined welfare with low earnings (20 percent), worked some of the time and were on welfare between jobs (23 percent), worked limited hours and looked for work (7 percent), or looked for work the entire time they received welfare (23 percent). This study shows that it is primarily insufficient jobs and wages, not work incentives, that keep women on welfare.⁵

• There also are good reasons why some welfare mothers should not be expected to work outside the home. These include the need to care for very young, disabled or seriously ill children or for infirm family members. Nor does it make sense to force teenage mothers to go to work before they complete high school.
• Real welfare reform would include policies to provide jobs, child care, transportation, health coverage and education and training for all families, not just those on welfare.
• Forcing welfare mothers to work when there are not enough jobs will add further downward pressure on wages by increasing the number of job-seekers in the labor market. Government needs to create more jobs, not more job-seekers.
• JOBS FOR ALL AT DECENT WAGES would reduce the need for welfare and make many more men and women self-supporting. The assumption that we cannot afford to create the jobs we need ignores the costs of unemployment. We might actually save taxpayers money by creating jobs for all.⁶

 WORKFARE IS NO SUBSTITUTE FOR REAL JOBS

• Welfare “reform” will require single parents on welfare to work a minimum on 20 hours per week in exchange for their benefits. Two parent families in such workfare programs will be required to work a minimum of 55 hours per week. The act does not require states to provide benefits high enough to ensure that this work will be paid at the minimum wage. In the state with the lowest benefits (Mississippi), a single parent required to work 20 hours a week would receive only $1.38 per hour. Two parents required to work 55 hours per week would be paid only $0.50 per hour. In a state paying the average benefit ($381 per month in 1996), a parent would work at the rate of $4.40, or 85 percent of the new, still inadequate, minimum wage. Workfare programs that require people to work for less than the minimum wage violate the Fair Labor Standards Act.

Instead of offering welfare recipients real jobs, workfare forces people impoverished by a job-short economy to earn a meager public assistance benefit pegged well below the poverty line. This is considered fair by workfare advocates only because they assume erroneously that real jobs are available in all locations for anyone who really wants to work.

• Under the new legislation, states are not only permitted to pay welfare recipients less than the minimum wage. Recipients will, in addition, be denied social security credit, the Earned Income Tax Credit, unemployment insurance, and collective bargaining rights to which other workers are entitled. If society thinks welfare recipients should work, they ought to be offered real jobs and real benefits-as should all workers. Indeed, many workers, especially part-timers, are now denied essential health and child care benefits that workfare participants will continue to receive. The solution is not to deny essential benefits and rights to any group but to provide them to all.
• More is at stake in welfare reform than the economic security of welfare mothers and their children. With more fiscal pressure on state and local governments, people on workfare increasingly are being used to replace regular government employees, thus lowering wages and working conditions in the public sector, with spillover effects on the private sector. For example, one estimate is that the Senate’s welfare proposals would depress the wages of the poorest 30 percent of workers by an average of about 12 percent.⁷
• Work requirements are punitive when there are not enough jobs and unnecessary when there are. The vast majority of welfare recipients want to work, and many do already. When jobs are available in lower-income communities, the number of persons who apply for them far exceeds the number of openings. With decent jobs and child care available for everyone who wants to work, the need for welfare among able-bodied persons of working age who are not needed to provide family care will largely disappear.

BLEAK EMPLOYMENT PROSPECTS FOR “WELFARE” MOTHERS    & FATHERS

• “Welfare mothers” often have little education and employment experience. Without decent job prospects, the only realistic way to help such individuals avoid the need for welfare is to enhance their educational opportunities. Several studies indicate that post-secondary education for welfare mothers is a powerful antidote to poverty as well as enhancing their self-esteem and increasing their children’s educational ambitions.⁸ However, given the number of educated but unemployed workers, education is no substitute for increasing the number of available jobs.
• Similarly, “welfare fathers” tend to be young men with little education and poor employment prospects. More of these fathers could contribute to the support of their families if there were JOBS FOR ALL at decent pay.

Studies of metropolitan areas with low unemployment rates in the 1980s found that young black men with less than a high school education took jobs when they were available, substantially increasing their labor force participation rates and decreasing their poverty rates.⁹

• In recent years there has been a serious deterioration in the employment prospects for these two groups. The proportion of young workers, 18-24 years of age, who have low annual earnings (8 percent below the poverty line for a family of four) more than doubled between 1979 and 1993.As the U.S. Census Bureau observed; “low wages make it less affordable for young adults to marry, have children and establish independent households.”¹⁰

• The problem in the United States is not a lack of work incentives. It is a lack of work opportunities. Those who wanted to increase work incentives could have done so by making work more rewarding rather than making welfare more restrictive. Supporting a livable minimum wage¹¹ is a fairer and more effective way to increase work incentives than tightening work requirements for welfare recipients. But increasing work incentives cannot place people in non-existent jobs. The best welfare “reform” is JOBS FOR ALL at decent pay. Short of this goal, reform requires adequate welfare benefits for those unable to work and for all who are denied the opportunity to earn enough to support their families.

America needs JOBS FOR ALL AT DECENT WAGES; FAIR WORK, instead of Workfare.
Notes:

1. Katherine G. Abraham, “Structural/Frictional vs. Deficient Demand Unemployment,” American Economic Review 73 (September 1983):722. Professor Abraham now heads the U.S. Bureau of Labor Statistics, so the Clinton Administration cannot plead ignorance of the economy’s long-standing failure to produce enough jobs for everyone who wants to work.

2. Harry Holzer, Unemployment, Vacancies and Local Labor Markets (Kalamazoo, MI: Upjohn Institute, 1989), p. 48, Table 3.8.

3. Employment and Training Institute, University of Wisconsin/Milwaukee, Survey of Job Openings in the Milwaukee Metropolitan Area (biannual).

4. Katherine S. Newman and Chauncy Lennon, Finding Work in the Inner City; How Hard is it Now? How Hard Will it be for AFDC Recipients? (New York, Columbia University, 1995.

5. Roberta Spalter-Roth, Beverly Burr, Heidi Hartmann and Lois Shaw, Welfare That Works: The Working Lives of AFDC Recipients (Washington, DC: Institute for Women’s Policy Research, 1995.

6. Philip Harvey, “Paying for Full Employment: A Hard-Nosed Look at Finances,” Social Policy, Spring 1995, 21-30. This article has beeen adapted as Uncommon Sense #14.

7. Lawrence Mishel and John Schmitt, “Cutting Wages by Cutting Welfare,” Economic Policy Institute Briefing Paper, Sept. 1995, p. 5

8. Center for Women’s Policy Studies, “Getting Smart About Welfare” (Washington, DC).

9. Richard B. Freeman, “Employment and Earnings of Disadvantaged Young Men,” in Christopher Jencks and Paul Peterson, eds., The Urban Underclass (Washington, DC: The Brookings Institution, 1991).

10. U.S. Bureau of the Census, “The Earnings Ladder: Who’s at the Bottom? Who’s at the Top?” June 1994, and unpublished data of the Bureau.

11. See “Let’s Have an Adequate Minimum Wage,” Uncommon Sense #10.

Editor: June Zaccone, Economics (Emer.), Hofstra University