Can We Put a Time Limit on Welfare?

The
first results are just beginning to trickle in from
Washington's last venture in welfare reform, the Family Support
Act
of 1988, which sought to cut the welfare rolls by collecting more
child support from absent fathers and giving single mothers more
job training. Not surprisingly, evaluators are finding that
modest
expenditures on job training yield modest increases in welfare
recipients' potential earnings. Faced with such unexciting news,
and mindful of its many previous unsuccessful efforts to make
America's welfare system more acceptable to the public, Congress
now shows little enthusiasm for new legislation in this area.

Nonetheless, grass-roots hostility to the system has been driving
both state legislators and presidential candidates to propose
more
drastic changes. Many states have trimmed benefits for parents
receiving Aid to Families with Dependent Children (AFDC) for
childless adults receiving General Assistance (GA), or both.
Michigan has abolished GA altogether. New Jersey has decided not
to
increase AFDC recipients' benefits if they have another child
while
on welfare, and Wisconsin has moved in the same direction. Many
other states have been considering changes in AFDC rules that
they
hope will encourage young women to stay in school, postpone
motherhood, or get married. But by far the biggest proposed
change
is Bill Clinton's suggestion that no one be allowed to collect
AFDC
for more than two years.

If this proposal does nothing else, it should at least give pause
to those who see Clinton as a middle-of-the-road Democrat
committed
to the status quo. A two-year time limit would be the biggest
change in AFDC since Congress established the program in 1935.
The
average recipient now stays on the rolls 6.6 years. A two-year
limit would, therefore, cut the number of recipients by more than
70 percent. At the peak of the last business cycle in 1989,
something like 3.8 million families were collecting AFDC. With a
two-year time limit, the figure would have been about 1.1
million.

A time limit on AFDC would also largely solve the problem that
most
worries conservatives these days, namely that AFDC makes
recipients
"dependent." So far as I know, there is no evidence that this is
a
real problem. Almost all mothers depend on someone for money:
their
husband, their employer, their parents, their boyfriend, or the
government. All are in some sense "dependent" as a result. But it
is far from obvious that depending on the government has
significantly worse psychological effects than depending on
anyone
else. The elderly certainly don't complain about it much. It is
true that welfare recipients are more likely than most people to
be
depressed, passive, and irresponsible. But that does not mean
AFDC
caused their problems. Many had such problems the first day they
walked into a welfare office. Depression, passivity, and
irresponsibility make it hard to find either a job or a husband.
Without one or the other, a mother is pretty much stuck on
welfare.
Nonetheless, the doctrine that collecting welfare is bad for the
recipients is so widely accepted that we have to accept it as a
political fact, regardless of whether it is true.

Until now, conservatives who wanted to minimize welfare
dependency
have tried to keep benefits as low as possible and make
collecting
them as onerous and humiliating as possible. Clinton's proposal,
which he borrowed from David Ellwood, a welfare expert at
Harvard's
Kennedy School of Government, would achieve this goal in a far
more
humane way, by putting a time limit on "dependency." If AFDC
became
a short-term program designed to help women who had just become
single mothers achieve self-sufficiency, it might even be
possible
to set benefits at a realistic level, allowing recipients to
support their families without having to cheat.

But what happens at the end of two years? It is tempting to
pretend
that if we just invested adequate resources, two years of
intensive
education and job training could make every single mother
economically self-sufficient. But while that will surely be true
for some, it will never be true for all. Unless we want another
round of welfare "reform" that fails, we need to be realistic
about
the options open to us.

Contrary to what many liberals claim, the big obstacle to making
single mothers economically self-sufficient is seldom the
shortage
of jobs. During recessions, of course, jobs are hard to find. But
when the economy is healthy, minimum-wage jobs are relatively
easy
to find. The problem is that a minimum-wage job will not make a
single mother economically self-sufficient.

There is endless controversy about how much money single mothers
need to make ends meet. Conservative legislators and absent
fathers
seem to imagine that these families can live on air. Liberals
have
been somewhat more realistic, but not much. In large part this is
because we take official income statistics too literally.

In 1990, for example, the official poverty line for a family of
three was just over $10,000. Yet when the Census Bureau
interviewed
the heads of three-person families, one out of every ten reported
an income below $10,000. Most observers, both liberal and
conservative, conclude from this that families can survive on a
sub-poverty budget. That conclusion is probably wrong. If we had
accurate measures of what these families consumed, I believe we
would find that very few got by with goods and services worth
less
than $10,000. The idea that millions of families somehow survive
on
minuscule budgets is, I believe, largely a product of poor
measurement, not widespread frugality.



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If
you look at the Census Bureau's income data carefully, you find
that nearly half the families of three with incomes below $10,000
in 1990 actually reported incomes of less than $5,000. Some
reported no income at all, and some reported net losses (from a
family business). Clearly these families were not living on their
reported income alone. Some were living off savings. Some were
only temporarily poor and were borrowing against future income. Some
were not reporting off- the-books income. Some were single
mothers whose budget deficit was being made up by a live-in boyfriend
whose presence the mother probably did not report and whose income the
Census Bureau would not have counted anyway, because he was not
part of the mother's family.

Nonetheless, a lot of three-person families undoubtedly spent
less
than $10,000 in 1990. But when you look at the way such families
live, you almost always find that they are also consuming quite a
lot of things for which they do not pay cash. Some get free food
stamps, housing subsidies, and medical care from the government.
Some get free housing because they work as janitors, caretakers,
or
tenant farmers, or because they live with relatives. Some ride to
work with a friend, or get free child care from a relative. No
survey provides a full accounting of what poor families consume,
but it seems highly unlikely that a family of three could consume
less than $5,000 worth of goods and services over the course of a
year. Most surely consume more than $10,000 worth.

Kathryn Edin's interviews with Chicago welfare mothers during
1989
and 1990 (see Christopher Jencks and Kathryn Edin, "The Real
Welfare Problem," TAP, No. 1, Spring 1990) confirm this
judgment. She found that while the typical mother got less than
$5,000 a year in cash from AFDC, all supplemented their checks in
various ways. Even if we ignore the cost of their free medical
care, almost all were consuming goods and services worth at least
$10,000 a year, and the average was around $12,000. Even at this
level of consumption many families were desperately poor. Some
had
to skip meals or settle for rice and beans near the end of the
month. Others had no heat in the winter or no telephone. If these
mothers had been working regularly, their expenses would have
been
even higher, because they would have needed more and better
clothes, more transportation, and more child care. When Edin went
looking for single mothers who supported themselves entirely by
working, she found few who spent less than $15,000. More recent
work shows that the figure is even higher in Boston and only
slightly lower in Charleston, South Carolina.

In order to earn $15,000, a woman who works forty hours a week
must
earn at least $7.50 an hour. The minimum wage is currently $4.25
an
hour, and while many liberals want to raise it, there is no
serious
support for pushing it above $5 an hour. If you work regularly at
$5-an-hour, you can earn about $10,000 a year before taxes and
de-

ductions. But most $5 an hour jobs involve a lot of layoffs and
short weeks, so even if an unskilled single mother is trying to
work regularly, she cannot count on doing so. We therefore have
to
assume that many welfare mothers will earn no more than $8,000 or
$9,000 in a good year, and even less during recessions.

Census data confirm that few welfare mothers are likely to earn
$15,000 a year in the labor market. Most are under the age of
thirty-five, and only a few have attended college. Figure 1
shows what women with these characteristics typically earned if
they worked full-time throughout 1990. High school graduates over
the age of twenty-five averaged $17,000 a year, but nearly half
earned less than $15,000. High school dropouts did far worse, as
did younger women. Even these averages overestimate welfare
mothers' potential earnings, because they cover a relatively
select
group of women those who were both willing and able to work
full-time throughout the year. The women who were collecting
welfare during 1990 would surely earn less than those who worked
throughout the year, even if they had the same amount of
schooling
and were the same age.



 [Figure 1] src="/tap_images/print/V3/images/11jencf1.gif">

If AFDC recipients all spent two years getting additional
education
and training, their potential earnings would rise, but here again
we need to be realistic. The chart shows that high school
graduates
earned 20 to 25 percent more than high school dropouts in 1990,
and
women with some college eventually earned 20 to 25 percent more
than high school graduates. But it does not follow that two years
of training could boost AFDC recipients' potential earnings by 20
to 25 percent.

First, even two years of formal education have less impact than
the
chart implies, because women who get more education have other
advantages as well. High school graduates come from more
advantaged
families than do dropouts, they are better at reading, math, and
other subjects when they enter high school, and they are less
like-

ly to have been in trouble with the school authorities or the
police. The same logic applies when we compare students who
attended college for a couple of years to those who merely
finished
high school. While there is no consensus on how much of the
apparent effect of schooling is due to this kind of selection,
most
estimates suggest that the figure is between a fifth and
two-fifths.

A second reason why we cannot expect two years of training to
boost
AFDC recipients' earnings as much as two years of high school or
college boosts others' earnings is that single mothers are not in
a position to give as much time to their studies as the average
high school or college student gives. Realistically, therefore,
we
should probably not expect two years of training to raise welfare
recipients' earning power by more than 10 or 15 percent.

If the Clinton proposal is to be implemented, then, we need to
find
a way of closing the gap between what single mothers can earn and
what they need to support their families. Otherwise we will end
up
with hundreds of thousands of homeless families instead of the
tens
of thousands we have now. Even worse, we will end up with more
abandoned children, recreating the very problem we invented AFDC
to
solve in the 1930s. To avoid all this, we will have to provide
single mothers who work in minimum-wage jobs with free medical
care
and at least $5,000 worth of other resources every year to
supplement their wages. In years when the labor market is slack
the
figure will have to be even higher.


The Income Gap

Ideally, absent fathers should come up with this money. Even if
the
cost of pursuing absent fathers exceeds the amount collected
which
will certainly be so for "hard" cases harassing them will make
other men more cautious about fathering children they cannot
support. Until the 1960s a lot of young men used condoms because
they knew that an unplanned pregnancy meant a shotgun marriage.
Now
that parents no longer pressure expectant couples to marry, we
need
some other way of encouraging men to use birth control. If they
know that having a child out of wedlock will either cost them a
lot
of money or lead to a lot of grief when they cannot pay, condom
sales should edge upward.

But the absent fathers of today's welfare mothers do not have
anything like enough money to fill the entire gap between what
single mothers can earn and what they need to support their
children. If a mother of two is earning $9,000 a year and has no
other help, an absent father would typically have to come up with
at least $6,000 for her to balance her budget, even if she got
free
medical care. Child support orders typically require absent
fathers
to pay about 25 percent of their income. That means the father
must
earn at least $24,000 a year before his payments reach the
required
level.

Men with children who get AFDC are mostly young and poorly
educated. In addition, many are black, and race affects men's
earnings far more than it does women's. As Table 1
indicates, a large minority of these men did not work at all
during
1990, and the percentage would be even higher if the table
included
men who were in jail, in mental hospitals, homeless, or missed by
Census Bureau surveys.

 [Figure 1] src="/tap_images/print/V3/images/11jenct1.gif">

The table also shows the mean earnings of the groups most likely
to
have fathered the children who are currently on welfare. In 1990
no
group of twenty-five to thirty-four year-olds without some higher
education averaged as much as $24,000. The best available data
suggest that the typical absent father of a child on welfare
would
only have been expected to pay about $2,000 as of 1987. This
would
not be trivial, but it still leaves a $4,000 gap between what
welfare mothers might get from work plus child support and what
they need to pay their bills.

When single mothers with low-wage jobs do not have enough money
to
pay their bills, some can move in with their parents, other
relatives, or friends. While these arrangements may well be quite
good for children, sharing space tends to create a lot of
conflict
among adults. As a result, only a minority seem able to sustain
such relationships over the long run. Instead, many single
mothers
with budget deficits end up sharing their bed and their bills
with
a boyfriend. These boyfriends seldom contribute a lot, but they
usually contribute something.

Casual boyfriends help single mothers survive with less public
support, but it does not follow that public policy should
encourage
single mothers to depend on them. Such a policy often pushes
women
into abusive relationships with men on whom nobody should have to
depend. Encouraging single mothers to depend on casual boyfriends
also leads to more unplanned pregnancies, more abortions, and
more
unwanted children. Indeed, such arrangements are often so
unsatisfactory that single mothers prefer prostitution, which
some
find less emotionally demanding and which usually brings in more
money.

If we want to give single mothers the option of not depending on
men, I fear we must turn to the solution conservatives hate the
most, namely using tax dollars to make up part of the difference
between what unskilled single mothers can earn and what they need
to support their families. The simplest way to do this is through
the Earned Income Tax Credit (EITC), which gives employed parents
with children a refundable credit if their earnings are low
enough.
At the moment, EITC is popular with legislators, because it only
helps those who work. In addition, it lowers tax revenues instead
of increasing expenditures, which looks good in the newspapers.
But
an EITC that could raise a single mother's income from $9,000 to
$15,000 would inevitably arouse conservative ire, both because it
would give a lot of money to people who sometimes spent it
foolishly and because it would weaken recipients' incentive to
work
more hours.

The best way around this particular political problem is to
supplement the EITC with programs that cut single mothers'
expenses
by paying for their children's medical care, food, and day care.
Ideally, such programs should cover all children, regardless of
income, so as to ensure that they win broad political support.

Even if we remain unwilling to provide universal health
insurance,
for example, we should at least make Medicare cover all children
whose parents pay Social Security taxes. That would mean raising
Social Security taxes, but it would also cut insurance costs for
families that now insure their children privately. The only
losers
would be families with jobs and no children, who also happen to
be
the group that can best afford a modest tax increase.

We should also eliminate income tax deductions for dependent
children and replace them with food stamps for children at all
income levels. All families with children could get a year's
worth
of food stamps when they filed their tax return, minimizing
auditing expenses. Such a system would eliminate the social
stigma
now attached to cashing food stamps, while increasing parents'
incentive to work.

Finally, we could provide families in which all adults worked
full-time with tax credits for, say, half the cost of enrolling
their children in a preschool or after-school program that met
certain minimal educational standards.

In other cases it makes more sense to direct programs primarily
at
low-income children. Historically, for example, federal housing
funds went mainly to build large city-owned projects reserved
entirely for the poor. Rents in these projects were limited to 30
percent of the tenant's reported income, which was often almost
zero. This policy was, in effect, a way of bribing poor parents
to
live near other poor parents. That was a plus for more affluent
parents, but it has had terrible effects on many of the children
involved, who grow up in communities where crime is a way of life
and no one takes school very seriously. More recently, we have
moved away from city-owned projects and have begun subsidizing
tenants in private housing, but in practice most of this housing
is
still located in very poor neighborhoods.

A child-oriented housing policy would concentrate on giving low-
income parents strong incentives to live in better neighborhoods,
where their children would be safer and would attend better
schools. Chicago's Gautraux program, initiated as a result of a
court order designed to eliminate racial segregation in the
city's
housing programs, has been doing this for many years and has
yielded impressive benefits for children. The Gautraux program
offers black mothers an apartment in a white suburb, and then
makes
up the difference between the apartment's market rent and what
the
federal government thinks she can afford to pay, namely 30
percent
of her income. It is important to recognize, however, that a
program of this kind will not work unless its benefits are
restricted to those who are willing to move. If we offer poor
black
mothers a housing subsidy they can use wherever they want, past
experiments with rent vouchers show that most will remain in
their
old neighborhood.

If
we did all these things, any single mother who worked regularly
would be able to make ends meet, even if she held only a minimum
wage job. If she got child support, she could even take her
children to a movie now and then. But these programs do not help
single mothers who cannot find steady work. What are we to do for
them?

So far as I can see, single mothers who cannot find jobs after
their AFDC runs out have no more and no less claim on the public
purse than married parents who cannot find work after their
unemployment benefits run out. If a jobless single mother is
mentally or physically ill, she should get disability benefits
just
like anyone else. If she cannot find work because the whole
economy
is in recession, her AFDC benefits should be extended, just as
unemployment benefits usually are. If she cannot find work
because
she lives in a permanently depressed area, she may have to move,
just as married couples do. I personally think a strong case
could
be made for having the government serve as an employer of last
resort in certain cases, but I doubt that Congress will do this
any
time soon.


Reform at What Cost?

Setting up a program that allowed all single mothers to make ends
meet would not be cheap. A two-year time limit on AFDC would save
perhaps $18 billion a year, but there were 7.7 million families
headed by women with children under the age of eighteen in 1990,
and 4.3 million of them had incomes below $15,000. Raising all
these families' incomes to $15,000 a year would cost about $33
billion, even if we did not give any benefits to anyone else. We
should be able to get perhaps $5 billion of this from absent
fathers, but even allowing for the $18 billion saved by the
two-year limit on welfare, that leaves a $10 billion tab for
taxpayers. If we want all these families to get goods and
services
worth $15,000 while at the same time ensuring that everyone has a
significant incentive to take a better job, we also have to give
some benefits to people who earn more than $15,000. By the time
we
are done, such a program could easily raise government
expenditures
by $30 billion to $50 billion. If we extend benefits to children
in
two-parent households the bill could be even higher, as it
usually
is in Europe.

Why should a program that asks more people to work end up
demanding
more money from taxpayers? We know that several million single
mothers are currently getting by on low-wage jobs that pay less
than $15,000 a year. Why can't we just insist that welfare
mothers
do the same thing? The answer is that single mothers with
low-wage
jobs currently survive by making arrangements that not all
mothers
are willing or able to make. One lives with her mother. Another
has
a boyfriend who beats her up but whom she does not throw out
because he also helps pay the rent. A third sometimes works as a
prostitute at the hotel where she cleans. A fourth leaves her
chil-

dren home alone after school because she cannot afford paid child
care. But we cannot create a system that assumes all single
mothers
will make such arrangements. If we try, a lot more single mothers
will be unable to make ends meet, and we will end up with more
families in shelters and more abandoned children in foster
care.

Yet as soon as we construct a system that allows a woman with a
minimum-wage job to pay her bills without depending on anyone
else,
a lot more women will choose to exercise this option. The woman
who
now lives with her mother will move out, and the woman whose
boyfriend beats her up will kick him out. The prostitute will
turn
fewer tricks, and the woman who works until five will get paid
child care. Single mothers' lives will be a lot better, but there
will probably be more of them, and taxes will certainly have to
be
slightly higher. In my judgment, a program of this kind would be
worth the price, both because it would make children and single
mothers better off and because it would do so in a way that is
consistent with deeply held American values about work.

My
rough guess is that creating such a system would require us to
raise the tax burden from 34 to 35 percent of gross domestic
product the equivalent of about one year's growth in personal
income. Neither Clinton nor anyone else could easily raise such a
sum in today's political climate. One must therefore ask whether
America could make a more gradual transition from today's welfare
system to a new system based on the expectation that women should
work, spending a few billion dollars in the first year, slightly
more the second year, and so forth. This is certainly feasible,
but
only if we keep the present welfare system intact until we have
created an alternative for mothers who take low-wage jobs.

Indeed, Congress has been moving in this direction since the
mid-1980s, gradually expanding benefits for the working poor
while
doing very little for welfare recipients. If we increase the
Earned
Income Tax Credit again, if we extend Medicaid to all poor
children, if we expand federal support for child care, and if we
were to create a new federal housing program especially for
working
single mothers, we could gradually make it possible to support a
family on lower and lower wages. At that point we could impose
Clinton's two-year time limit on AFDC.

But until we make it practical to support a family on a
minimum-wage job, setting a time limit on AFDC will impose huge
costs on many poor children and their mothers. That fact has
defeated all previous efforts to abolish or drastically change
AFDC, leaving us with a system very similar to the one the New
Deal
established in the 1930s. With growth rates low and resistance to
new taxes high, improving the position of working single mothers
is
likely to take at least another decade of incremental change, and
even that will suffice only if both liberals and conservatives
recognize the long-term benefits of such a strategy. That means
ma-

jor changes in AFDC will also have to wait.

In the absence of radical reform, however, political discussions
of
welfare are likely to become steadily nastier. Everyone now
agrees
that we should encourage single mothers to work. Conservatives
want
to do this by cutting welfare benefits, passing rules, or both.
Liberals want to do it by making work more rewarding. The
conservative approach is unlikely to work, because
middle-of-the-road legislators are seldom prepared to adopt
policies that leave a lot of welfare recipients homeless and
force
a lot of mothers to abandon their children, and without that
ultimate sanction, coercion cannot succeed. The liberal approach
may work eventually, but it will not work any time soon, because
it
requires a lot of money that most Americans are currently
unwilling
to spend.

The effect of this impasse is a lot of grandstanding and name
calling. Such partisan maneuvering creates a constant danger that
both liberals and conservatives will lose sight of the ultimate
goal, which is to create a system that rewards self-help. To
achieve that end liberals must join conservatives in trying to
make
sure that mothers who work do better than mothers who do not. If
liberals fail at that, as they have over the past half century,
the
public will continue to see welfare as a menace, and will
continue
to punish legislators who appear intent on making it more
generous.
If we create a system that rewards work, the politics of helping
the poor would be completely transformed. Americans love to help
people who are trying to help themselves.


FIGURES


Figure 1: How Much Can Mothers Earn?

Mean Earnings of Women Who Worked Full-Time Throughout 1990, by Age and Education
Age       No High   Some High    High School  Some  
          School    School       Graduate     College

18-24     *         $11,033      $13,385      $14,487

25-34     $11,832   $13,825      $17,026      $20,872

(* Sample size too small to yield reliable estimates)

Source: U.S. Bureau of the Census


TABLES


Table 1: What Can Fathers Contribute?

Employment status and annual earnings of men aged 18 to 34 in 1990, by education and race
Age and race        No High      Some High     High School
                    School      School        Graduate

Percent of 25 to    
34 year old men
with no earnings
in 1990
     White          16.0%        6.8%        3.9%
     Hispanic        8.9         9.3         6.3
     Black          52.1        24.0         9.4

Mean earnings of
25 to 34 year old
men who worked
     White          $12,837    $16,108       $22,312
     Hispanic        12,344     14,808        17,861
     Black               --     10,935        15,888
     All             12,689     15,399        21,371

Percent of 25 to 34
year old men who
worked full-time,
year round
     White          49.5%       54.5%         72.1%
     Hispanic       55.9        58.5          66.0
     Black             --       40.9          61.8

Mean earnings of 
18 to 24 year olds
     All men who 
     worked         $8,800      $6,879        $11,186
     All men who 
     worked full-time,
     throughout 1990   12,710   14,613         15,829

Source: U.S. Bureau of the Census

The sample sizes in empty cells are too small to yield reliable estimates. The data do not
cover men
living in prisons or other institutions, members of the armed forces, the homeless, or men living
in
conventional households whose presence was not reported by the household head.



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