Working on Welfare

How to reform the system

Virginia Postrel from the April 1994 issue

(Page 2 of 6)

Postrel: Assuming that this job would still be available if you got married.

Kaus: In my proposal, the job is available to all comers--married, unmarried.

Murray: If you did it exactly like that, there would be a lot of reasons for a single young woman not to get pregnant and have a child, because she knows that if she does that she is going to have to be working in a low-wage job, working a 40-hour week, and it is going to be no fun. Both Mickey and I are saying that you don't make big changes in this problem with incremental steps. We have to end welfare as we know it, truly.

Postrel: You used to not put that "as we know it" part on at the end.

Murray: Well, actually, it should be end welfare, period.

Hobbs: A lot of practical problems have arisen when I've tried to make that point and to make it stick. I remember Pat Buchanan used to say at the White House, "Chuck, when are you going to get one state to quit welfare cold turkey?" I tried to point out to him that it wasn't quite that easy, that there were a whole bunch of people out there who had gotten used to welfare, and that there had to be some kind of a weaning process. But I do not think that a national solution for this problem is possible. I think we must devolve the decision making about public assistance, and we must make the contacts between the employer community and the public-assistance system that have never been made.

Postrel: I would like to talk about some of the experiments that are going on in the states. Chuck has been working a lot in Oregon.

Murray: What's the latest from Oregon?

Hobbs: Oregon and Mississippi are both in Washington seeking waivers for the Full Employment Program. [Two federal departments, Agriculture and Health and Human Services, have the authority to waive federal law for welfare-reform demonstrations.] HHS has signified that waivers will be forthcoming. The Department of Agriculture is holding the line because they do not want any more cash-outs [allowing the state to pay cash instead of food stamps]. The program is very similar to what Mickey's talking about. Essentially it takes AFDC, food stamps, and unemployment compensation and puts those three pots of money together and pays anybody who wants to work the minimum wage--at a public or private job. In Oregon that's $4.75 an hour. Add to that the Earned Income Tax Credit, and somebody getting a minimum- wage job with a couple of kids is above the poverty level. At $4.25 in Mississippi they're right at the poverty level.

Postrel: The employer pays nothing?

Hobbs: The employer pays nothing on the wage, but he does pay a dollar into an education fund that can be used by the participant or the participant's kids for education in the community college system for a 10-year period. In Mississippi, because the benefit structure's so low, the employer kicks in $2.00, a dollar toward the $4.25 minimum wage and another dollar for the education or health-care fund, whichever the participant wants to use it for. We've got 10 states that have actually modeled this thing. Two of them have passed it and enacted it as law. There are bills out before four other legislatures around the country, and each case is different because the benefits are different.

Postrel: One question Mickey has always raised is where the money is supposed to come from.

Kaus: It always costs more to put somebody to work than to send them a check because you have to a) provide day care if they're single mothers and b) supervise them and provide them with materials, which adds about 40 percent to the cost of their paycheck.

Hobbs: There are already eight separate pots of child-care money, and seven of them apply to almost everybody who's in this category. Also, there are all kinds of costs in child care that shouldn't be there. If you, for instance, go over here to Maryland today and ask how much child care would cost, they'll say, "Oh, boy. It's $700 a month to take care of one kid." But if you look nationwide at how much is actually spent by people who pay for child care, it averaged in 1991 something like $70 a week. And the reason is they're not putting kids in these institutional child-care settings. But perhaps the most important thing is that many of the women in this program are going to go into child care themselves. One of our first moves will be to apprentice people to institutional child-care facilities so they can get the on-the-job training to get licensed themselves and become in-home child-care providers. Then they can make considerably more money than the minimum wage. So I think the child care is a bogus thing. And talking to employers in Oregon and other places about how much they're going to have to spend for training, I don't get a 40-percent addition.

Kaus: In Oregon, what troubles me is that there is no requirement that any of these jobs be created. The legislation does not say, "We will end welfare by a certain date and replace it with these jobs." It says if you can gin up private employers to offer these jobs, only to that extent does the system change.