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Ethos Issue 3, Oct 2007
Making Workfare Work: The US Experience
Interview with Lawrence M. Mead
New York University’s Professor Lawrence
M. Mead discusses workfare and income inequality in light
of the US experience after a decade of welfare reform.
Singapore has put in place a Workfare
Income Supplement scheme as an additional social safety net
for low-income workers. What can we learn from the US experience
in work-for-benefit programmes?
It is important to distinguish American-style work enforcement
from Singapore’s workfare. The two initiatives are markedly
different: in Singapore, workfare refers to the supplementation
of wages, while in the US, workfare entails requiring people
who receive aid to work.
The national Personal Responsibility Act
of 1996 accelerated welfare reform. The Act meant that welfare
was no longer a legal entitlement. However, there was no real
reason to abolish the entitlement since the intention was
to condition aid on work. Another excessive aspect of US welfare
reform is the time limit enforced which only allows recipients
to be on aid for a maximum of five years. This was unnecessary
since reform was not aimed mainly at ending dependency, but
instead at encouraging people to work.
One state, Wisconsin, even insisted on a
universal and immediate work requirement, which was more severe
than required. Wisconsin’s strong administrative capacity,
however, meant that welfare reform met with success in the
state. Washington was another state that saw the smooth running
of welfare programmes post-1996. Like Wisconsin, Washington
had a strong tradition of good government.
US welfare reform was aimed mainly at raising
work levels. Reducing dependency was secondary. The idea that
the poor should be entirely non-reliant on the Government
is never going to happen and it is even unnecessary. In reality,
even the middle class is reliant on the Government. Strict
self-reliance is not a meaningful goal. Instead, the goal
of reform should be to achieve joint responsibility between
citizens and the Government. The poor have to help themselves
as much as others help them.
The focus on work rather than reducing dependency
meant that welfare benefits were not generally cut. Most of
the states which control benefit levels actually raised them
in the sense that work incentives were increased. That is,
recipients were allowed to keep more welfare if they worked.
The combination of earnings with remaining welfare could raise
incomes substantially. The cost of work incentives along with
the childcare and healthcare provided to support working meant
that welfare did not save money for the Government, contrary
to what some commentators expected. Rather, spending increased.
Helping the poor move out of poverty
also means that there is an attempt to close the widening
income gap between the rich and the poor. What should governments
do to deal with the challenge of inequality?
Inequality is a real issue but less important than may appear,
for two reasons. First, the causes are not well understood.
We do not know why inequality is rising. Some scholars find
that the trend is related to the decline of labour unions,
to the rising payoffs to higher education, and to a lesser
degree, to growing trade and immigration, but these factors
account for only part of the trend. Second, concern about
inequality is mostly confined to academics. The ordinary person
cares less about it and, as a consequence, politicians do
not grant it much attention. A more pressing concern among
ordinary Americans is whether they can secure a job and get
ahead on their own. They are not particularly offended by
the rich.
There appears to be greater political concern
about inequality in Europe than there is in the US. This seems
to be the case in Singapore as well. The political class in
Singapore is concerned about inequality in a way that is not
true in the US. Here the problem is a more serious political
question.
If governments choose to tackle this problem,
it is clear that one reason for growing inequality is disorganisation
at the bottom of society and falling work levels among the
poor. Welfare reforms and other efforts can help to raise
work levels at the bottom. In the 1990s, the massive increase
in earnings among the low-income as a result of welfare reform
did slow trends toward inequality considerably. In fact, measures
like this might even reverse the trends and reduce inequality.
Hence, getting the lower-income population to work more steadily
is the best thing governments can do to retard inequality.
Does making welfare recipients work
for a reward facilitate upward mobility, for example, through
increased earnings? Are there also other benefits or costs
of working that should be taken into consideration?
Work does to some extent translate into social mobility. Recipients
who go to work typically experience some gains in income.
That gain is less, admittedly, in states paying high welfare
benefits, as the recipients lose more income when they leave
welfare for work. But even in these states they are generally
better off than they were before, at least in terms of income.
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