APPENDIX 4 (continued)
VISIT TO WASHINGTON AND WISCONSIN 1-5 DECEMBER 1997
10. AMERICAN FEDERATION
OF LABOUR-CONGRESS
OF INDUSTRIAL
ORGANISATIONS (AFL-CIO)
| Mr Marc Baldwin | Assistant Director, Public Policy Department
|
| Mr Chris Owens | Senior Policy Analyst
|
The AFL-CIO was broadly supportive of the President's welfare
initiatives. They had concerns about worker substitution and ex-welfare
recipients being used to depress wages or to weaken unions.
The US economy as a whole was performing well and jobs were
being created. The overall picture masked some pockets of high
unemployment in certain geographical areas (mostly those formerly
dependent on heavy industry) and among certain groups of workers.
For example, for women without high school graduation, some pockets
of unemployment over 10 per cent existed. It was important to
ascertain what was the true picture on the ground before the welfare
initiatives began, if accurate evaluation was to be made.
There were various tax credit incentives for employers to
take on employees but these had variable take-up rates and employers
usually applied for credits after employing someone to do the
job, rather than them being an incentive in deciding to employ
the worker in the first place. Subsidies and incentives appeared
most useful if linked with in-work training.
The AFL-CIO had identified two basic forms of economic development:
| Low road | - low wages |
| - few rights for employees
|
| High road | - anti-poverty strategy
|
| - training schemes and |
| - in-work support |
| |
Within training schemes, there was currently an emphasis
on life skills and employability skills yet the work ethic was
only a small part of the problem for the unemployed/welfare recipients.
AFL-CIO saw its main role to focus on better wages and conditions.
AFL-CIO President Sweeney had initially wanted the President
to use his veto on the 1996 Act but the AFL-CIO had accepted that
there was a consensus among its members, and the population as
a whole, that people should work whenever that was possible. There
was however not a full consensus on exactly who should be compelled
to work and how this should be facilitated.
The true test of the reforms would be if an economic downturn
occurred. In fact, some areas already did not have sufficient
jobs for all welfare recipients and the Republican mayor of Philadelphia
had already questioned whether the present scheme was feasible.
There were already tensions between the different levels
of jurisdictions: State (Governors) -v- County -v- City (Mayors).
There was not much evidence on whether the existence of the
EITC depressed wages. The EITC was well accepted because it was
seen as part of the tax system, unconnected to welfare handouts.
The EITC made no demands on employers and its impact on wages
was spread further up the income scale, above the poverty level.
The minimum wage had declined in real terms and it was this that
had led to in-work poverty. There was no real evidence for the
view that lower real value of the minimum wage had led to a greater
number of jobs being created. A higher minimum wage might actually
have created jobs by boosting demand in areas where many people
lived on minimum wage incomes.
The 1996 Act was only part of the picture; President
Clinton had launched initiatives that the AFL-CIO greatly welcomed.
These included greater employee protection, $3 billion job creation
schemes and resisting privatisation of human services administration.
The jobs gap analysis concerned the numbers of people expected
to join the workforce and the number of jobs likely to be available.
The difference in the jobs gap, other factors that needed to be
accounted for were education, training and special needs support.
Coalitions of businesses and government had come together to undertake
the America Works project which intended to provide jobs for people
in a particular locality but such initiatives tended to be limited
in scale.
The definition of work activity was very narrowly drawn.
The result was that in some instances, education and training
was not counted as an acceptable work activity and some people
had had to give up their courses which appeared counter-productive
to welfare to work aims. States could vary the numbers in education
who were deemed to be in acceptable work activity.
The AFL-CIO worked directly with employers worked positively
with employers to promote work credits, the EITC and child support
initiatives.
As for the wider political environment affecting trades unions,
a recent strike concerning UPS had had widespread public support,
partly perhaps because people could relate to the issues of part-time,
contract and temporary working. The AFL-CIO had been initially
hostile to the growth of part-time jobs but had had to accept
reality and now negotiated for a better deal for part-timers.
There were concerns from existing workers and a belief that
increasing numbers of welfare workers would dilute rights for
all: this had to be monitored. In the last 25 years union membership
had been falling, possibly hastened by anti-union policies pursued
under Presidents Reagan and Bush between 1980 and 1992. The union
movement regarded President Clinton as much more union-friendly
and the decline in membership had now halted. People were perhaps
aware that wages at the bottom end of the workforce had dropped
and workers in the middle were therefore more fearful of dropping
down themselves.
The Conference of Mayors had recently discussed welfare reforms
and had focussed on the need for decent pay and conditions for
those who worked hard.
The issue of medicare costs was very important in getting
people off welfare. The loss of medicare acted as a deterrent
(an unemployment trap) for people moving into low paid jobs without
attached medical insurance. The problem of the working poor could
come to be seen as more important than those of welfare recipients.
11. HERITAGE
FOUNDATION
| Mr Robert Rector | Senior Policy Analyst
|
Mr Rector introduced himself as the individual who
crafted the Welfare Reconciliation Act legislation, based on ideas
borrowed from Wisconsin. The background to the changes was job
creation at the macro-economic level, but a growing problem of
dependence. There was concern about values because welfare recipients
were subject to cultural poverty and an eroded work ethic. The
institution of marriage was eroded and with successive generations
of a family on welfare there was a need to disrupt that culture.
It was necessary to affect those values directly. Marriage or
teen abstinence could not by themselves take a million people
off the welfare rolls. Education and training programmes were
a political teddy bear, exemplified by the dictum from President
Johnson's War on Poverty that it was better to teach a man how
to fish than to give him a fish to eat. Despite the wide initial
support for this approach, it did not work and had no effect on
the welfare caseload. The JTP Act allowed for a controlled evaluation
of individuals randomly assigned to training or jobs. Male trainees
improved their outcomes by zero per cent, and females by only
three per cent. These programmes did not produce the results that
were needed.
Evaluation had been carried out over several years. On the
job training in the form of workfare was effective. Classroom
training, directed at a population which during years of elementary
and high school had mastered the art of sitting in a classroom
and learning nothing, was not. School education produced people
who could not read and write very well. Training was being used
as a mechanism to avoid work. Since the early 1970s $68 billion
of taxpayers' money had been spent on education and training,
but it had not led to reduced dependence on welfare. Workfare
had been advocated since 1970 but was not practised until the
past 3 or 4 years. Since then the AFDC had declined dramatically.
From 1987 the national caseload had continued to increase but
in Governor Thompson's Wisconsin the caseload had declined, then
remained steady during the recession, followed by falls of 3 or
4 or even 10 per cent a month. Supposed experts on welfare had
agreed that the maximum effect on welfare rolls would be 5 per
cent or so, but Wisconsin showed drops of 5 per cent in a single
month. The rationale of why dependence was supposed to be inevitable
was disproved by the data.
Oregon, South Carolina and other States had delivered similar
successes. What happened to people leaving welfare was not necessarily
known. Anecdotally, it appeared that 70 per cent were now in work
and 30 per cent were being supported by other family members.
The welfare bureaucracy was faced with a 98 per cent drop in the
caseload in some counties in Wisconsin. Welfare reform posed a
maximum threat to the welfare industry.
It was a myth that lack of daycare was an obstacle to work.
The essential dynamic of reform was that the States could keep
the surplus generated by reducing the level of entitlement spending
for greater spending on the poor. Dramatic savings were expected.
Spending per claimant rose as there was a more intensive effect
on claimants.
The two criteria for success should be a reduction in caseload
and a reduction in the number of out-of-wedlock births. Everything
else would flow from that. People would not be kicked out on the
streets. The objective was to reduce long-term welfare dependence
and the absence of fathers.
There had been some worry over whether it was right to force
mothers of very young children into the workplace. Initially it
had been intended to target only the mothers of older children.
There was a daycare problem for children under school age, so
starting at a later age had been considered. The overall ranking
of the best environments in which to bring up children was:
- two parents with one parent at home
- two parents with both working
- one parent working
- one parent not working and at home with a welfare cheque.
The last environment had no positive consequences whatever
for the child. In addition to two parents, a child needed the
example of a working parent and an ethos of independence. The
data were very clear. Being home alone with a welfare mother was
not good for the children.
The more income was injected into a welfare dependent family,
the worse the problem became. The source of the income mattered
a great deal. There were negative effects on the child if the
money coming in came from welfare, whether in terms of labour
force participation, chances of high school graduation and so
on.
IQ levels were not correlated with benefits. The higher the
benefit, the longer was the time spent on welfare. The length
of time on welfare had a negative effect. Giving salves to the
poor had not worked in either the UK or the USA.
Apart from the narrow range of the incomes near the level
of malnutrition, there was no US study which showed higher welfare
payments benefited the child. It made a difference where the income
came from.
Many benefit recipients got money under the table. Occasional
prostitution, called "going out" in the US, was not
a big time activity. Where the habit of dependency was disrupted,
such women could find much better ways of making money. The overall
objective should be to bring down the number of births out-of-wedlock.
A pattern of serial co-habiting partners did not support
the child. It was a devastatingly bad thing, and the core behaviour
that produced dependency. Conservatives believed that the power
of cash was a contributing factor to the numbers of out-of-wedlock
births. It was necessary to move into a pro-marriage direction.
Under income-tested systems, the easiest way to be able to report
a lack of income was to not have a male earner present. The welfare
system actually promoted marriage break-up. Welfare should be
made to be no longer a one-way handout. Workfare in Wisconsin
had cut rolls by 70 per cent. Milwaukee had previously had one
of the highest dependency rates in the country, with 90 per cent
of the black single mothers being on welfare. There had been an
85 per cent drop in the caseload, and welfare dependence had been
eliminated throughout most of the rest of the State of Wisconsin.
It was the job of charities to support those who truly needed
aid. Everyone had known at the beginning of the century that it
was necessary to have a work test, but this wisdom had been lost
until recently. If money was paid to individuals for not having
a job, they could end up being on welfare for years. If someone
approached the State to say they needed help to find a job, they
would be given 4 weeks under supervision to find a job. At the
end of that time they would be given a broom and told to start
cleaning the halls. It was remarkable that 60 to 80 per cent of
welfare recipients who reached that stage suddenly remembered
that they had another option - to get a job instead of carrying
a broom.
The reductions in caseload were not purely related to the
state of the economy. There was a negligible 0.5 correlation between
the level of unemployment and welfare caseload. The top 8 States
by the size of the fall in caseload all had workfare programmes.
Wyoming's caseload had been cut dramatically while that of Hawaii
had increased. It was clear that the key variable was the reform
process not the economy.
The variation between States provided natural experimental
models as they diverged in policy. New York City had introduced
workfare, while a liberal democratic legislature in California
had no introduced systematic reforms. In Oregon 6 out of 7 recipients
offered a community service job found they had other things to
do; a lot of them would already have been working, off the books.
In theory, workfare could put other people out of work and
depress the wage rates of entry level jobs, but the US economy
created so many jobs. If one was frightened by the possibility
of affecting the wages and security of people already in work,
one would end up having people in long-term dependence.
Education never had any effect on welfare caseloads. Only
workfare could deliver the "wake-up call" to make people
find work. People would be cut off without any income at all only
if they refused to co-operate with the system and were unwilling
to begin work.
The negative consequences such as crime, prostitution, begging
and destitution had proved to be a lot smaller than people would
have thought. Mothers would not refuse work and thereby put their
children at risk. In Wisconsin it had been found that non co-operating
mothers might have a drug problem. The work requirement was sorting
out that kind of problem. It was much better to challenge a person
than to leave them at home with a welfare cheque and a cocaine
habit funded by a little prostitution on the side.
Even without operating a time limit two counties in Wisconsin
had reduced their welfare caseload by 98 per cent. A recent New
York Times article by Jason DeParle had reported on what was called
a "homeless shelter" but was actually a supervised living
facility, with one inmate saying that workforce was the best thing
that had happened to him - just the wake up call he needed. It
had been argued that the rhetoric was draconian, and that the
public could not accept it, but it was debatable whether there
would be any real increase in homelessness.
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