In a compelling July 4th column at the Wall Street Journal, Peter Cove argues for wholesale welfare reform.
Cove laments the returns on investment that characterize current federal anti-poverty programs. Put simply, those programs are very expensive but achieve very little. And he notes the plummeting labor participation rate for prime-age Americans, “The unemployment rate is at a 15-year low, but only 55% of Americans adults 18 to 64 have full-time jobs.”
Still, Cove’s most interesting contention is that “young men who are not working” but receiving welfare payments should face “a mandatory two-year public-service requirement with an off-ramp for those who snag a job.” This, Cove says, “could motivate them to get off – and stay off – the couch.”
I agree. It’s a simple message but one that has both moral and political justification.
For a start, nothing is free. Welfare payments cost the taxpayer hundreds of billions each year. And those payments offer no economic productivity (creating goods or services) beyond the expenditures recipients make at stores. And that raises a question.
Why do we tolerate this absurdity?
The answer, sadly, is quite simple. It’s because the Democratic Party has no vested interest in forcing those who do not wish to work to do so. It’s the ultimate feudal exchange. In return for votes, welfare recipients are gifted with benefits.
That said, the Trump administration has an opportunity here.
By reforming welfare in such a way that benefits are maintained in return for work, Trump could nullify the criticism that he is behaving immorally. He would not be removing welfare payments, simply qualifying them. And he would not be affecting those who truly cannot work.
As with the Clinton-Gingrich welfare reforms of 1996, this reform would reduce the incentives of staying on welfare. By involving recipients in various community service endeavors (clearing downed trees, cleaning the streets, assisting in basic construction projects etc.), those working would find new motivation to find a job that offers better pay and greater satisfaction than their welfare work. It’s a basic zero-sum exchange.
Again, the key here is that the incentives to work outweigh the relative costs of welfare.
Over in the U.K., the Spectator’s Fraser Nelson gave a good example of this challenge in 2014, when he noted why Britain’s welfare system fails. Using the example of Dee, “a single mother with two young children,” Nelson explains that “Were she to earn, say, £90 a week as a cleaner, then the system would reduce her benefits by £70 – an effective tax rate of 78 per cent on that £90 she’s earned. She’d thus be slaving away all week for £20 – far less than the minimum wage. It doesn’t get too much better higher up the scale. If she landed a £23,000-a-year job, her effective tax rate would still be 74 per cent – so she’d end up just £5,975 a year better-off than if she’d spent the year sitting on the sofa watching daytime TV and chatting to her pals on the street. If she then worked extra hours, or earned a pay rise, she’d keep a pitiful 9p in every extra pound paid… Which of us would work at a 91 per cent tax rate?”
Of course, it’s not just about the incentives. If any welfare-to-work program is to truly succeed, we’ll also have to clamp down on fraud and waste. For example, it remains far too easy to obtain social security disability payments. And unless that changes, many welfare-to-work enrollees are likely to jump onto alternate programs rather than accepting work requirements. We’ll also have to improve the nation’s education system. As I found in Michigan’s upper peninsula, many employers cannot match their job openings to qualified applicants. To address these gaps we need to put skilled apprenticeships on a par with college degrees.
Nevertheless, welfare reform is a moral and economic imperative. Too many Americans are leaving or ignoring employment. Such choices ruin the life chances of those who make them, and deny taxpayers their right to productive government spending. We can and should do better.
