Welfare to work Tough love works Jul 27th 2006 >From The Economist print edition
Why America's pathfinding reform holds lessons for other countries A DECADE ago, Americans began a bold social experiment. In August 1996, Bill Clinton signed into law the bill that introduced "welfare to work". >From that point, poor families could no longer claim welfare indefinitely as an entitlement. Instead, parents had to find a job. The reform, controversial enough in America, was reviled in many parts of Europe. Its opponents said that welfare claimants, most of them single mothers, would be unable to find work. They and their families, it was argued, were being condemned to destitution. Ten years on, such dire warnings have been proved spectacularly wrong (see article). America's welfare rolls have fallen by over half as existing claimants have found work and fewer people have gone on benefit in the first place. A strong economy, generating plenty of jobs, has undoubtedly helped; but the main reason for the steep decline in caseloads is the reform itself. Furthermore, there has been no upsurge in the poverty rate; in fact, it has fallen over the period. Most of the jobs taken by former claimants are poorly paid, but in general they are doing somewhat better than when they were on welfare. The reform has succeeded by combining sanctions and incentives. The sanctions comprise strict limits on the length of time that benefits are paid. Families are normally not allowed to receive welfare for more than five years and all mothers are expected to work whatever the age of their children, although states can exempt those with a child under one. The incentives include financial support for low-income earners through a more generous Earned Income Tax Credit, which has burgeoned over the past ten years, and much higher public spending on child care. Since success is infectious, several other countries have adopted features of the American reform. In Britain, the Labour government has administered tough love in its programme to prevent young people from getting stuck in unemployment. Despite some wretched administrative foul-ups, it has also greatly boosted financial support for poor working parents, including generous help towards child care. Smaller European states like the Netherlands and Denmark have also introduced strict conditions to get people off welfare and have boosted incentives to work by making benefits less generous. The success of such policies in cutting unemployment has helped to convince more resistant countries like France and Germany that they, too, must move away from entitlement to conditionality. Belatedly, they are starting to adopt similar measures as part of their drive to cut chronically high rates of joblessness. Time out for time out Much more could still be done. In Britain, for example, single parents can remain on welfare until their youngest child is 16. This needs to change. Australia, which has had a similar rule, is showing the way by reducing the age from 16 to six for new claimants this year; those with older children will have to look for paid work of at least 15 hours a week. As important, the principles of welfare-to-work can be applied to other working-age people who in many countries have come to depend on welfare through disability payments. Whereas in Britain, for example, the jobless count has fallen sharply over the past ten years, the number of people claiming incapacity benefits has carried on rising. As a result, it now greatly exceeds those on unemployment benefit. Once people are on incapacity benefit, they tend to remain on it. Yet most are able to work. Again, a mixture of conditionality and in-work support is needed to make reform effective. These principles now lie behind a long-overdue effort in Britain to reduce the number of claimants. Welfare recipients, whether lone parents or the long-term unemployed or many disability claimants, tend to be poorly educated with few skills. Help with basic learning and training for people re-entering employment is another way in which welfare reform can be improved. And what's even more important is to ensure that children do better in school in the first place. Welfare reform was once regarded as a harsh, right-wing, America-only idea. But an unexpected lesson of the past ten years is that it enjoys much wider political appeal. Within America, its success has silenced the former fierce opposition of left-wing Democrats, which Mr Clinton had overruled. For the Labour government in Britain and for social democrats in Europe, reform offers a way to reintegrate people who would otherwise live in a welfare apartheid. Furthermore, it is a way to defend generous support for the poor-as long as they find work. Another attraction for developed countries as their populations age is that it mobilises more employment to maintain living standards and help pay for the old. And, best of all, it works. Jayson Funke Graduate School of Geography Clark University 950 Main Street Worcester, MA 01610
