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: FABIAN PAMPHLET 567 •

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. Reforming . 


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FABIAN PAMHLET 567 

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Reforming Welfcle: 
American lessons 


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1 Introduction 1 
2 American poverty: the facts 4 
3 The Clinton plan 8 
4 Making work pay 10 
5 From welfare to work 14 
6 Moral engineering 18 
7 The success ofAmerican 
Social Security 21 
8 American lessons? 23 
9 American/English glossary 28 

Simon Crine, General Secretary of the Fabian Society, was a 
Harkness Fellow at the Center for Policy Alternatives in Washington 
D.C., 1993-94 

The author would like to thank the Commonwealth Fund of 
New York for their support. 

This pamphlet, like 
all publications of the 
Fabian Society, 
represents not the 
collective views of the 
Society but only the 
views of the author. 
The responsibility of 
the Society is limited 
to approving its 
publications as 
worthy of 
consideration within 
the Labour movement. 

Design: Tony Garrett 

Septem.bed994 

ISBN 0 7163 0567 4 

--.... 

ISSN 0307 7523 

Printed by The CollegeHill Press Limited (TU), 
London and Worthing 

Published by the Fabian 
Society, 11 Dartmouth 
St, London SWlH 9BN 


BLPES 

Introduction 

Ill 111111 

21 0297875 5 

1

Only in America could a left of centre candidate 

for the Presidency, albeit one from a small, poor 
and conservative southern state, promise to "end 
welfare as we know it" and expect tow·, ~votes. It 
would destroy a British Labour leadeE ,an~,. 
probably a Conservative one too. ~~ .t..,\Jo 

OA.. ' 

.. ,,c se\~ 

B 
B
ut that is exactly what Bill Clinton did, to deadly electoral effect, 
when running against George Bush in 1992. With one soundbite, he 
attacked the undeserving poor, appealed to the Reagan Democrats 
who had deserted their party in successive elections, and confirmed 
his reputation as a moderate 'New Democrat'. But the pledge has come back to 
haunt him in power. 

However there are some similarities between the welfare debates in Britain 
and the US. Ifyou believe what you read in the papers, both welfare systems 
are in crisis. Not only are they despised by those whom they serve and resented 
by those who pay for them, but now they are gnawing away at the moral fibre 
of the nation. Frightened by low growth and high unemployment, Britain is 
becoming almost as obsessed by welfare dependency, family breakdown and the 
urban underclass as the United States. 

The moralistic tone of the American debate is inescapable. New Democrats 
and conservative Republicans are agreed that 'welfare', by which they mean 
means-tested benefits for single-parent families (Aid to Families with Dependent 
Children or AFDC), rewards idleness and dependency and traps the poor 
in poverty. Moreover, they say, welfare undermines traditional American 
values -like work, the family and individual responsibility-and that what is 
needed is a revival of stigma against those who deny or ignore those values. In 
practice, it has proved a short step from lofty disapproval ofwelfare's values to 
the harsh cuts in welfare benefits which have marked the last 13 years in 
America. 

At the heart 

American politicians talk about welfare because it goes to the heart ofwhat 
kind of society America is. Everyone agrees that the elderly, the blind and the 
disabled and the newly unemployed deserve support in their time of need but 
there is no such consensus about poor single mothers. Fifty years ago, when 

1 


Roosevelt created the forerunner of AFDC, most Americans thought mothers 
should be at home looking after their children; today, they think they should 
be out working. The irony is that AFDC is about as cheap a welfare scheme for 
single parent families as could be devised, accounting for a mere 1% of the 
Federal budget and a mere 3.4% of the budget of the average state. 

The British angle 

Britain, of course, is having its own debate about the welfare state, albeit 
more broadly interpreted. Encouraged by the launch of John Major's 'Back to 
Basics' evocation of old England, Michael Howard and Peter Lilley made 
moralistic appeals to the 1993 Conservative Party Conference. Both remarked 
on the rising rates offamily break-down and illegitimacy. Both drew attention 
to the higher incidence of poverty-and other social problems -amongst single 
parent families. In recent months, they have been joined by Kenneth Clarke 
and Michael Portillo echoing traditional Tory concems about the undeserving 
poor, welfare dependency and family breakdown. Mr Major himself has kept 
out ofit. 

Fortunately, and in no small part thanks to a succession of minor scandals, 
nobody seems to have taken their interventions too seriously. Anti-welfare 
rhetoric, wrapped up in moral panic, doesn't play as well on this side of the 
Atlantic. First, British voters do not like their govemments to lecture them on 
the way they ought to live and are inclined to suspect a degree of hypocrisy in 
politicians who preach morality. Secondly, there is not the same individualistic 
reaction to the very idea of social welfare that lies just beneath the surface of 
American life. Battered but still popular notions ofcollective responsibility-or 
social solidarity -underpin popular support for the British welfare state. A 
British Prime Minister, as Mrs Thatcher learnt, might well laud work, family 
and individual responsibility but he or she would be advised to add 'society' too. 

Or perhaps the biggest difference is just that British voters have become 
more used to high unemployment (an average of 10% of the workforce in recent 
times as against 6 or 7% in the US) and live in greater fear oflosing their jobs. 
You are less likely to distance yourself from the poor if you think you may be 
the next to go. And in Britain it is but a short step from the relative respectability 
ofUnemployment Benefit, paid for by your National Insurance contributions 
when you were in work, to Income Support paid for out ofgeneral taxation. 
And the distance will be shorter still when the two are merged into the 
grace-and-favour benefit of the Jobseeker's Allowance. 

The driving force of the debate in Britain is not morality but money. The 
British social security budget-which covers every form of cash transfer from 
pensions and child benefit to means-tested public assistance-now accounts for 
28% of all govemment expenditure, more than education, health or defence. 
Whilst an economic upturn would reduce the costs of mass unemployment, 
demographic changes will still exert pressure on the budget. Britain, like most 

2 


western countries, has an ageing population, which will place an increasing 
burden on people of working age. It was the rising costs of the British welfare 
state and the apparent unwillingness of the taxpayer to fund them which 
prompted John Smith, the former Labour Leader, to set up the Commission on 
Social Justice. 

By contrast, American politicians do not really want to talk about the cost 
oftheir social welfare system though the financial and demographic geography 
is just as harsh, if not harsher than Britain's. Social Security (the universal 
pension system) and Medicare (the universal health care system for senior 
citizens) account for nearly one halfofthe Federal budget on their own and, say 
critics like Ross Perot and the Concord Coalition, can only increase given the 
steep rise in the proportion of the American elderly. But these entitlements are 
justtoo popular with the great American middle class-not for nothing is Social 
Security called the third rail ofAmerican politics. 

Conservatives in both countries have always seen poverty and inequality as 
a reflection of individual characteristics, aided and abetted by ineluctable 
economic forces. The left has tended to be much more interested in how 
government policy can reduce overall poverty and inequality than in separating 
out the deserving poor from the undeserving poor. For 30 years after the War, 
the socialist or social democratic view prevailed: the welfare state,riding on the 
back of full employment and steadily rising living standards, reduced poverty 
and inequality. The retum of high unemployment, low economic growth and 
increasing taxpayer resistance to public spending in any form undermined the 
welfare state. Today, the individualist view prevails: a means-tested safety net 
for anyone who is in trouble rather than social security for everyone. 

But the big questions for American liberals and British socialists remain the 
same as they were 50 years ago. Which are the best ways to alleviate personally 
disabling and socially destabilising poverty and inequality? Are means-tested 
benefits, directed simply at the poor, or universal benefits, designed for everyone, 
more effective? Should benefits be paid for out of general taxation or by a 
dedicated tax on those in work? Is the aim simply to get more people into jobs 
or to enable people to combine work and caring for dependents? And how can 
the voters be persuaded to pay for a fairer society when they feel so insecure 
about themselves? 

3 


2 


American poverty: the facts 

Poverty in America has made a comeback in 
recent years. In 1992, one in seven Americans 
(36 million people) were living below the official 
poverty line-the highest figure since 1962. 

T
T
he child poverty rate was even higher: more than one in five children 
(14 million) were below the poverty line. Just over half the poor are 
single parent families and eligible for welfare and 15 million mothers 
and children (only 10% of AFDC families are headed by the father) 
actually claim AFDC. 

The non-working poor without children are virtually on their own. They are 
not eligible for AFDC because they don't have children, nor for means-tested 
Supplemental Security Income (SSI) unless they are aged, blind or disabled. 
General Assistance, a vestigial system ofpoor reliefin the shape ofgrants, gifts 
or loans, is available in a steadily diminishing band ofstates. After that it's the 
ehurches, charities or doing what mostAmericans do: moving on. Over a quarter 
of the poor get no cash assistance of any kind. Food Stamps (the biggest 
means-tested programme of all, covering 26 million working and non-working 
poor people) and Medicaid (means-tested healthcare) offer minimal solace. 

Mounting concern about welfare dependency, family breakdown and the rise 
of the underclass and the steep climb in the number ofwelfare cases in the last 
recession have forced welfare onto the top of agenda. The number of AFDC cases 
is up by a third and Food Stamps by 45% since July 1989. In many states, the 
increase in the AFDC caseload has been even steeper: Florida's caseload more 
than doubled, Texas's rose by a half and California, enduring the worst recession 
in its history, saw the number of cases rise by 4 7%. 

From its inception nearly 60 years ago, the AFDC programme has been a 
matter ofjoint responsibility, with the Federal government setting the national 
framework and the states adapting it to their own circumstances. The 55:45% 
funding split roughly reflects the sharing of responsibilities. The result is a 
patchwork quilt of50 different welfare systems (plus the District ofColumbia) 
each with its own definition offamily needs and its own wildly varying level of 
benefits. No variation in the cost of living can fully explain the differences: 
rather, they reflect local political judgements and varying social attitudes. 

The average AFDC benefit for a poor family was only $388 per month in 1992 
(£260 per month), which is well under halfthe official poverty line of $820 per 

4 


A transatlantic guide to welfare jargon 


American British 
Aid to Families with Dependent Children (AFDC) Income Support 
Earned Income Tax Credit (EIOL)-refundable Family Credit 
Food Stamps 
Social Security Tax National Insurance 
Supplemental Security Income (SSI) Invalidity Benem 
Unemployment Insurance Unemployment BenefiV 
Jobseeker's Allowance 
Child Benefit 

month for a family of two and $1027 for three. In any case, the federal poverty 
line, fixed at three times the minimum food requirement for the average person, 
has long been criticised for being too low to live on. Nor does AFDC come well 
out of a less ambitious comparison with its means-tested sibling for disabled 
people: SSI for the single person is $434 and for a couple is $652. The only thing 

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0 
0 
1970 1975 1960 1985 1990 
AFDC Benefits for a Family ofFour, 1970-1990 

Source: Committee on Ways and Means, US House ofRepresentatives. 

5 


to be said in mitigation is that, in spite of the official rhetoric, nobody really 
expects the poor family to live on AFDC and Food Stamps alone. Income from 
off-the-book jobs, gifts from other family members and in-kind support such as 
free childcare go a long way towards doubling the total. 

In the popular mythology of American welfare, the typical welfare family 
has an idle, feckless black mother who breeds as fast as she can to increase her 
AFDC cheque-when she's not tuming down lucrative job offers. But the facts 
are not so convenient: a third ofrecipients are, indeed, African-American but a 
third are white and the remainder Hispanic and other minorities. The average 
AFDC family has two children but two out offive families have just one child, 
pretty much in line with the figures for the population as a whole. As for staying 
on welfare indefinitely, the average spell on AFDC is 6 months, with half the 
recipients leaving within a year and three quarters in two years. Marriage 
comes before a decent paying job as the favoured way out. 

The causes ofpoverty 

It is easy to list the causes of poverty but not so easy to weigh their relative 
importance. First, there is unemployment, the surest way to poverty. Whilst 
national unemployment has levelled off at around 6% (considerably lower than 
most ofEurope), many manufacturingfirms are continuing to downsize and the 
first jobs to go are the relatively well-paid skilled manual jobs. Second, and 
linked to the above, there is the chronically low wages of the new jobs which 
are being created in the service industries. The Center for Budget Policy and 
Priorities has estimated that 28% of American workers do not eam enough to 
keep a family out of poverty. There just are not enough well paid jobs to go 
around, especially for low skilled and uneducated workers. Thirdly, at a time 
when most families need the wages of two workers, the proportion of single 
parent families, 90% of which are headed by women, has jumped to one in four 
(in 1960, one in eleven families were headed by a woman). Thanks to the lower 
wages which women traditionally endure, female-headed families are over 
three times as likely to be poor as two-parent families. 

Finally, successive rounds of welfare cuts over the last decade (44 states cut 
or froze benefits in 1992 alone) have reduced the ability of benefits to lift the 
poor out of poverty. The Urban Institute has estimated that the AFDC level 
would have to increase by around 40% to recover its real value in 1975. The 
result is that the welfare mother can't hope to support her family on AFDC 
alone and must combine it with some other source of income. So much for 
dependency. 

6 


Poverty in the United States, 1989 

Source: US Department of Commerce, Bureau of the Census 

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3 


The Clinton plan 

Bill Clinton's campaign pledges to "make work 
pay" and "end welfare as we know it" constituted 
defining moments in his campaign. More than 
anything else, they demonstrated that he really 
was a hard-headed, tight-fisted New Democrat, 
on the side of the working man and woman and 
not just another soft-hearted, high-spending old 
liberal, obsessed with the needs of minorities. 

F
F
ortunately for him, George Bush never called his bluff and he never 
had to say what he meantby ending welfare. Liberals went along with 
it because they thought it would mean more money; conservatives 
wanted to believe thathe really meant to end it; and the uncommitted, 
whom Clinton was trying to woo, took it to mean stricter work requirements. 
Jimmy Carter, who also preferred paid work experience to higher cash benefits 
for the poor, had pulled off the same trick when running in 1976. 

In power it wasn't so easy to keep everyone happy. Public expectations had 
been raised and old prejudices given a new lease of life: President Clinton set 
up a high level task force on welfare reform, jointly chaired by his new Assistant 
Secretaries at the Department of Health and Human Services, David Ellwood 
and Mary Jo Bane, and by his chief domestic policy adviser, Bruce Reed 
(Ellwood and Bayne were welfare professionals from Harvard, whilst Reed 
made his name on the presidential election campaign). They were to be guided 
by four broad principles: work should always pay more than being on welfare, 
child support enforcement should be tightened up, education and training 
should be expanded and, most controversially, AFDC benefits should be replaced 
by paid work experience after a period of two years. 

Patchwork ofideas 

The announcement of the President's task force stimulated the formation of 
many others. By early 1994, everyone with any interest in the subject, from the 
poverty advocates and the professionals who administer the system to the 
conservative think tanks, had delivered their own recommendations to the 
President. Most pointedly of all, the House Republicans took President Clinton's 
half-promises, beefed them up with a series of punitive proposals and 

8 


tabled their own welfare reform bill. They turned his vague promise of a 
two-year limit on welfare without work into an unambiguous commitment to 
workfare -the requirement that welfare recipients should work for their 
benefits after their time was up.They also proposed to cut offadditional benefits 
to babies born on welfare (the 'family cap') and to cut off all benefits to 
immigrant families and to parents under the age of 18 to push them back into 
their parental homes. 

As if that were not enough the states were stampeding towards their own 
welfare reforms. 1993 and 1994 saw the granting of numerous waivers by the 
Clinton administration to enable states to experiment with their welfare 
systems. Most of these involved relatively uncontroversial changes to welfare 
rules to make work pay, to improve child support and to increase child and 
health care coverage for welfare recipients re-entering the workforce. But they 
also included a number of major experiments, sometimes local, sometimes 
state-wide, to test out controversial new reforms. 

Room for manoeuvre 

By the time ofthe 1994 State of the Union address, his room for manoeuvre 
had been limited by the ever more punitive proposals coming up from the states 
-Wisconsin's two-year time limit on welfare and New Jersey's family cap-and 
from Congress. His own first preference -a guaranteed minimum wage job 
scheme for the long-term welfare recipient -would cost big money (between 
$20-25 billion) and nobody thought Congress would find those kind ofsums for 
something as unpopular as welfare, even if it were in the name of ending 
welfare. 

In June, the President finally came up with his own $9.2 billion plan to make 
welfare "a stepping stone not a way oflife". The key feature was a two-year time 
limit on the receipt of welfare benefits, after which the recipients would be 
expected either to get a private sector job or to take a minimum wage community 
service job. To cut costs and reduce the number of jobs required, he 
proposed that the scheme should only apply to younger welfare mothers born 
since 1971 and that mothers with children under the age of one would be 
exempt. Other features included an expanded education, training and job 
search programme, enhanced child support enforcement (including much 
tougher penalties for 'deadbeat dads'), a campaign against teenage pregnancies 
and legislation to facilitate the family cap. The money to pay for all this would 
come not from general taxes but from cuts in means-tested benefits to legal 
non-citizens-mainly elderly immigrants. 

Whilst the plan might not add up to the end of welfare, it would introduce 

the strictest work requirements for people on benefits since AFDC was in


vented. The only question is whether Congress will buy something that already 

looks relatively moderate compared with some of the other proposals that are 

coming forward. 

9 



4 


Making work pay 

11% ofAmerican workers -5 million people work 
full time but do not earn enough to keep 
them above the official poverty line. They are the 
working poor and they are also the people who 
most resent welfare payments to the 
non-working poor. Long before he became 
President, Clinton recognised that there could 
be no meaningful welfare reform that did not 
also do something for the working poor. Work 
had to pay more than the dole. 

H
H
is greatest success on the poverty front so far has been to translate 
his election slogan "make work pay" into the biggest single increase 
in the Earned Income Tax Credit (EITC) since it was introduced in 
1975. 10 million people will benefit. The cash refundable EITC will 
put an average of$2,000 in the pocket ofthe low paid family with one child and 
$3,700 into that of the family with two children in 1994. Together with Food 
Stamps, it will be enough to bring a family headed by a worker on the minimum 
wage up to the official poverty line. To put the dollars into percentages: the 
credit rate for working families earning less than $12,000 (from which point, 
the EITC begins a gradual phase-out up to $24,000) nearly doubles to a 
maximum of 26% for families with one child and 30% for families with two 
children (the figures will go on rising to 34% and 40% respectively in 1996). 
Further, in recognition that low pay is not just a problem for low paid workers 
with children, the EITC is to be extended to childless low paid workers between 
the ages of24 and 65 albeit with a maximum credit ofjust $300. 

The General Accounting Office's analysis of the expanded EITC estimates 
that it will reduce the impact ofFederal income tax and Social Security tax from 
14% to 1.2% on the poorest workers in the EITC phase-in range, from 13% to 
3.5% on those earning between the main EITC bands ($7,500 -$12,000) and 
from 14% to 7.8% on those in the phase-out range. The EITC went through a 
gruelling budget process in 1993 virtually unnoticed and consequently unscathed, 
but it will be the best thing Clinton does for the poor. 

The one disadvantage of the EITC, and one which the administration is 

10 


working on, is that it is only payable in a lump sum after the tax return has 
been filed in April. In other words, it does not do much for family cashflow since 
most low paid families need a regular income each week rather than an Easter 
bonanza. But the advantages far outweigh the disadvantages. First, it rewards 
work: you can't get it ifyou are not working. Secondly, it is good for all kinds 
of families because it is based on the size of the household rather than their 
status as a single parent or two parent unit (unlike AFDC). Thirdly, it is as 
targeted on the relevant group as any transfer can be: itbenefits everyone below 
the threshold and no-one above and does so without creating stigma because 
everyone has to file a tax return. Even before the Clinton revolution, take-up 
was 80 to 90%; no means-tested cash benefit comes remotely close to that kind 
of success rate. 

Unfortunately, only six states have their own equivalents of the Federal 
EITC to offset the impact ofstate income taxes on the working poor (Minnesota, 
Wisconsin and Vermont have fully refundable credits, whilst Iowa, Maryland 
and Rhode Island have non-refundable credits). 24 ofthe 42 states which have 
an income tax still tax people earning less than the poverty line. There is 
nothing the President or Congress can do to oblige these states to introduce 
their own EITCs but few things would increase the work incentive or aid the 
working poor more than for the states to follow suit. 

Why not the minimum wage? 

The other way of making work pay would have been to increase the Federal 
minimum wage and many expected the first Democrat President in a dozen 
years to order a substantial hike in the rate (currently, $4.25 per hour £2.85). 
Mter all, when Jimmy Carter was President, he increased the minimum wage 
to the point where it was sufficient to lift a family offour headed by a full-time 
worker over the poverty line. So why didn't Bill Clinton? 

The minimum wage lost out politically because any substantial increase and 
it would have had to be large to make up for the 24% real cut in the real 
value of the minimum wage since the mid-1970s -would have courted the 
accusation that it was risking jobs. That was a price a new President, elected 
on a minority ofthe vote to do something about unemployment and low growth, 
could not pay. Thus, with surprisingly few objections from organised labour, 
the minimum wage is being left to stagnate and with it the example it sets to 
the states, who have the right to fix a higher rate ifthey so desire (only DC and 
five others actually do set higher rates). 

The minimum wage also lost out to the EITC on public policy grounds 
because the latter looked like a better way of targeting poor households: 
whereas the EITC only goes to households with low incomes, an increase in the 
minimum wage would also benefit many families with average or even above 
average incomes, which happen to have a low-paid member. Whilst defenders 
of the Federal minimum wage, as a means of underpinning the labour market 

11 


and preventing competition by wage-cutting, remain numerous, within the 
administration there are few advocates ofusing it as a way of tackling income 
inequalities. The minimum wage isn't dead but it isn't kicking either. 

The cost ofchildcare for those in work is scarcely defrayed by the Dependent 
Care Tax Credit (DCTC), which is worth an average of$600 per annum to each 
household. Unfortunately, the DCTC is oflittle use to the poor, working family 
because it is non-refundable, so that you can only benefit if you are paying 
enough tax in the first place. That leaves the working poor with the rare 
possibility of publicly subsidised childcare, most ofwhich is reserved for people 
coming off welfare and back into work. 

Such a Catch 22 could have been resolved by making the DCTC refundable 
and increasing its value, but the administration preferred to concentrate on 
expanding the EITC for the working poor rather than expanding the DCTC for 
the average middle class family. Given the increasing demand for good quality 
childcare, it is hard to believe that the DCTC will not be revisited at some future 
date. The alternative would be some form ofuniversal public childcare system, 
funded by the government, and itis hard to imagine most Americans preferring 
that to a tax break. 

As part of his plan to increase work incentives, particularly for single 
parents, Clinton proposes to tighten up child support by requiring hospitals to 
establish paternity, denying drivers licences to fathers who fail to pay, and 
making the first moves towards a federal system of child support collection, 
distribution and enforcement. "If you're not providing for your children, we'll 
garnish your wages, suspend your license, track you across state lines and if 
necessary make some of you work off what you owe" as he put it. 

Although by no means all single-parent families are poor, the incidence of 
poverty is much higher than in two-parent families. Life is doubly hard if the 
ex-partner is not contributing to the cost of having children and, in America, 
40% of single parent families have no child support order (CSO) at all and, of 
those who do, fully a half do not receive the sum awarded by the court, often 
because the partner has crossed the state line into a different jurisdiction. Only 
one in five of young unmarried mothers receive child support payments from 
the absent father. 

However the President is probably exaggerating the benefits of tightening 
up CSOs. It is hard to believe that there is another $34 billion just waiting to 
be re-directed from high-spending ex-husbands to hard-pressed mothers (in 
addition to the $13 billion which is already collected). Many fathers will have 
taken on new family responsibilities perhaps through re-marriage and taking 
from them may hurt the second family more than it benefits the first. In any 
case, as the chequered history of the Britain's Child Support Agency demonstrates, 
post-divorce arrangements which apportioned property and wealth, as 
well as income, are unpicked at their peril. 

Nor is it easy to believe that the financial problems of working and non-work


12 


ing poor families could be solved by better child support arrangements.The fact 
is that poor families usually have poor absent parents. Chasing a low paid or 
unemployed father-Clinton's "deadbeat dad"-across state lines may satisfy 
a sense of natural justice but it will not make the difference between poverty 
and the average lifestyle for the poor family. 

Childcare and health 

There are two other major hurdles for the poor to jump if they are to make 
work pay in America: childcare and health care. The Clinton welfare plan 
provides for a modest increase in spending on means-tested daycare for both 
those on welfare and the low-paid. Once again,the Clinton approach recognises 
that you cannot hope to build public support for better provision for the 
non-working poor and not do the same for the working poor. But it falls well 
short of treating childcare as a universal necessity -like school age education 
and increasingly further & higher education. 

His ambition for health is much greater: universal health coverage, if-and 
it is a big if-Congress can be persuaded to pass his health security bill. Lack 
of health coverage probably ranks higher than either low wages or lack of 
childcare in explaining the decision which some single parents make to stay on 
benefit rather than take a job. At least on welfare, you and your children get 
Medicaid. As President Clinton said in his Union message "one million people 
are on welfare today because it's the only way they can get health care coverage 
for their families". Taking health care out of the equation for working and 
non-working poor alike would be a major welfare reform. 

There may only be a short distance between the low paid worker, struggling 
to keep his or her family out of poverty, and the unemployed parent on welfare; 
but there is a gulfbetween the two as far as the American public and politicians 
are concerned. On the one side stands the deserving, working poor, on the other 
the undeserving, welfare poor. President Clinton recognised that you can't do 
anything for people on benefits unless you also do something for the one in ten 
working Americans who do not earn enough to keep their heads above the 
poverty line. Work must pay. 

13 


5 


From welfare to work 


Leaving aside all the high-flown rhetoric about 
moving from welfare dependency to 
self-sufficiency, the main aim of the Clinton 
welfare reform package is to move people off the 
dole queue and back into some kind of paid work. 

F
F
irst, that means encouraging welfare recipients to top up their 
benefits by taking part-time work. At present, AFDC recipients who 
wish to top up their AFDC benefits by undertaking some paid work 
face a formidable poverty trap: any additional earnings will result in 
close to a dollar-for-dollar withdrawal oftheir AFDC grant (and remember that 
the average AFDC grant for a family tends to be around 40% of the federal 
poverty line). In future, he is proposing to allow welfare recipients to "fill the 
gap··between their benefit and their state's standard of need by taking part-
time work-currently, 35 states set AFDC benefits lower than their standard 
of need. 

Yet despite this disincentive to work (and bearing witness to the strength of 
the American work ethic), recent research has demonstrated that two out of 
five welfare mothers worked for "a substantial number ofhours over a two year 
period". Some of the women cycled on and off welfare, depending on how good 
the pay was (and the current state oftheir child and health care arrangements), 
whilst others combined part-time work and benefits (illegal ifthey earned more 
than $30). Further research showed that whilst 51% of poor single parents 
worked at some point during the year, only one in eight worked full time. The 
Institute for Women's Policy Research common-sense conclusion was that, as 
most single mothers seem to prefer part-time work to full-time work (so that 
they can combine work and caring for their children) and as few jobs pay enough 
to get out of poverty, the policy issue should not be how to force mothers off 
welfare and into work but how the "packaging of paid part-time work and 
AFDC" can be facilitated. 

Filling the gap makes sense because itreconnects welfare and work but there 
should be no illusions about what it can do. Itwill lead to more people combining 
part-time work and welfare openly and honestly and to higher net incomes for 
those who do; but it will not abolish poverty. Most ofthejobs are just not well 
enough paid for that and, ifthey were, most AFDC recipients would be leaving 
welfare altogether. Nor will it do much to iron out the grosser inequalities 

14 



between the states. Only the adoption of a federal minimum benefit for AFDC, 
which states could supplement if they wished, would do that (following the 
precedents set by both SSI and the minimum wage). But that is not even on the 
table. 

The second aspect ofthe welfare to work programme is providing recipients 
with the tools required to find and retain a job. People on welfare generally have 
lower education and skill levels than those in work and the gap is biggest 
amongst unemployed teenagers, who are also the most likely to become long 
term welfare recipients. President Clinton's aim is to build on the 1988 Family 
Support Act (FSA), which addressed itself directly to the human capital needs 
of the non-working poor and provided them with the necessary childcare and 
Medicaid back-up. The Job Opportunities and Basic Skills (JOBS) programme 
was set up to provide 20 hours or more ofbasic education and training to those 
deemed eligible. As was to be expected in a programme planned by the Federal 
government but administered by the states, the JOBS programme looks very 
different from state to state and often has a different name. In a few states, 
such as Oregon, it offers high quality education and training to equip welfare 
recipients for better paid, skilled jobs but, in many more, it amounts to little 
more than learning the basics for a job interview: how to prepare a CV, arrive 
on time, dress appropriately and talk properly. Useful but not the difference 
between a skilled and an unskilled job. 

The problem with the FSA, as Senator Daniel Patrick Moynihan, architect 
of the 1988 Act, never tires of saying, is that it was never fully implemented. 
The states only draw down two-thirds of the matching federal funds available 
for the JOBS programme and barely 15% of eligible recipients actually participate. 
Of those who do, 11% are on work experience programmes, 30% on 
training schemes and 40% back in education. 

The President's welfare plan would expand the number of places available 
on the JOBS programme with a view to providing a placement for everyone who 
was eligible and would codify much ofwhat is good in the 1988 Act. Every JOBS 
scheme would have to produce a contract between the welfare recipient and the 
state government, laying down everything from required punctuality, reliability 
and appearance to the precise contents of the education and training 
programme. Case management, childcare and Medicaid would be available as 
required. 

There is much to applaud in any improvements to the JOBS programme especially 
those which target the teenager on welfare -but expectations that 
they would lead to a permanent reduction in the welfare rolls would be 
misplaced. Early assessments of the JOBS programme, most notably those by 
the Manpower Development Research Corporation of California's GAIN pro-
gramme and Mathematica ofNew Jersey's REACH programme, have produced 
mixed results. Whilst there was modest but real success in getting JOBS 
participants into employment, most of the jobs were low-skilled and paid only 

15 


marginally more than those obtained by non-JOBS participants. Moreover, and 
soberingly, for every person who quit the welfare rolls, there was a replacement 
drawn from the ranks ofthe unemployed.The JOBS programme's main benefit 
may well turn out to be the intangible but nonetheless important one of helping 
reverse the downward spiral of self-confidence, which is the usual accompaniment 
of any prolonged period of joblessness. 

Ending "welfare as we know it" 

The final strand of the President's welfare to work proposals -his plan to 
"end welfare as we know it" by offering a job guarantee after two years on benefit 
-is the one which has caused him most grief. The financial problem is that any 
kind ofa half-sensible proposal would cost big money-and welfare reform was 
sold as a way of saving money not spending it, whilst the political problem is 
that his conservative opponents have seized on the rhetoric to suggest yet more 
cuts to the safety net. 

The President's task force originally estimated that it would cost around 
$5,000 per annum in childcare, transport and administration just to put a 
welfare recipient into a minimum wage community service type job or a 
subsidised private sector job. And there are around 1.2 million welfare recipients 
who have been on for two years or more at any point in time. Faced with 
these daunting figures, the task force was obliged to scale down its ambitions 
to offering places simply to the newest and youngest entrants-around 600,000 
people a year. Only mothers ofchildren less than one year old would be exempt 
and failure to comply would be met by cutting off benefits. 

Workfare? 

In the past, strict work requirements have proved counterproductive. Just 
like good job search, training and education programmes, good work schemes 
are expensive to provide and there seems little to be said for wasting scarce 
resources on the unwilling and incapable when there are so many who are want 
paid work and would relish a second chance. That said, it should be clear that 
President Clinton's mandatory work programme is not workfare: after two 
years on welfare, recipients would move on to a paid job, whether a subsidised 
private sector job or a government sponsored community service job but would 
not work for their welfare benefits (the essential feature ofworkfare). 

Contrary to some expectations, Clinton's welfare plan does nothing to 
encourage workfare, which in any case has always been more of a slogan than 
a reality in the States. The case against workfare is not so much that it forces 
the workless to do something against their will -although coercion is not 
usually a great motivator -nor that it appears to do little to build hope, 
confidence and self-respect amongst the conscripts. Rather, it is expensive to 
run and the money could be better used elsewhere. 

16 


Extreme 

The President's approach looks moderate compared with what some states 
are coming up with. Wisconsin's "Work Not Welfare" proposal will cut off all 
welfare benefits after two years in two selected counties, starting in 1995. In a 
bizarre game ofpolitical chicken, the Republican Governor, Tommy Thompson, 
and the Democrat legislature also decided to abolish AFDC across the state in 
1998, without having begun to discuss what if anything should take its place. 
Despite the publicity, the Work Not Welfare waiver will not tell us very much 
about reforming welfare because it is a small experiment in a relatively 
prosperous area. It expressly excludes Wisconsin's largest city, Milwaukee, 
which is home to over half of the state's welfare population and has nearly 
double the unemployment rate ofthe rest ofthe state (6%). No amount ofprivate 
sector co-operation and government-led job search could put all those people 
into work after two years. 

The whole notion of a time limit is based on a misunderstanding of the 
motivation ofthe welfare poor. Most are not work-shy. Few single parents prefer 
life on welfare to a job which pays enough to bring up a family with the 
appropriate child and health care.Thatis why halfof all new entrants to welfare 
exit within 12 months and why nearly three-quarters do so within two years. 
Admittedly halfofthese will be back on welfare within five years butthat simply 
demonstrates that few ofthejobs offer a good enough package of pay,healthcare 
and childcare to make them a rational choice for the poor family. 

The two-year limit also looks arbitrary: only 15% of recipients stay on welfare 
for five years or more and fit the popular image ofthe welfare-dependent. And 
it could be argued that many ofthem are so remote from the work mainstream 
-through depression or addiction-as to be off the welfare-to-work continuum. 
Far from pushing them into generally expensive make-work schemes, it might 
be wiser and cheaper for the Federal government to take responsibility for them 
as they do for those who are blind or disabled and to widen the eligibility criteria 
for Supplemental Security Income. 

Ifit gets through, President Clinton's job guarantee scheme will have to be 
judged on its results. Ifit is successful (and to have any real chance of success 
and status it would have to be run not by the welfare departments but by the 
labor departments), it could give long-standing welfare recipients President 
Clinton's second chance: a job with a pay cheque, dignity and hope. At its worst, 
it will go the unlamented way of the last such job creation scheme, President 
Carter's CETA, which was abolished by President Reagan in 1981 after eight 
years ofleaf-raking and minor scandals. 

17 


6 


Moral engineering 

It seemed that no sooner had President Clinton 
adopted the idea of a two-year limit than his 
conservative opponents moved the goalposts. 
They used to say that the main problem with 
welfare was the way it undermined work 
incentives and bankrolled dependency. Now they 
say that the real problem is that welfare 
undermines family values. 

W
W
illiam Bennett, Education Secretary under George Bush and a 
would-be Republican candidate for President, wrote recently 
that "the worst problem with welfare today is not that too many 
unmarried women are not working; the worst problem is that too 
many unmarried women are having babies" (Washington Post, 30/3/94). Noting 
the rising curve ofillegitimate births over the last 25 years-more than one in 
five white babies and three infive black babies are bom out ofwedlock-Charles 
Murray, author ofLosing Ground, the conservatives' bible offamily breakdown, 
says quite simply that "illegitimacy is the single most important social problem 
of our time". Dan Quayle, the former Vice-President, blames illegitimacy for 
welfare dependency, drug addiction and crime. 

Murray, whose influence on the American debate cannot be over-stated, has 
proposed the most drastic (iflogical) solution-the complete abolition ofwelfare 
so as to discourage single parenthood and teenage pregnancies. He would give 
current AFDC recipients 9 months to make other arrangements and at the end 
of the period there would be no more payments. If single parents should prove 
unable to support themselves and their families, their children should be taken 
into "luxury" orphanages, paid for by private philanthropy. The govemment 
would be doing the right thing and saving large sums of public money. 

Nor is it a party matter. The President's key advisers glide from understandable 
concems about the rising rate ofteenage pregnancy(teenage mothers 
are much more likely to stay on welfare indefinitely) and the greater incidence 
of poverty amongst single parent families (single parent families are five times 
as likely to be poor as two parent families) to echoing the conservatives on the 
dangers of illegitimacy, separation and divorce (Galston and Kamarck in 
Marshall and Schram). Thus the US debate centres not on the well-being ofthe 

18 


children but on the moral shortcomings oftheir undeserving parents. 

President Clinton's nod in this direction is his plan to oblige teenage mothers 
to go back to their parents on pain of losing their welfare benefits (neither he 
nor any of his critics seems to be suggesting that the teenage fathers should be 
forced back into the home, logical though it would be). There is little to be said 
for this: the last thing many teenage mothers-and their babies-need is to be 
reunited with the parents who pushed them out of the home or whose abuse 
caused their departure in the first place. If the aim is to break the cycle of 
teenage pregnancy, single parenthood and poverty in the inner cities, teenage 
mums need new family models not old ones. 

But the President's moral engineering is mild compared with what is coming 
up from the states. The best known is New Jersey's "family cap", which would 
automatically withhold benefits from children born whilst the mother is on 
welfare. The effect of this would be more mean-spirited than life-or-death: it 
would mean $64 per month less for the mother who has a second child on welfare 
in New Jersey. In the words of Wayne Bryant, the black Democrat who 
shepherded the proposal through the legislature: "Why should people on welfare 
be guaranteed a raise when they have additional children.. .If a person 
wants to enlarge their family while on welfare, they should go to work to support 
the additional children like any working family". 

But the plain fact is that the family cap will make children pay the penalty 
for their parent's failure to follow the rules. The legality of this decision has 
been challenged in the courts and judgement is awaited, watched anxiously by 
a growing number of states who want to follow suit. Arkansas and Georgia 
already have approval from the Federal government for their own family caps; 
California, Maryland, Virginia and Wisconsin are waiting. 

Breeding 

Underlying both the family cap and the conservative call for the total 
abolition of welfare for single parent families, is the idea that benefits encourages 
single parents to have more children. Yet, try though they have, no-one 
has been able to demonstrate any kind of a causal relationship between the 
level of public assistance and family size. Whilst the decade from the mid-60s 
saw rising rates ofboth AFDC payments and illegitimacy, the period since then 
has seen a widening gap between the two with AFDC falling in real terms and 
illegitimacy continuing to rise. In any case, the states with the lowest level of 
welfare benefits tend to be the ones with the largest families: Mississippi pays 
the lowest benefits ofall but has the highest proportion offamilies with four or 
more children. Moreover, if there is a trend, it is towards smaller families. 
Twenty five years ago, a third of welfare families had four or more children, 
today the figure is under 10%. 

Even if you accept the view that illegitimacy and single parenthood are 
problems, rather than symptoms of changing family patterns across much of 

19 


the western world, there are no easy solutions. First, the institution of marriage, 
contrary to conservative mythology, does not guarantee stability for ever 
after, any more than non-married partnerships. Whilst one in three births in 
Britain are out ofwedlock, 40% ofthem are registered by two parents, living at 
the same address and three quarters are registered by two parents (the 
non-married two parent family is much less common in the United States than 
in Britain). The issue should not be whether the parents are married or not but 
what can be done to increase the percentage ofbirths where two parents declare 
their responsibility. 

Secondly, most children, if asked, would prefer one stable parent to two 
unhappy ones. Government should not pit two parent families against single 
parent families but assess what can be done by the community to support 
children in whatever family context they find themselves-a child rather than 
a parent centred policy. 

20 


The success of American 

7

Social Security 

America's jumble of means-tested benefits, 
including AFDC and SSI, owe far more to the 
continuing popularity ofindividualistic 
explanations of poverty than they do to 
structural explanations, which would imply the 
need for a more comprehensive assault on 
inequality. They also attest to the reluctance of 
most Americans to shell out serious money for 
the poor, without being sure whether they are 
deserving or not. That said, it has not been all 
one way: the creation of universal benefits for 
the elderly, such as Social Security (the state 
graduated old age pension) in 1936 and Medicare 
in 1965, and the ongoing debate about President 
Clinton's plans for universal health care, 
demonstrate that the American people can be 
persuaded to adopt policies which have the effect 
ofincreasing everyone's sense of social security 
and of simultaneously alleviating poverty. 

Y
Y
et, paradoxically, Social Security is coming under attack today both 
on grounds of equity and of cost. Looking at the recent growth in 
occupational and personal pensions amongst the population as a 
whole, some liberals see no good reason to go on paying pensions to 
the better-off and would like to target them on the poor (echoes of Britain). 
Equally, some gloomy economists, looking at official and unofficial projections 
for the solvency ofthe Social Security Fund, believe thatthe system is becoming 
unsupportable (though the Fund currently runs such a vast surplus that it is 
lending to the Federal government to help pay for the budget deficit!). 

21 


Thanks to Ross Perot, who made an election issue out ofwhy a rich man like 
him should collect Social Security in his old age, there is a chattering class 
misconception that Social Security primarily benefits the upper middle class. 
That is not so. Two thirds goes to households with an income below $30,000 (the 
American median wage is $31,000 per annum) whilst only 2% of Social Security 
goes to people earning over $100,000. 

Mr Perot might wish that Social Security were more redistributive, although 
one doubts that is his real intent, but he could achieve that objective by 
converting Social Security Tax from a flat rate to a progressive tax, by getting 
rid of the contributions cap and, at the other end, by reducing the thresholds 
for taxing the better-offin retirement (currently retirees pay tax on 85% oftheir 
Social Security benefits above $34,000 per annum for an individual and $44,000 
for a couple). Itis not necessary to abolish the principle ofuniversality on which 
Social Security is based -everyone paying something in and everyone getting 
something out-to make the system more redistributive than it currently is. 

The other great misconception is over the cost of Social Security which 
congressional deficit hawks say is out of control. Not true, either. Whilst the 
cost of Social Security climbed fast in the decade up to 1975, it has flattened 
out since then: the average annual increase has been 1.6% since 1975, which 
contrasts favourably with the average 7.3% increase in the cost ofMedicare and 
Medicaid in recent years and with the growth in the Federal budget deficit. As 
President Clinton keeps saying: the real problem is health care. 

In any case, Congress has shown itselfsurprisingly willing to grasp the nettle 
of ensuring long term solvency. The 1983 Social Security amendments froze 
cost-of-living adjustments for six months, made benefits taxable for above 
average earners for the first time and pushed back the retirement age to 67 in 
2027. Indeed, there is the prospect offurther retrenchment now that the House 
Ways and Means Committee has joined the would-be trimmers. The possibilities 
include a further reduction in taxability thresholds for Social Security 
beneficiaries, the bringing forward of the higher retirement age to 2016, 
increases in employer and employee Social Security Tax rates (currently 6.2%, 
they would rise to 7.35% and later to 8.15%) and, more contentiously, a 
reduction in the actual benefits paid out to retirees on higher incomes. 

American Social Security is a universalist success story. It was designed to 
give everyone the assurance of a reasonable pension in old age and, as a 
by-product, it has slashed poverty amongst the elderly. 12% of senior citizens 
are poor today, which is halfthe figure of25 years ago (the figure would rise to 
nearer 45% according to the AARP if it were not for the existence of Social 
Security). AFDC, on the other hand, was explicitly designed to alleviate poverty 
amongst single parent families with children but it has had a minimal impact: 
AFDC lifts fewer than 1 in 20 out of poverty. 

22 


American lessons? 

Promising to reform welfare has become 
something of an American presidential tradition 
since President Nixon first proposed to sweep 
away AFDC and to replace it with a negative 
income tax. But nothing ever seems to change 
though the political rhetoric becomes steadily 
more punitive. The poor continue to say that 
welfare is ungenerous, intrusive and 
stigmatising, whilst the taxpayers complain that 
it undermines the incentive to work and rewards 
indolence. Liberals say the system does nothing 
about poverty and conservatives complain that it 
is breaking up the family. 

B 
B
utfor all the criticism, the welfare system is a safety netfor America's 
poorest families. Get rid ofit and it would only have to be reinvented 
in some other form, since most Americans do not want to see poor 
children on the streets.The most importantcharge against President 
Clinton's handling of welfare reform is not that he is being nasty to the poor 
but that by promising far more than he could ever deliver he has played into 
the hands of the conservatives, who have always opposed a safety net for the 
poor. Unfortunately, Congress is likely to be more influenced by the conservatives 
than by the President in its current mood. 

The most important lessons for Britain from the American debate about 
welfare and entitlements are about the principles and practice on which sound 
reform should be based: 

8 


• Good welfare reform costs money. Both traditional left solutions such as 
higher benefits and more childcare (and wider health coverage in the US) 
and new left education and training programmes to prepare people for work 
mean higher public spending. The cheaper alternatives are all essentially 
punitive -from workfare to the family cap. 
• Thus President Clinton has had to scale down his ambitions from a $25 
billion scheme to "end welfare as we know it" to a modest $9.3 billion scheme 

23 


for expanding existing education and training opportunities and creating a 
minimum wage job guarantee for long-term welfare recipients under the 
age of25. Even that sum of money looks hard to find at the moment, hence 
the rob-Peter-to-pay-Paul proposal to remove means-tested benefits from 
recent immigrants and legal non-citizens. President Clinton is in grave 
danger of neither ending welfare nor reforming it. 

• 
Work must pay. Welfare reform has always suffered from falling between 
good policy and good politics. Good policy means alleviating poverty and 
giving people a second chance, both ofwhich are likely to cost more money, 
but good politics means that those who are workless cannot be seen to be 
better-off than those who are in work. 
• 
President Clinton's increase in the EITC suggests that the best way to help 
the low paid is through the tax system. There has never been any stigma in 
drawing the full range of tax deductions, allowances and credits. Indeed, 
the wealthy have made an art form of it. In considering the needs of poor 
working families (and as part of a greater integration of tax and benefit 
systems), Britain should examine the advantages ofthe Earned Income Tax 
Credit, which goes to over 90% of eligible working families in the US -a 
figure with which no means-tested cash benefit, including Family Credit, 
can compete. In the meantime, raising the tax threshold to help the half a 
million people brought in to the tax net in recent budgets would be a good 
start. 
• 
Work and welfare should strengthen the family. Many ofthose who are most 
dependent on benefits in both countries could not expect to eam enough to 
keep themselves and their families above the poverty line even ifthey could 
find a full-time job. In any case, their ambition is to reconcile family 
responsibilities-the care ofyoung children, elderly or disabled dependerits 
-with part-time work-not necessarily to work full-time. 
• 
President Clinton's proposed increase in the eamed income disregard for 
single parents is designed to make it easier to combine work and welfare. 
John Hills has estimated that poor working families on Family Credit pay 
a marginal tax rate of 70% on any increase in eamings and that poor 
non-working families on Incomes Support lose 100% of their eamings after 
the first £5 is disregarded. Increasing the disregards and merging Family 
Credit and Income Support would reward the honesty of those on benefits 
who declare paid work and look after their families. 
• 
Neither full-time work nor a combination of part-time work and social 
security benefits can pay without affordable and available childcare. The 
socially inclusive solution to the problem of making work pay for working 
parents in Britain -without creating a permanent two-tier system based 
on income -is universal access to childcare in its many forms. It can't be 
24 


done for free but the good news is that there are votes in childcare as 
President Clinton discovered to his benefit in 1991. 

• 
There is no substitute for a real job-and the US is better at creating them 
than Europe. In the end, the transition from welfare to work depends more 
on the supply ofjobs than it does on the motivation ofthe non-working poor. 
Contrary to conservative wisdom, most people would rather work and have 
more money than not work. Itfollows that education and training for welfare 
recipients can do some good but it cannot do miracles. The American 
example suggests that concentrating resources on younger people, who are 
in most danger ofspending a life on benefits, is most productive. 
• 
There is no point in wasting public money on obliging the unwilling to 
undertake education and training when other young people are queuing up 
for such opportunities. Nor is there much to be said for workfare, given the 
high costs of setting up and running such schemes and the absence of any 
clear improvement in the self-image of the young unemployed person. It 
would be cheaper for the taxpayer and better for the welfare recipient to use 
the money to improve the quality of education and training or to increase 
the cash benefits. Workfare only creates real jobs for those who run it. 
• 
Universal benefits, such as pensions, have immense advantages over 
means-tested benefits. Not only are they more popular (because everyone 
has paid in and everyone takes out) but they are better attargeting the poor, 
to which both American Social Security and the British state pension attest. 
Means-testing necessarily separates the poor off from the rest of society, 
reduces the area of common experience and, thanks to stigma, usually leads 
to a low take-up of benefits by the poor themselves. The key issue in the 
British debate about pensions is not whether the system is public or private, 
graduated or flat rate -the basic and earnings related state pension are 
likely to co-exist indefinitely -but how a minimum pension, which takes 
account of rising living standards, can be guaranteed to every citizen. 
• 
The most popular social security benefits in both countries are those based 
on dedicated social security taxes. Means-tested benefits, financed out of 
general taxation have never had many supporters. National Insurance is 
the day-to-day embodiment ofthe British welfare state: you pay into it not 
because you need it today but because you want it to be there for tomorrow. 
Whether National Insurance should continue to be contribution-based (albeit 
re-drawn to include part-timers and the self-employed) or should simply 
become a dedicated social security tax for social security is less important 
than maintaining it as a separate levy. The left would undo National 
Insurance at its peril. 
• 
The viability of the British and American welfare states is a matter for 
voters not accountants. The American debate is a reminder that govern25 



ments should not be panicked into ungenerous and unnecessary cuts intheir 
welfare states by doomsday forecasts of economic and demographic trends. 
American politicians resist the siren voices who say that their Social 
Security system cannot be afforded and will go broke sometime in the next 
forty or fifty years. So should the Social Justice Commission. 

The right has long argued thatthe welfare state undermines work incentives 
and encourages benefit dependency; recently they have added the charge that 
it is responsible for rising rates ofillegitimacy and single parenthood. But there 
is precious little evidence on their side. Unemployment and low pay have far 
more to do with the numbers in poverty than the generosity of the benefit 
system and the changing family structure seems relatively impervious to 
govemment action. 

But criticism of the welfare state has not been a right-wing preserve. The 
old, Fundamentalist left accused the welfare state ofdoing little to address the 
inevitable inequalities of a capitalist society. Some went further and argued 
that increasing govemment activism and public spending had more to do with 
social control than social justice -a typically patronising and superficial view 
of the real world, as well as being one into which the facts scarcely intruded. 

By the late 70s, the welfare state seemed to have more critics than advocates 
and the way was open for Mrs Thatcher to overtum the traditional Beveridge 
model and shift Britain towards a more individualistic, American model. In a 
time ofrelative economic prosperity, few realised that such change would entail 
an increase in social insecurity as more and more people found themselves 
depending on means-tested safety nets designed for the very poor. 

But, contrary to the fatalism of modern Conservatives, it doesn't have to be 
like this. We have to decide how much poverty and inequality we will tolerate, 
whether we would rather base our social security system on inclusive, universal 
principles or means-tested safety nets, if we want people to work at any price 
or to support their families. In sum, whether we want a fairer society or not. 

26 


Further reading 

American Public Welfare Association (1994), Responsibility, Work, Pride: The Values of 
Welfare Refonn, (APWA, Washington DC) 
American Association of Retired People (1993), Entitlements, the Deficit and Spending 
Caps (AARP, Washington DC) 
Center for Budget Policy and Priorities (1993), The States and the Poor, Making Work 
Pay, A Hand Up, (CBPP, Washington DC) 
Commission on Social Justice (1993), The Justice Gap and Social Insurance: Refonn or 
Abolition (CSJ, IPPR, London) 
General Accounting Office (1993), Welfare to Work and Interstate Child Support, (GAO, 
Washington DC) 
Gueron, Judith & Edward Pauly, From Welfare to Work, MDRC, NY 1991. 
Hills, John and the LSE Welfare State Programme (1993), The future of welfare: a guide 
to the debate, (Joseph Rowntree Foundation, York) 
Centre for Law and Social Policy (1993), The Devil is in the Details and Beyond 
Stereotypes, (CLASP, Washington DC) 
Jencks, Christopher (1992), Rethinking Social Policy, Harper Collins, New York 
Institute for Women's Policy Research, (1992) Combining Work and Welfare, April1992 
(IWPR, Washington DC) 
Levitan, Sar and Mangum, Garth, (1994) Federal Human Resource Policy: from Kennedy 
to Clinton, Washington DC 
Kamarck, Elaine and Galston, William, (1993), A Progressive Family Policy for the 1990s 
and Marshall, Will and Kamarck, Elaine, (1993), Replacing Welfare with Work in 
Marshall and Schram, Mandate for Change (Berkley Books, New York) 
Tuck, Clifford, General Accounting Office (1993), The Earned Income Tax Credit, 
(APPAM unpublished paper, Washington DC) 
UK Department of Social Security (1993), The growth of social security and Containing 
the cost ofsocial security and The Government's expenditure plans, 1994-95 to 1996-97, 
(HMSO, London) 

27 


American/English Glossary 


Aid to Families with Dependent Children (AFDC)-Federal/state means-tested 
benefit for single parent families. The states define needs and set the benefits, 
which vary widely. 
Earned Income Tax Credit (EITC) -a refundable tax credit, usually retrospective, 
for low paid workers with children. 
Entitlements -popular term for non means-tested benefits such as Social 
Security and Medicare (but in law also includes means-tested benefits such as 
Medicaid, Food Stamps, SSI and the EITC, which must be provided to any 
citizen who meets the criteria). Nearest equivalent-universal benefits 
Food Stamps-means-tested food vouchers for the poor. 
"Family cap" -cutting off AFDC benefits to additional children born whilst the 
parent is on AFDC. 
"Liberal" -left ofcentre. "Progressive" -nicer way of saying "liberal" 
Medicaid-federal/state means-tested health care for the poor. The states define 
coverage and benefits and systems vary widely. 
Medicare -federal health care for senior citizens and permanently disabled 
(over 65s). 
New Democrat-centrist Democrat 
Social Security-non means-tested old age pensions related to former earnings 
-federal. 
Social SecurityTax-payroll tax on employees (around 6% ofearnings), matched 
by employers and also by self-employed. 
"Social Welfare" -welfare state. 
Supplemental Security Income (SSI) -Federal means-tested benefit for the 
blind, disabled and elderly poor. 
Unemployment Insurance-equivalent to Unemployment Benefitl"Jobseekers 
Allowance". Payable for 6 months and related to former earnings and occupation. 
"Welfare/welfare poor"-essentially pejorative,popular shorthand for the AFDC 
programme and beneficiaries. 
"Workfare" -obliging beneficiaries to work for their benefits. 

* See also Table 1, Welfare Jargon, p5. 
28 


Recent Fabian Publications 

Infertility, feminism and the new technologies. Sally Keeble. Pamphlet 
No 566. £3.50 July 1994. Argues that the traditional feminist stance against 
the reproductive technologies is misguided and that such treatments should be 
more widely available on the NHS. 

Towards a social economy-trading for a social purpose. Peter Welch 
and Malcolm Coles. Pamphlet No 564£3.50 May 1994 Outlines the European 
concept of the 'economie sociale' and argues that it is a useful tool for the Left 
in escaping from the publid private debate. 

Fair Is Efficient -a socialist agenda for fairness. Cordon Brown MP. 
Pamphlet No 563 £3.50 April1994 Analyses inequality in Britain and concludes 
that socialism and equality are the pre-requisites of economic efficiency. 

What Price a Safe Society? Proceedings ofthe 1994 New Year Conference. 
Pamphlet No 562£5.00 April1994. Collected essays on crime and punishment. 

Beyond the Town Hall: reinventing local government. Margaret 
Hodge and Wendy Thomson. Pamphlet No 561. £3.50 February 1994. Argues 
that local government should once act as a conduit for change and a focus for 
local pride. 

More Southern Discomfort: a year on -taxing and spending. Giles 
Radice and Stephen Pollard. Pamphlet No 560. £3.50. September 1993. Looks 
at attitudes to the Labour Party in the South of England and proposes ways of 
attracting floating voters back to the party. 

All for one: the future of the unions. Philip Bassett and Alan Cave. 
Pamphlet No. 559. £3.50 August 1993. Argues that unions must emphasise the 
individual rather than the collective if they are to survive. 

Private Pensions for All: squaring the circle. Frank Field and Matthew 
Owen. Discussion Paper No 16.£10. July 1993. Proposes universal, compulsory 
private pensions. 

Available from the Fabian Society, 11 Dartmouth Street, London, 
SWIH 9BN. Please make cheques payable to the Fabian Society. 


Reforming Welfare: American Lessons 

Britain and the United States are both in the middle of 
fierce debates about the future of the welfare state. But 
whereas the debate in Britain centres on the affordability 
of the welfare state, the debate in America focuses on the 
morality of "welfare". Critics of varying political complexions 
have long charged welfare with undermining work 
incentives and encouraging welfare dependency; now, a 
new wave blame it for the breakdown of the American 
family. 

Simon Crine, who spent a year in Washington following 
President Clinton's attempt to reform welfare, argues that 
whilst we should resist the excessive moralism ofthe American 
debate there are some valuable lessons which hold good 
for both countries: 

• 
Good welfare reform costs money 
• 
Work must pay 
• 
Work and the benefit system should strengthen the 
family 
• 
Work and welfare can't pay without affordable childcare 
• 
Nothing beats a real job-and certainly not workfare 
• 
Universal benefits.target the poor more effectively th~n 
means tested benefits. 
£3.50 


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