Work and Welfare

Southern Economic Journal, Oct, 1999 by Jeanne S. Ringel

Edited by Amy Gutmann. Princeton, NJ: Princeton University Press, 1998. Pp. xix, 100. $19.95.

Work and Welfare, edited by Amy Gutmann and published by the Princeton University Press, is a compilation of lectures given in the Princeton University Tanner Lectures Series on Human Values. The format of the series is such that a main speaker chooses a topic and gives two lectures. Then, scholars from a variety of disciplines are afforded the opportunity to respond to and critique these lectures. For the lectures that make up Work and Welfare, the primary speaker was the Nobel Prize-winning economist Robert M. Solow. In his lectures, Solow outlines and discusses his vision of welfare reform. The respondents include two economists, Glenn Loury and John Roemer; an author, Anthony Lewis; and a sociologist, Gertrude Himmelfarb.

Welfare to work is a timely and important topic. We are only now beginning to gauge the effectiveness of the work requirement programs initiated under the welfare reform bill of 1996. Although Solow's lectures were given only a short time after work requirements were enacted, he foresees many of the issues and problems that have arisen from the current system. In this book, Solow does not discuss the particulars of any specific program but rather talks very generally about the fundamental aspects that he believes are required for a successful reformation of welfare. In Solow's view, the solution to the current welfare problems lies at "the intersection of two social norms: self-reliance and altruism" (p. 5). He provides both anecdotal and survey evidence that in a society in which much of one's self-identity and self-respect comes from one's ability to provide for one's family, welfare recipients are ashamed of their position and would rather work than remain on welfare. It is interesting to note that this argument is in complete contradiction with standard models of labor-leisure choice. The difference lies in the value of self-reliance. Standard models assume that the individual gets no utility from work other than from the income the work generates. In Solow's model, work provides utility through a feeling of self-reliance. Solow further argues that while people are in general altruistic, their supply of altruism is limited. He suggests that helping women move off of welfare and into the workforce will conserve altruism. With more people working, fewer will depend solely on the government for support, and thus less tax dollars will be needed. In addition, taxpayers will not feel as though they are being taken advantage of when welfare recipients have to work in order to receive benefits. Solow believes that replacing unearned benefits with earned wages is the only solution that will promote both self-reliance and altruism. He is not so naive, however, as to believe that the transformation of the system will be easy. Rather, Solow suggests that if this transformation is pursued correctly, it will be harder and more costly than policy makers are willing to admit.

Standards set by the U.S. federal government require that 25% of the adult welfare population in each state be working. States whose welfare employment rates fall below this minimum standard may be subject to financial penalties. Recent reports indicate that work requirement programs have had varying levels of success in different states. The work participation rates for 1998 range from a low of 13.5% in Louisiana to a high of 96.7% in Oregon (Pear 1998). This wide difference is indicative of one of Solow's main arguments: The success of any work requirement plan depends on the resources and effort that are put into the program. Solow argues that in many cases, a demand for unskilled labor may have to be created. This could occur either through public-service employment or through the extension of incentives to the private sector. Furthermore, the wages that unskilled workers receive may be insufficient to live on when child care costs and the loss of food stamps and housing subsidies are considered. Thus, some women will be materially worse off when working than they were on welfare. To combat this problem, Solow suggests that states package welfare with work. Wisconsin is a state that has been successful in moving women off of welfare and into work. Its success is evidence that Solow's arguments are correct. Much of Wisconsin's success is attributed to the fact that it has created thousands of community service jobs and has provided the necessary support services, such as child care, to all who need them.

Solow has an idealistic vision of welfare reform. He envisions a system of fair workfare, one in which people who need income support are obligated to work and in which society as a whole has an obligation to provide adequate employment opportunities and support services. Solow's discussion of the subject is interesting and well presented, and his views are often difficult to dispute. Unfortunately, this book is unlikely to provide much practical help to policy makers. Work and Welfare is not a guidebook, and Solow does not dwell on the institutional details of how to implement the policies he prescribes. In fact, it is only in the last paragraphs of the final lecture that he mentions that a reformulation of the Earned Income Tax Credit might be a good way to package welfare with work.