Why behavior matters, "No feasible amount of cash assistance could solve America's poverty problem"

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
Forgot about haves and have-nots. Think do's and do-nots

(excerpts follow)

"Although you might have thought it would be easy to reauthorize one of the most successful government programs ever enacted, in Washington everything is hard. A year ago, the reformed federal welfare program expired. Ever since, Congress has been passing short-term extensions and arguing. The House has passed one bill, and last week the Senate Finance Committee approved another. Whether Congress can settle the argument this year is an open question.

Still, the bigger picture is encouraging. Since the mid-1990s, almost everyone has accepted that welfare should be linked to work. Only the most reactionary of liberals want to go back to providing cash as a substitute for employment. The new consensus is a good thing, because it matches a new reality. No feasible amount of cash assistance could solve America's poverty problem, even in principle. The problem has changed. It has become more behavioral than economic.

I grew up, in the 1960s and 1970s, taking for granted that the poor were just like you and me, only with less money. They were victims of a stingy government and a harsh economy. Poverty could be abolished by writing checks. America's unwillingness to rise to the task showed an unconscionable lack of compassion and common sense.

In recent years, several lines of evidence have converged to suggest that the "it's the economy, stupid" view of poverty is plain wrong. One is research by a sociologist named Susan Mayer, whose work I described in detail in an earlier column. (See NJ, 11/13/99, p. 3295.) She performed a variety of innovative statistical tests and found that lack of money was more an effect of poor people's other, more-fundamental problems than a cause in its own right; and so handing out more cash would be of little help. Other research similarly pointed away from money and toward the importance of two-parent families, education, and work.

***

Forget about the haves and the have-nots. America now faces a divide between do's and do-nots. Coping requires conservatives to see that inequality threatens mainstream values, and liberals to see that mainstream values are the key to reducing inequality. Conservatives, Sawhill argues, will need to spend more generously on child care subsidies and wage supplements and last-resort jobs to get the poor working (jobs bring mainstream values as well as money). Liberals will need to accept that money without behavioral change is useless or worse."
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
I guess I'm a "reactionary liberal", whatever that means, no doubt meant to be disparaging, because a mother/housewife with four kids whose husband ups and leaves simply can not raise these children on a low barrier to entry job. So now she must get training, care for the children, and work a minimum wage? Impossible. The problem is not too much money it's not enough always stuck in the poverty trap, she needs at least $2000 a month to do this properly. I think you should do something, NO FREE money, must work on human and career develpoment but increase funding dramatically.

Here are some good reads on welfare which is a very complex issue... which BTW only consumes a paltry 4% of the federal budget, no need to get all worked up over it.

Myth: People on welfare are lazy and stupid bums.

Fact: Studies overwhelmingly show people prefer work to welfare.



Summary

A General Accounting Office summary of over 100 studies found that welfare does not significantly reduce the desire to work. The reason is because welfare payments often do not cover the bare necessities of living. People can't enjoy being lazy when they're stressed out about surviving.



Argument

Many studies show that welfare recipients find welfare degrading and demoralizing, and greatly prefer the chance to work. (1) In fact, in March 1987, the General Accounting Office released a report that summarized more than one hundred studies of welfare since 1975. It found that "research does not support the view" that welfare significantly reduces the incentive to work. (2) This may seem contrary to common sense, but, as Norman Goodman points out in Introduction to Sociology: "Many 'common sense' beliefs are simply untrue. For example, many believe? that most people on welfare really don't want to work. [This is] false." (3)

Again, there is no "incentive" for lazy people to enroll in welfare because the payments do not allow families to make ends meet. One study of Chicago welfare mothers found that their family's rent and utilities cost $37 more than the welfare check. Even for those few who received housing assistance, that left only $160 to cover all other monthly expenses, such as transportation, clothing, hygiene and school supplies. The typical food stamp allowance was insufficient, and many recipients actually went hungry near the end of the month. To make ends meet, the mothers had to receive income from somewhere else. Some of this came from absent fathers, friends and relatives, but almost half came from work -- work that typically paid $3 to $5 an hour. The authors of the study concluded that "single mothers do not turn to welfare because they are pathologically dependent on handouts or unusually reluctant to work. They do so because they cannot get jobs that pay better than welfare." (4)
Text

Myth: Welfare gives people an incentive to avoid work.

Fact: Over 100 studies have not found this alleged incentive.



Summary

Statistics show that average welfare benefits pay below the poverty line and less than a full-time job. Research overwhelmingly proves that welfare recipients prefer work to welfare. The General Accounting Office has reviewed over 100 studies on welfare and concluded that welfare does not significantly diminish the incentive to work.



Argument

Many conservatives argue that welfare provides people with an incentive to avoid work. However, the statistics do not bear out this accusation. Let's divide our answer into two parts: first, a look at how low the "incentives" really are; and second, how many individuals are responding to these incentives.

How much does welfare pay?

The two largest welfare programs -- by far -- are Aid to Families with Dependent Children (AFDC) and food stamps. In 1992, the average yearly AFDC family payment was $4,572, and food stamps for a family of three averaged $2,469, for a total of $7,041. (1) In that year, the poverty level for a mother with two children was $11,186. (2) Thus, these two programs paid only 63 percent of the poverty level, and 74 percent of a minimum wage job.

There are other welfare programs available, of course, but they either pay a minuscule fraction of AFDC and food stamps, or, if larger, they are collected by only a small percentage of all welfare recipients. For example, housing assistance trails a distant third on the total welfare budget, but only one-fourth of all AFDC recipients collect housing assistance, and even then their food stamp benefits are reduced if they do. Studies show that combined AFDC, food stamps and housing assistance lift fewer than one welfare family in five above the poverty line. (3)

The low payments, low participation rates, and exclusionary policies of these other welfare programs hasn't stopped some welfare critics from adding them all up together and claiming that the average welfare recipient collects some ridiculously huge sum, like $20,687 a year in California. Indeed, the Cato Institute, a libertarian think tank, has done exactly that. It's regrettable to see such flawed methodology pushed by a national think tank, even more dismaying to see their figures cited by political leaders like California governor Pete Wilson. (At least before more serious academicians corrected him). But it's probably the only way that welfare critics can continue to maintain the fiction that welfare rewards nonwork more than work. (For a fuller deconstruction of the Cato study, click here.)

Who takes the welfare incentive?

Because typical welfare payments pay less than a full-time job, it should not be surprising to find that most welfare recipients do not see it as an incentive to avoid work. Indeed, studies reveal this in two different ways: that most welfare recipients do indeed want and seek work, and that in a dynamic economy, the welfare rolls are ever-changing.

Many studies show that welfare recipients find welfare degrading and demoralizing, and greatly prefer the chance to work. (4) In fact, in March 1987, the General Accounting Office released a report that summarized more than one hundred studies of welfare since 1975. It found that "research does not support the view" that welfare significantly reduces the incentive to work. (5) This may seem contrary to common sense, but, as Norman Goodman points out in Introduction to Sociology: "Many 'common sense' beliefs are simply untrue. For example, many believe? that most people on welfare really don't want to work. [This is] false." (6)

Again, the "incentive" accusation fails because of welfare's inability to let families make ends meet. One study of Chicago welfare mothers found that their family's rent and utilities cost $37 more than the welfare check. Even for those few who received housing assistance, that left only $160 to cover all other monthly expenses, such as transportation, clothing, hygiene and school supplies. The typical food stamp allowance was insufficient, and many recipients actually went hungry near the end of the month. To make ends meet, the mothers had to receive income from somewhere else. Some of this came from absent fathers, friends and relatives, but almost half came from work -- work that typically paid $3 to $5 an hour. The authors of the study concluded that "single mothers do not turn to welfare because they are pathologically dependent on handouts or unusually reluctant to work. They do so because they cannot get jobs that pay better than welfare." (7)

Furthermore, it is incorrect to assume that the welfare rolls are filled with a substantial population of sedentary freeloaders who stay on for ten years at a time. Most welfare recipients leave within the first two years:

Percent of
Time on AFDC Recipients (8)
-------------------------------
Less than 7 months 19.0%
7 to 12 months 15.2
One to two years 19.3
Two to five years 26.9
Over five years 19.6
Some may think that even two years is too much, but one should remember that almost all welfare is for mothers with children. (There are no federal welfare programs for adults without children.) In 1993, the average person collecting state unemployment benefits did so for four months. (9) But the search for work is greatly complicated when one also has a child. A great deal of money, time and energy must go for the care of the child, which significantly detracts from any job search. There is also the bias of employers against women, especially single women with children. Therefore, we should expect mothers with children to take longer getting back on their feet. Society could make it easier for them by providing child care during their job search -- and in fact, many conservative critics of welfare are beginning to see the economic reasons for doing so.

But the above numbers do not tell the whole story. A 1984 University of Michigan study examined welfare from 1969 to 1978 and found that families rarely depend exclusively on welfare income; instead they use it to supplement their income, especially during lean times. (10) Data from the U.S. Census reveals that most women who collected welfare intermittently in a two-year period spent most of the time off welfare legitimately employed. They spent an average of four months unemployed and looking for work before applying for welfare. They held 1.7 jobs, and 47 percent held two or more jobs. Forty percent of the welfare mothers worked about the same number of hours as all working mothers: 1,800 hours. (11)

As you can see, it is irrational to accuse people of aspiring to a lifestyle that doesn't even allow them to make ends meet or purchase the basic necessities of life. The evidence suggests quite the opposite: most welfare recipients would like better paying jobs -- or just any job.

Return to Overview

Endnotes:

1. AFDC figures from U.S. Social Security Administration. Food Stamp figures from U.S. Department of Agriculture, "Annual Historical Review of FNS Programs" and unpublished data.

2. U.S. Bureau of the Census, Poverty in the United States, Series P-60, No. 185, 1993.

3. Sharon Parrott, "How Much Do We Spend on 'Welfare'?" Center on Budget and Policy Priorities, Washington, D.C., March 1995 (rev.), p. 10.

4. Joe Davidson, "Welfare Mothers Stress Importance of Building Self-Esteem If Aid System Is to Be Restructured," Wall Street Journal, May 12, 1995, p. A14.

5. The GOA report was summarized in Frances Piven and Richard Cloward, "The Historical Sources of the Contemporary Relief Debate," The Mean Season: The Attack on the Welfare State, Fred Block, Richard Cloward, Barbara Ehrenriech and France Piven, eds., (New York: Pantheon, 1987), pp. 58-62.

6. Norman Goodman, Introduction to Sociology (New York: HarperCollins, 1992), p. 5.

7. Christopher Jencks, Rethinking Social Policy: Race, Poverty, and the Underclass (Cambridge, Mass.: Harvard University Press, 1991), p. 204.

8. Overview of Entitlement Programs, Committee on Ways and Means, U.S. House of Representatives (U.S. Government Printing Office, 1994).

9. U.S. Employment and Training Administration, Unemployment Insurance Data Summary, 1993.

10. Greg J. Duncan, Years of Poverty, Years of Plenty (University of Michigan, Institute for Social Research, 1984).

11. Roberta Spalter-Roth, Making Work Pay: The Real Employment Opportunities for Single Mothers Participating in the AFDC Program (Institute for Women's Policy Research, 1994).

Myth: Welfare can be replaced by charity.

Fact: Charity is too under-funded, too localized, too mismatched and too ill-suited to replace welfare.



Summary

Americans would have to make at least 10 times the donations they currently give to charity to fully replace government social spending. And there is no reason to believe that people who so bitterly hate paying taxes would gladly surrender an equal amount to charity. Arguments that charities can do the job better than government are naïve - most charities are small, highly localized and ill-suited to responding to national disasters or shifting economic trends. About 90 percent of charity funds are both collected and spent locally, which means that rich communities tend to have well-funded charities, and poor communities tend to have poorly funded ones. For this reason, only 10 percent of all charitable donations are directed to the poor. Re-allocating charity donations to the communities that need them most will incur intense political opposition from the communities that fund them.



Argument

Many conservatives argue that if government welfare were eliminated, charity would take up the slack in helping the nation's poor and needy.

In his book, The Tragedy of American Compassion, Marvin Olasky detailed many of the conservative arguments against government welfare and its damaging effects on charitable giving. He argued that what the poor needed were not anonymous welfare checks that seduced and trapped them into dependency. What they really needed was human contact: face-to-face consultations with charity workers who would take a personal interest in their plight and help them work through their problems. Olasky argued that these charity workers would not always see an automatic cash handout as the best solution to the needy person's problems. Rather, "tough love" might be needed instead: getting over a drug addiction, finding motivation to work, getting a deadbeat dad to pay child support, etc. Continuing this train of logic to its end, Olasky argued that churches were superior to government officials in dispensing moral advice; indeed, he called conversion to Christianity "the key to poverty fighting."

Olasky also articulated a second objection against welfare: that it drives away potential charitable donors who do not agree with the government's value-free giving. For example, many potential donors would like to give to the arts, but are already paying taxes that go to support objectionable art like the Mapplethorpe exhibit. Or they would like their donations handled by charities they can trust to teach traditional family values and a proper work ethic. Many conservatives would feel more inclined to give if they agreed with the philosophy of the charitable organization.

Before addressing these arguments, let's briefly review several basic facts about charitable giving in the U.S.

Charity in the United States

In 1993, Americans contributed $126 billion dollars to charity. This averages out to $880 per contributing household, or 2.1 percent of contributing household income. For all households, that works out to $646 per household, or about 1.7 percent of household income. (1) In general, the poor give a greater percentage of their income to charity than the rich. Consider:

Household income and percent given to charity (1993) (2)

Percent of income
Income level given to charity
--------------------------------------
Under $10,000 2.7%
$10,000 - 19,999 2.3
$20,000 - 29,999 2.7
$30,000 - 39,999 2.0
$40,000 - 49,999 1.3
$50,000 - 59,999 1.1
$60,000 - 74,999 2.3
$75,000 - 99,999 2.0
Over $100,000 ?
There are statistical difficulties in determining the percentage of charity donated by those in the richest group, because this group includes billionaires as well as those making "merely" $100,000 a year. However, even if better research clarifies this question, we should remember that different income groups make different types of charitable contributions anyhow. The rich tend to donate to "rich" charities; the poor tend to donate to "poor" charities.

Charity experts have long known that donors give to charities with whom they identify and from whom they might reasonably expect something in return. (Indeed, the Olasky argument above strongly suggests this.) While the very poor tend to donate more to the Salvation Army, the very rich tend to donate more to the arts, humanities and sciences. Because the rich still donate more in absolute dollars, this has caused a serious mismatch between donations and allocations. Only about 10 percent of charitable contributions are specifically directed to the poor. (3)

Furthermore, charities are highly localized. Most are small neighborhood organizations that are tied to their immediate community by their charters, service missions, support bases, and relationships with trustees. They reflect their neighborhood's values, religious preferences, interests, problems and, above all, income. As charity expert Julian Wolpert writes: "Most of the donations that charities raise go to support community churches and synagogues, Y's, museums, public radio and television, universities, and parochial schools -- the services that donors themselves use -- and these funds are largely unavailable for helping the neediest." (4) For these reasons, almost 90 percent of all charity funds are both raised and spent locally. (5) But what this means is that communities with high incomes tend to enjoy well-funded charity programs; those with low incomes tend to suffer poorly-funded ones. This is exactly backwards from the way it should be. It would be more logical to see well-funded organizations transfer their help to the communities that need it most, but their ties to the local community prevent them. Even re-allocating funds within a community is difficult. For example, if an epidemic breaks out in a local community, an educational charity cannot re-allocate its funds or resources to help out a health charity. The situation is akin to a fire department being unable to help out the police department during a crime wave.

The following chart shows how the $126 billion in charitable donations was allocated in 1993:

Allocation of charitable donations (1993) (6)

Type of Percent of
organization total collections
------------------------------------------
Church or religion 45.3%
Education 12.0
Human Service 10.0
Health 8.6
Unclassified 8.5
Arts, culture and
humanities 7.6
Public/societal benefit 4.3
Environmental/wildlife 2.5
International 1.5
Most donations go to churches, but churches are an excellent example of the localized nature of charities. And churches with even national charity campaigns hardly spend a substantial amount of their money on helping the poor. Until recently, the Seventh-day Adventist church had one of the most enviable records of charity collections of any U.S. religious denomination. Yet its department devoted to helping out the poor and needy -- the Dorcas Society -- received only a tiny fraction of the church's donations. Instead, the vast majority went to church administration, religious and educational facilities, and a remarkable world-wide missionary effort to convert other nationalities to their faith. (7)

In a thorough review of charities in the United States, Wolpert summed up the problems of replacing welfare with charity this way:

There is a serious mismatch between the location of charitable resources and needs.
There is a mismatch between the kind of programs that attract charitable donations and the kind that benefit needy people.
Charities are severely limited in their freedom to shift their efforts to the places and programs that are in the most trouble.
The voluntary hand of charity as a substitute for government entitlements might involve objectionable religious, political, and social intrusion into the lives of many people. (8)
The Liberal Response

In 1992, Hurricane Andrew devastated Southern Florida, leaving 137,000 homes destroyed or damaged and 250,000 people homeless. Imagine, for a moment, that there was no federal emergency response, and that charities and private organizations were responsible for the cleanup and recovery. Of course, most of the charities in Southern Florida were destroyed along with everything else, so local charities would be of little help. By definition, the charity response would have to come from other communities -- but, as we have seen, most charities are small and tied to their local communities, and not designed to export their help. Clearly, a disaster the size of Hurricane Andrew calls for a national response -- but how is a neighborhood charity in Seattle, Washington going to ship its few volunteers and resources all the way to Florida?

If thousands of independent, local charities from all across the nation tried to help out the victims of Hurricane Andrew, the resulting confusion, duplication of effort and the lack of a clear, overall strategy would waste much of their time and effort. In this respect, the federal government has a huge advantage over thousands of isolated, disparate charities; it can draw on deep strategic reserves and allocate them according to an organized plan. Furthermore, the operations required to fight a national disaster are far different from the ones required to fight local neighborhood problems. Small charities are not even suited for these different mission requirements.

Many conservatives -- Olasky among them -- concede that the federal government is more efficient at handling national disasters like the Great Depression. However, they argue that in a normally functioning economy, charities are sufficient to handle the everyday poverty they find.

But this is not true either. Our economy is dynamic, and hard times may hit one region one year, another region the next. Many will recall the film Roger and Me, which detailed the horrific unemployment and economic devastation that visited Flint, Michigan when General Motors closed down its auto plants and moved them to Mexico. This single business decision resulted in years of hardship -- but the city is recovering today. California is another example; it did not recover with the rest of the nation after the 1991 recession, and its poverty rate remained high. Yet, within a few years, the state returned to a booming economy.

Economic twists and turns like this are almost impossible to predict. When they do hit a region, the very charity organizations that would help it -- the local ones -- are the least able to help, since they suffer too. So a national charity organization would have to set up offices in these temporarily stricken regions, only to uproot them when good times returned and move them to the next stricken region. That is expensive, and a waste of resources. Compare that to the current federal system, which already has offices everywhere (doing more than just welfare); this makes it much simpler to divert the required funds to the appropriate regions. And as we have seen, charitable donors tend to donate only to their own communities; we should expect to find little support for national charities that spend most of the donor's money elsewhere. Indeed, the current federal system is unpopular for exactly that reason.

Furthermore, charity is a drop in the bucket compared to all the social spending conducted by the government. The total assets (as opposed to merely the income from endowments) of America's 34,000 foundations add up to only about 10 percent of current government expenditures for social welfare and related domestic programs. (9) As Senator Daniel Patrick Moynihan says, "There are... not enough social workers, not enough nuns, not enough Salvation Army workers" to care for the millions of people who would be dropped from the welfare rolls.

To replace welfare with charity, our society would have to boost its charitable giving tenfold. Which raises an interesting point: conservatives bitterly assail the federal government for making them pay taxes to help the poor. Why, then, would they turn around and happily surrender an equal amount to charity? The answer, of course, is that they would not. Once conservatives are freed from their obligation to help the needy, charitable donations will continue to languish as they always have.

Here conservatives might return to Olasky's argument: that they would feel more inclined to give to charities that espoused traditional family values and conservative morals. But, as we have seen, Olasky's idea of charity is to dispense advice, not funds. There is no question that a charity that simply tells the needy, "Get a job," is less expensive to run. But it should be pointed out that Olasky's entire argument is really a disingenuous change of subject. The original argument was that charity could replace welfare. In Olasky's world of privatized philanthropy, this is not the case; welfare would be eliminated but charity donations would not rise to replace it. This is a different argument, one about the benefits of eliminating most financial aid to the poor, not replacing it.

Finally, there is a matter of accountability. Private charities are notorious for spending 90 percent of their revenues on administrative costs. Many will certainly remember the fund-raising efforts of Jim and Tammy Faye Bakker, who raised millions ostensibly to spread the word of God -- but actually spent it on themselves. In such cases, a donor's only recourse is to stop giving once the scandal breaks. These scandals are often belated, because the media does not actively search out scandals in the private sector; they need to be tipped off to them. The scandal may put this fraudulent charity out of business, but there always seems to be another to take its place.

By contrast, the federal government is held much more strictly accountable for its actions. The media conducts an intense and proactive search for scandals in government, and their discovery becomes front page news. This results in enormous political pressure to correct deficiencies. Just one example is FEMA -- the Federal Emergency Management Agency. This is the agency commissioned with helping Americans recover from natural disasters. Under President Reagan, the nature of these disasters was assumed to be nuclear, and the agency poured millions into the creation of nuclear-proof command and control structures that would survive and "win" a nuclear war. Needless to say, it was completely unprepared to deal with the many natural disasters that were actually occurring. It took FEMA three days just to show up after Hurricane Andrew, and they snarled its victims with an unforgivable amount of red tape. Media reports sparked such public outrage that Senate hearings were held. Senator Fritz Hollings called FEMA "the sorriest bunch of bureaucratic jackasses I've ever known." (10) Under the intense glare of the national media, reforms occurred. James Lee Witt took over the ailing organization and completely turned it around. Today, it is one of the best functioning agencies in government, and is winning praise even from its former critics.

In sum, the claim that charity can replace federal social spending -- and do it better -- is a hopelessly unfounded one.

Return to Overview

Endnotes:

1. Total contributions: AAFRC Trust for Philanthropy, New York, NY, Giving USA, 1993. Household contributions: Giving and Volunteering in the United States, 1994 ed. (Washington, D.C.: Independent Sector, 1994).

2. Giving and Volunteering in the United States, 1994 ed.

3. Julian Wolpert, "What Charity Can and Cannot Do" (New York: Twentieth Century Fund Press, 1996).

4. Ibid.

5. Ibid.

6. Giving USA, 1993.

7. Early personal experiences of author.

8. Wolpert.

9. Ibid.

10. Daniel Franklin, "The FEMA Phoenix," Washington Monthly, July 1995.
 

Orsorum

Lifer
Dec 26, 2001
27,631
5
81
Welfare is the least of my worries. Government-provided retirement and medical benefits is another matter entirely.

Our economy may be in serious trouble in twenty-five years if we don't take the necessary steps now. Unfortunately, no one I've talked to really knows what those steps are.
 

Red Dawn

Elite Member
Jun 4, 2001
57,530
3
0
Conservatives, Sawhill argues, will need to spend more generously on child care subsidies and wage supplements and last-resort jobs to get the poor working (jobs bring mainstream values as well as money). Liberals will need to accept that money without behavioral change is useless or worse."
That's the truth!
 

Tom

Lifer
Oct 9, 1999
13,293
1
76
"Liberals will need to accept that money without behavioral change is useless or worse."

That part is already accomplished, although it didn't really ever exist..

So when are conservatives going to do their part ?

"Conservatives, Sawhill argues, will need to spend more generously on child care subsidies and wage supplements and last-resort jobs "
 
Jan 12, 2003
3,498
0
0
"Any social transfer increases the net value of being in the condition that prompted the transfer."

--Charles Murray, "Law of Unintended Rewards."