IN CASE you missed the first, or second, or third time around, let us say it again: there is something fundamentally wrongheaded and outrageously unfair about the recent changes in welfare law that punish poor people for working. We are not talking about some abstruse concern of theoretical economics. We are talking about real people who now face the grotesque choice of either quitting their jobs or, by keeping them, losing both income and medical care.
Why would the administration propose, and Congress enact, a law with so perverse a result? OMB Director David Stockman defends the changes on two grounds: they are that 1)previous welfare law was so generous to the working poor that families with incomes of $20,000 or more could still receive aid, and 2)there is no way to provide work incentives for the poor by income "disregards and offsets" without "putting half the population" on welfare.
The first of these arguments rests on a wild generalization from a handful of cases. It is true that, before Oct. 1, states were allowed to reimburse working welfare mothers for the full cost of child care and work-related expenses. If these costs were very high, families could have substantial earnings and still receive welfare. As a result, now and then some horror case would emerge--the recent divorc,ee with a good salary, three children in private school and payments due on a late model Cadillac. There weren't many such cases--three- quarters of working welfare mothers earn less than $500 a month--and the remedy, proposed by the last three administrations, was simple. You can put a reasonable cap on work-related expense deductions while still retaining the important feature of welfare law that, by reducing benefits by less than the full amount of earnings, provided at least a small reward for work effort.
It is this so-called "earnings disregard" that Mr. Stockman fears will put half the citizenry on welfare. This fear might be better grounded if the country had a very generous welfare system--one, say, that guaranteed a poverty-level income to all the poor and reduced benefits by no more than 33 cents for every dollar of earnings. But welfare in the United States isn't like that. Aid to Families with Dependent Children--what most people think of as welfare--is received almost exclusively by husbandless women with children to support. No state has a basic benefit level close to the poverty line, and some states have benefits less than half that amount even counting food stamps.
A modest work incentive was provided--before the recent changes--by reducing benefits by 67 cents for each dollar earned, but since food stamps were cut by another 10 cents the recipient netted only about 20 cents on the dollar for her labor. What all this added up to was that even with the full set of "disregards and offsets" in place, less than 9 percent--not one-half--of the population received AFDC benefits.
The elimination of work incentives is not claimed to be a big money saver even by its advocates. In fact, welfare costs are more likely to rise as recipients choose the higher income--plus Medicaid-- now offered by welfare instead of persisting in their generally low-paid dead-end jobs. Before that happens--before one more working welfare mother gets processed off the rolls or driven from the labor force --Congress should restore at least the minimal incentive for work that AFDC law used to provide.