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The Minimum Wage Debacle

By Paul Offner
Monday, June 16, 1997; Page A21

Liberals are hailing the White House announcement that states must pay workfare participants the minimum wage, but they shouldn't be. The ruling may be good for organized labor, but it's bad news for welfare recipients and a raw deal for states.

It all goes back to a year ago when critics were screaming that the welfare bill then being debated by Congress was weak on work. Rather than deal with the problem, the president agreed to language mandating that half of all recipients be working within six years.

The Congressional Budget Office said at the time that most states wouldn't make it because no additional funding was provided, but no one paid much attention. Now, under pressure from organized labor, the president has agreed to a wage rule that all but guarantees they won't make it. Caught in the middle are the nation's governors who opposed both the requirement and the rule, but who now are stuck with both.

The administration's rule isn't a problem right now, but within a year the minimum wage goes to $5.15, and a couple of years after that the work requirement increases to 30 hours a week, at which point almost every state will be in trouble. Then all bets are off. As states must put more and more recipients to work, and as the cost of doing so goes higher and higher, they will either have to come up with additional welfare funding or cut recipients from the rolls. In the current environment, it's not hard to imagine how that choice will come out.

The argument that all workfare jobs should pay the minimum wage is appealing but also weak. For many young mothers who have never held a job, workfare can provide the experience they need before they seek private employment. In effect, it's part work, part training. Wages should be low so there's an incentive to find a real job. Moreover, workfare differs from private employment. If you miss work but have a valid excuse (the baby sitter didn't show up, or the car broke down), you're not sanctioned in most places. If you have no excuse, you still get the children's portion of the grant.

Partly it's a desire not to hurt the children, and partly it's a recognition that many welfare mothers have serious problems – low IQ, substance abuse, little discipline – that make it difficult for them to hold regular jobs. They still should be required to work, but they need special help, which is what they get in workfare (in this respect, it's like sheltered workshops for the disabled). There's no reason why every rule designed for regular employment should apply.

The administration says the minimum-wage rule is needed to protect the low-wage market. "Current workers were at risk of being replaced by lower-paid welfare recipients in both the public and the private sectors," writes Mary Jo Bane, former assistant secretary of Health and Human Services.

It's a fair point. Forcing several million welfare mothers to work clearly will put downward wage pressure on the job market. But that's a consequence of the welfare bill the president signed, and it's a problem however we come out on the wage issue. The way to deal with it is through policies that supplement wages, such as the earned income tax credit. The new wage policy may help, but it could also make matters worse, because more families will be kicked off the welfare rolls, thus adding to the competition for low-wage jobs and further depressing wages at the low end of the market.

For President Clinton, it's another case of trying to have it both ways. Having earlier endorsed an unrealistic vision of welfare-to-work, he now agrees to a proposal that undermines that vision. Having sought to appease the supporters of the work strategy, he now seeks to placate its hard-line opponents.

Faced with such criticisms, presidential assistant Bruce Reed argues that the states shouldn't be focusing on workfare anyway. "Our first preference has always been for states to place people in private-sector jobs," he says. If only it were that easy. The Clinton people never have been willing to acknowledge the fact that their welfare reform strategy depends heavily on public employment. Sooner or later they'll have to.

As the more employable recipients get jobs and leave the rolls, states will be left with the more difficult cases, the long-term recipients who have severe barriers to employment and for whom workfare is the only real alternative. That's who is likely to be hurt by the new policy.

The writer is commissioner of health care finance for the District of Columbia.

© Copyright 1997 The Washington Post Company

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