from the pages of../

Economic Report

Welfare Reform

By Rick Mercier


The popularity of Clinton's pledge "to end welfare as we know it" indicates that in this phase of capitalism, poor mothers will be expected to join others in the "reserve army" of labor, whose historical role has been to hold down the wages of workers on the lower rungs of the wage hierarchy. Clinton has thus adopted a well-worn tactic in capital's ongoing effort to maintain social control through work. His welfare reform plan is reminiscent of the way the poor were dealt with in 19th century England: in order to receive income assistance, the able-bodied poor had to labor in prison-like workhouses. Today's workhouses are Burger King, Taco Bell, McDonald's, and whatever public-sector jobs the Clinton administration is able to scare up to keep welfare mothers busy. The Clinton plan, if implemented in its current form, would add significantly to the ranks of women 25 years and over who earn minimum wage or less. Currently, these women number approximately 1.6 million<197>33 percent of all workers 16 years and over who work at or below $4.25 an hour (Statistical Abstract of the United States Report, MIT Press, 1973).

The federal debt crisis has no doubt made the imposition of austerity on these women politically feasible. Of course, welfare reform will do little to solve the government's debt crisis. The main welfare program, Aid to Families with Dependent Children (AFDC), costs $24 billion a year, which equals the interest paid to the government's creditors every six weeks, or the amount the Pentagon devours every four ("Who's Poor," Left Business Observer, December 13, 1993). And AFDC payments are actually shrinking in terms of real value. Mark Robert Rank, in a recent speech at a Planned Parenthood symposium, noted that in 1970 the median state AFDC benefit for a family of four (controlling for inflation) was $799 per month. By 1992, the benefit had fallen to $435.

Moreover, federal giveaways to corporate America far exceed payments to the poor. According to a report recently released by Essential Information, a Washington-based public interest group, programs to aid corporate America will cost taxpayers $104.3 billion in 1994, while programs for the poor will total $75.1 billion (Corporate Crime Reporter, January 10, 1994).

Clearly, welfare recipients have relatively little to do with the debt the federal government has accumulated since the late 1970s. Yet, it is these folks who are now targeted by Clinton and the fiscal conservatives in Congress.

Even if Clinton and Congress succeed in dropping the able-bodied from welfare rolls, they will have a difficult time finding them decent-paying jobs. The latest data from the Census Bureau shows that 18 percent of all year-round, full-time workers over the age of 16 earn incomes below the poverty line. Between 1979 and 1992, the ranks of these workers rose by 44 percent (Wall Street Journal, November 12, 1993).

Welfare reform advocates, however, are not particularly concerned about increasing the number of working poor. Representative Rick Santorum, the senior Republican on the welfare subcommittee of the Ways and Means Committee, has written: "We can expect a great deal of worn rhetoric in the coming welfare debate about education for `good jobs.' But the simple truth is that most welfare mothers will start out working at places like 7-Eleven or McDonald's. And what's wrong with that? Millions of Americans work for $5 per hour." What's wrong is that American workers earning $5 an hour live in poverty. A full-time worker with a family of three employed at $5 an hour earns an annual income $740 below the poverty line.

Santorum, however, points to a silver lining for low-wage workers. He says "70 percent of workers who entered the labor market at $5 per hour or less were still employed a year later, 45 percent had received wage increases of 20 percent or more, and one-third who started without health insurance acquired it through their employers" (Washington Post, National Weekly Edition, December 20-26, 1993).

Let's think about these numbers for a moment. Assume you've been working full-time at a fast-food restaurant for the past year. One day your boss tells you what a good job you've been doing and says your wage will be raised from $5 an hour to $6<197>a 20 percent raise. Since you will now gross $12,480 a year, you still might qualify as "poor" according to the official definition, which is a family of four earning $14,428 a year. And despite the boss's benevolence, chances are you still won't be able to afford the premiums on the health insurance that your employer offers (assuming your employer offers any).

Such is the situation in which many workers find themselves. One of the main reasons for their plight is the failure of the minimum wage to keep pace with inflation the past 15 years. Labor secretary Robert Reich has figured that the minimum wage buys 25 percent less than it did in the late 1970s.

When the minimum wage was established in 1938, its purpose was to ensure that all working Americans could support themselves without government assistance. Today a full-time minimum-wage worker might be eligible for several forms of government assistance, including welfare and food stamps.

During the late 1960s and 1970s, the minimum wage was raised almost every year to keep pace with inflation. But with the election of Reagan in 1980, Congress quit automatically boosting the minimum wage, and it was not raised again until 1989. The effect of the minimum-wage freeze has been staggering: in 1979, a full-time minimum-wage worker supporting a family of three earned $459 above the poverty line; today, she or he makes $2,300 below it. The appalling level of the minimum wage affects more than just those who receive minimum wage; the decline in the minimum wage's real value constitutes a downward tug that has held down wages for all low-wage workers.

Candidate Clinton promised to raise the minimum wage, but President Clinton has been silent on the issue. Instead, he has offered the Earned Income Tax Credit (EITC) as a substitute. The EITC is designed to augment the income of the working poor, but, as is the case with welfare and food stamps, it does so by forcing taxpayers to pick up the tab left by low-wage employers. In other words, the EITC, like all government assistance for the working poor, can be seen as a wage subsidy provided to those who refuse to pay workers a decent living wage.

Clinton, of course, cannot be blamed for all of this. Speaking before Clinton took office, economist Alan Blinder, recently nominated to join the Federal Reserve Board, asserted that the economy's "poor performance during a so-called recovery is unprecedented in the nearly fifty years since World War II." And, as we are slowly learning, the indications are that the creation of good jobs may prove exceedingly difficult in the years ahead. The Wall Street Journal reports that the structural unemployment rate may rise to as high as 10 percent by the end of the decade due to automation, global competition, and the growth of the contingent workforce. The newspaper says the next automation boom will occur in the service sector, where the jobs of 16.7 million office workers will be vulnerable. Banking, airlines and retail are industries where jobs will most likely be targeted for elimination.

Harvard economist Juliet Schor observes that "in the past, we dealt with the specter of technological unemployment by reducing the amount of work time. But at the moment there are barriers to the reduction of work time. She therefore concludes that "it's impossible to avoid large levels of technological unemployment." But that's not the only menace workers face in the years ahead. Conservative economist Milton Friedman says we have only begun to feel the effect of global competition among workers. "It's not widely recognized how enormous this effect is. You've got a billion people in China who suddenly are available for use with capital. You have half a billion behind the [former] Iron Curtain," he told the Wall Street Journal.

Yet another specter looming over workers is the contingent workforce; it now makes up more than a quarter of the total workforce. The largest employer in the United States is a temp agency. Contingent workers hold down labor costs directly because they do not receive benefits and indirectly because they undermine the bargaining position of permanent workers.

The labor market is such that college graduates find themselves often taking work for which they are overqualified and underpaid. But if this is the case for college grads, what about those with less education and preparation for the world of work? Alas, Laura Tyson, head of Clinton's Council of Economic Advisers, believes she has the answer to our problems. She said recently in a Mother Jones' interview that "the real problem for the economy is to generate attractive employment alternatives so that people can move from industries with increasing unemployment to new industries with new technologies. Structural and technological change will generate new demands, which will generate new jobs and higher wages." This is nothing more than technology fetishism. It is just as plausible to argue that "structural and technological change" will result in fewer jobs and lower wages. Truth is, capital's managers don't know where they're going to find the jobs to replace the ones that are disappearing. Technology does not automatically yield new jobs; neither do education and training, despite what some people in the Clinton administration (such as Robert Reich) might believe. Furthermore, the creation of enough well-paying jobs to go around might require human and fixed capital investments of a magnitude that capitalists are not willing to stomach, given capital's past failure to keep American workers' wages linked to capitalist growth. Indeed, Alan Greenspan's seemingly irrational fear of "the inflation of the future" might be understood in light of the historic defeat of the Keynesian productivity deal in the late 1960s, when workers forced wages to outstrip productivity. The future that Greenspan wants for capital is one in which the brakes will be applied even to moderate growth, for fear of another tumultuous shift in class power relations in the direction of workers.

Thus, we can see the capitalist game plan for maintaining social control through work: automation, global competition among workers, a growing contingent workforce, and a high structural unemployment rate fostered by the Fed's monetary policy. Capital hopes that these weapons will be enough to keep workers subdued, so that they will be in no position to force wages to rise with productivity. Those who believe that increased productivity automatically leads to higher wages do not realize that productivity increases result in wage increases only when workers have the power to establish this linkage. The present global reallocation of capital, however, has as its goal the undermining of workers' power. The means by which capital hopes to restore accumulation to a healthy level is also the means by which it will undercut workers' consumption, thereby creating the conditions for political and economic upheaval.

As a component of this overall strategy, welfare reform aims to reestablish the link between consumption and wage-labor, between wages and productivity. Clinton's welfare reform will add more weight to the bottom of the wage hierarchy, and as a result, wages will remain stagnant for millions of workers. Finally, the welfare reform campaign reinforces this message, whose internalization by workers is absolutely crucial to the survival of capitalism: that having any job, no matter how demeaning or low-paying, is better than not having a job at all. Against this latest effort to restore order by restoring work, progressives and radicals must posit an anti-work ethic. We don't need to create more jobs; we need to decrease the amount of work we do, while maintaining (or increasing) our current income. The fight against Clinton's welfare reform can be an important moment in the struggle against capitalist-imposed work. If this sounds at all strange, we must remember that the goal of the labor movement has always been to enable workers to cease being merely workers and to create the kind of world where each of us is free to develop our individuality to the utmost. This necessarily involves a radical change in the quantity and quality of our work. Let's not reflexively ask for more jobs; instead, let's offer people a vision of a world in which work is only one component of a rich and varied life.

Rick Mercier is a researcher for Jim Hightower and is currently working on a documentary about efforts to organize Baltimore's downtown service-sector workers.