Among the issues that won’t be addressed in detail in the current election campaign is the case for, and against, welfare reform along the lines adopted in the US. Although the Howard government has made various changes aimed at increasing ‘mutual obligation‘, there has been nothing approaching the reforms to the main pure welfare program in the US, then called Temporary Aid for Needy Families, and received primarily by single-parent families. Among those who still think substantial measures of microeconomic reform are needed, welfare reform along US lines is at the top of the list, and Wisconsin, where Governor Tommy Thompson slashed welfare rolls, is generally held out as the model.
Although there are various rationales for welfare reform, the only one I think worth considering is the claim that welfare perpetuates poverty. While relieving immediate distress, it is argued, welfare encourages a culture of dependence that perpetuates poverty. Against this, I’d put the argument that what matters most in preventing dependence is the availability of good jobs, and that a government commitment to full employment is what is needed for a genuinely mutual or reciprocal obligation to work.
There’s not likely to be a convincing and rigorously defensible empirical resolution of this debate any time soon. However, one telling piece of anecdotal evidence is worth a dozen regressions, so I thought I’d check out the Wisconsin example. What I found is a report with the headlines
Poverty rate hits 10-year high
State’s struggles also evident in growing number of uninsured: 11%
The rise in the poverty rate is attributed mainly to the loss of manufacturing jobs, rather than to adverse effects of welfare reform. This is consistent with my general view that we need to look harder at employment and unemployment. But reform is clearly playing a significant role
We have gone since 1996, when Pay for Performance hit, from distributing 1.5 million pounds of food to 10 million on an emergency basis,” Tussler [executive director of Hunger Task Force of Milwaukee[ said, referring to the reform requiring work or job-seeking in exchange for welfare benefits.
I’m not claiming that this example proves that welfare reform increases poverty. But it’s hard to see how Wisconsin can be regarded as a successful exemplar of welfare reform when the poverty rate is higher than it was before the main phase of reform, and still rising.
fn1. As many have pointed out previously, the current government’s notion of mutual obligation involves drastically reducing its own obligations, while increasing those place on benefit recipients
fn2. Irony tags were clearly needed here, but Textile doesn’t support them
fn3. This is an absolute poverty measure, based on a poverty line set in 1965, and adjusted since then only for inflation. Of course, it’s not absolute by comparison with third world countries, and it’s about twice the income that was considered to constitute poverty 100 years ago.