Aiding the Poor Without a Safety Net

Three themes for a "post-welfare-reform" agenda are reshaping health and education policy in the U.S., and they can be employed to influence public welfare as well. These themes are: accelerating the upward mobility of the poor, empowering the poor through exercising choice in service provision, and restructuring public welfare. While these themes vary with conventional liberal prescriptions for public welfare, they are no less consequential.The reality is that the devolution of public assistance via the Personal Responsibility and Work Opportunity Act (PRWOA) will shape welfare policy in the foreseeable future. Assuming that welfare devolution will not be reversed, Congress can act constructively by: 1) insisting on tough reporting requirements on the part of the states, particularly in regard to the experience of families who are terminated from welfare as a consequence of time limits; and 2) beginning the unpleasant task of reviewing the relevance of existing federal social programs, in order to craft a format for future poverty policy. After the Safety Net The issue now is how to aid the poor without the safety net. There are at least a few possibilities.Accelerate the upward mobility of the poor. Conservatives have half the formula to this theme in welfare-to-work programs that have been emphasized since the Family Support Act of 1988. After seeing some light at the end of the welfare tunnel, however, Congressional conservatives winced and deleted the revenues essential to integrate poor mothers into the labor market. As a result, they've painted themselves into a corner. Ordinarily, welfare-to-work increases the earnings of typical AFDC families about $250 to $750 per year, hardly enough to make them self-sufficient. To compound matters, welfare reform reduces aid to the states by $55 billion over the next six years, not the route to successful welfare reform, as Wisconsin's Republican Governor Tommy Thompson has pointed out. Even if these funds were restored, however, the result would be little better than the welfare poor being offered the opportunity to be working poor -- in other words, running indefinitely in a squirrel cage of dead-end, no-benefit, low-wage jobs.Little noticed, PRWOA does contain a provision that could address this problem for both the welfare poor and working poor: Individual Development Accounts. IDAs are tax-exempt accounts that can be used to complete college or vocational school, buy a home, start a business, or supplement a pension. An individual's contributions to an IDA are matched by an external source according to the account-holder's income. The purpose of IDAs is to encourage the poor to accrue assets, the most successful vehicle for escaping poverty. This strategy, largely responsible for elevating yesterday's working poor to the middle class, would be as effective for today's poor given sufficient funding, but welfare reform provides no money for IDAs.Also needed is an asset strategy such as that of Women in Self-Employment, a San Francisco business incubator for low-income women. Since 1988, WISE has trained 3,500 poor women and set up more than 500 businesses, all on a shoestring.Empower the poor by allowing them choice in selecting financial and social service providers. A good indicator of the absurd expectations we make of the poor is to ask these questions: Would you elect to receive your financial services from the income-maintenance division of the local welfare department? If you had a pressing personal problem, would your first choice be to call one of the case workers in public welfare?Of course not! Only the poor are expected to stomach the waiting rooms, wasted hours "until the next worker is available," and the rudeness, to say nothing of the caprice, that typifies public welfare. Here the solution is to offer the poor the same options available to the rest of us.Regarding cash benefits, ask the poor to identify the local financial institution to which their benefits would be direct-deposited. As a condition of receiving benefits -- aid in the millions of dollars each month in some communities -- financial institutions would be required to offer basic services such as savings, checking, financial planning and counseling in home ownership. The experience to date suggests that commercial banks would be willing to offer such services. The pity is that liberals have been so capital-phobic that they have failed to develop the community-based financial institutions that could use such deposits for community- development purposes.Electronic Benefit Transfer is a case in point. For the past several years states have been transforming benefit checks to EBT because it offers more security and is less expensive. A half-dozen states now have contracted with commercial banks for the service. Note the incongruity: cash benefits to poor families are being dispensed by commercial banks that derive a profit from such transactions, the profits being diverted to management and shareholders. What could be done if such profits were diverted, instead, to community-development ventures?Quite a bit. For poor New Mexicans, each month the federal and state government deposit $29.7 million for AFDC and Food Stamp EBT transfers with First Security Bank, a commercial bank headquartered in Utah. Citibank, the largest EBT contractor, estimates the current EBT "market" at $111 billion annually. Rocket science isn't necessary to realize the value of such capital for the nation's distressed communities. Prototypes of such institutions already exist. In Chicago, South Shore Bank has leveraged more than $270 million and rehabbed more than 350 apartment buildings; since its inception in 1989, the Central Brooklyn Federal Credit Union boasts assets of $4.7 million and more than 4,000 members to whom $1.46 million in loans have been extended. But such institutions are the exception when they should be the rule.With respect to social services, the poor could be "mainstreamed," allowing them access to the same providers used by the middle class. Except for protective services for children and adults, the social services needed by the poor are good candidates for vouchers. Ideally, today's welfare department would become a clearinghouse for private nonprofit and commercial social- service providers seeking to participate in a voucher program. Rather than provide services, the public agency would be responsible for screening applicants for public reimbursement, insisting that consumers evaluate provider services, posting consumer ratings along with provider ads, and negotiating contracts annually with the provider network.The consequences of social-service vouchers for social workers in the welfare department are predictable. Burned-out personifications of Scrooge would be pink-slipped; oppressed Cratchits would be liberated. More capable and enterprising minority professionals would be free to develop practices that are appropriate to the clientele they want -- and need -- to serve.Restructure public welfare. During the past two decades, we have seen substantial reorganization of the nation's health and education institutions. In health care, Health Maintenance Organizations focus on preventing illness instead of responding to disease after it has occurred. Alternatives to defunct public schools are being established in a dozen states through the charter school movement. Inexplicably, the last vestige of state socialism perseveres in the public welfare bureaucracy.The most direct way to restructure public welfare would be to charter human service agencies. Government could set specific standards of service provision, reimburse agencies by capitation (which would encourage them to enroll and retain the poor as members), and insist on evaluation of service provided. Other than that, the private sector should be encouraged to innovate in human service delivery.Again, a prototype has been field-tested, although its performance is just now being recognized. Since 1987, the Savannah-Chatham Youth Futures Authority has integrated a range of income-maintenance and social services and targeted them at a poor community. Applying available technology has combined eight different categorical programs into one application form and afforded paperless records. Consolidating staff positions that had previously ben assigned per poverty program yielded family advocates who are assigned two per census tract, each advocate serving no more than 20 families. At the end of its five-year plan, YFA documented significant achievements: reductions in incidence of low-birth-weight infants, lower numbers of confirmed cases of child abuse, fewer children behind school grade for their age, a downturn in school suspensions, reduced rates of teen pregnancy and births, and fewer interventions on the part of children's services and the juvenile court. Rethinking Welfare Policy Accelerating upward mobility of the poor, empowering them to have access to the same financial and social services enjoyed by the middle class, and reducing the welfare bureaucracy are all within the parameters of possibility of present social policy. Yet they remain on the margin, overshadowed by assumptions that have guided social-welfare policy for the past half century. If the 1996 welfare reform demonstrates anything, it is the urgency for rethinking these assumptions. Once the failure of conservative welfare reform is evident, progressive strategies will need to be ready. Optimally, such strategies will have been field-tested; therefore, Congress should authorize demonstration projects that could serve as a basis for more extensive welfare restructuring.Whether or not we support the welfare reform, we have to live with it -- at least for now. It limits our options, but it doesn't leave us without possibilities for a different approach to helping get poor people out of poverty.David Stoesz holds the Samuel Wurtzel Chair in Social Work at Virginia Commonwealth University.


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