Economics Review of Radical Political - Angelfire

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Review of Radical Political
Economics
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Welfare Payments and the Reproduction of Low-Wage Workers and Secondary Jobs
Bennett Harrison
Review of Radical Political Economics 1979; 11; 1
DOI: 10.1177/048661347901100201
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Welfare Payments and the Reproduction of
Low-Wage Workers and Secondary Jobs
Bennett Harrison*
ABSTRACT: Information gathered from five annual interviews with the adults
in some 2,700 households in the United States during the late 1960s and early
1970s is used in this paper to demonstrate that welfare — Aid to Families with
Dependent Children, AFDC for unemployed parents, and the various state Gen-
eral Assistance programs — is an institution which helps to reproduce the sec-
ondary labor market by systematically reinforcing low-wage, high-turnover
modes of work. More concretely, we are able to strongly refute the widely-
repeated ruling-class argument that there exists a distinct "welfare class" of
people unable or unwilling to work who must be supported by social programs
paid for by the taxes of those who do work for a living. This divisive assertion is
simply untrue; even within a single year, half of all the households that ever
receive welfare over a five-year period also have at least one working adult. And
the degree of mixing of work and welfare increases to the extent that, over the
whole five years, 92%_of these "ever-welfare" households also contain adults who
work at some time. At the macro level, labor market conditions and the need for
more income exert a strong impact on whether or not welfare is ever used,
whether it is used more than once, and how much welfare is received relative to
total family income.
Any welfare program serves both to regulate the supply of low wage labor
and to reproduce that labor and the segment of capital which exploits it. Only if
welfare is kept cheap and uncertain can it continue to support capital accumula-
tion. But cheap and uncertain welfare arouses the active opposition of the welfare
rights movement, whose demands are couched in the very rhetoric of liberal
ideology. Welfare rights and the demand for full employment are thus seen to be
mutually consistent as a basis for working class action.
Introduction most tenuous. In spite of these formidable obstacles,
the movement has won important victories at the
In the United States, capitalist ideology continues national and local levels.
to promulgate the image of a more or less permanent The welfare system can also be seen in its relation-
class of welfare recipients who are unable or unwilling ship to the accumulation process, i.e. as a mechanism
to work, and who must therefore be supported by the for reproducing the reserve army of unemployed. Wel-
taxes paid by those who can and do work for a living.’ fare recipients are kept alive, and capable of reproduc-
In their continuing struggle to gain and maintain some tion, so that capital will have adequate supplies of
measure of financial support for themselves and their labor-power when economic conditions or foreign
children, the recipients and their advocates in the wel- policy, e.g. war-making, create a domestic labor short-
fare rights movement have had to contend not only age. That segment of capital in which the labor
with the State, which controls the distribution of wel-
process is characterized by low wages and high sea-
fare, but also with the hatred and fear of other workers,
sonal or cyclical instability is especially advantaged by
especially those whose own economic security is the welfare programs whose payments are too low to per-
*It has taken me almost four years to complete this research and to mit recipients to refuse occasional jobs, but high
develop an understanding of the meaning of the findings from a enough to keep the workers alive and able to pay their
Marxian perspective. For much help and criticism along the way, I am rent during lay-offs, i.e., until these employers need
grateful to Barry Bluestone, Julie Boddy, Paul Cournoyer, Terry Fam, that labor-power again.22
David Fasenfest, Frank Levy, Charlotte Moore, Paul Osterman, Mar-
The empirical task which must be tackled in order
tin Rein, Bruce Steinberg, Robert Taggart, David Wheeler, and es-
pecially to Elliot Liebow, Director of NIMH’s Center for the Study of to challenge the prevailing ideology and to reveal the
Metropolitan Problems, which financed most of the research. accumulation function of welfare is the identification
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© 1979 Union for Radical Political Economics. All rights reserved. Not for commercial use or unauthorized distribution.
of a systematic relationship between work and welfare. clear which persons should be followed. For example,
How many recipients (or members of their households) when a couple splits, data become available for both the
receive both wages and welfare payments over time? husband and his new family and for the wife and her
What are the wages they earn when they do work? A new family. Since there is a great deal of such
demonstration of intermittent work activity at low reorganization in the sample, we had no other way to
wages would clearly locate welfare recipients in objec- analyze the family than to take those whose heads had
tively similar circumstances to those faced by a sizeable not changed. However, we were especially interested in
segment of the American labor force: the &dquo;working those families whose structure had changed. Our way
poor.&dquo; of resolving this dilemma was to make a single indi-
A related matter which is addressed in this paper vidual the unit of our analysis and to follow the fami-
concerns the long-standing struggle among economists lies with whom that person lived over time. We decided
around the ideological content of the category called to select the woman because entitlement to many wel-
&dquo;human capital.&dquo;3 Neoclassicals consider a worker’s fare programs depends largely upon her status. We
status in the labor market to be fundamentally a result screened out the very young and the older women to
of individual choice and capabilities, which are avoid having to deal with the special problems of early
assumed to be measured by education, training, age, career entry and later retirement.
and so forth. Radicals emphasize the importance of Of the 2,688 households in this extract, 17.7 per-
class position in a concrete historical context, e.g. cent had received welfare at some time during the five-
whether or not there are job openings available in an year period 1968-1972.’ The proportion of these &dquo;ever-
area, or whether a worker has been confined by her or welfare&dquo; households in the PSID as a whole, approp-
his sex or race to jobs characterized by low wages and riately weighted to reflect the national population, was
high turnover regardless of the capabilities of the 17.0 percent. Therefore, the truncated extract contains
particular incumbents. Thus, in the last part of this households which were neither more nor less likely to
paper, after measuring actual mixing of work and wel- be on welfare than the entire population. Thus, their
fare, I will also analyze the extent to which objective rate of welfare utilization seems representative of the
labor market conditions as opposed to human capital rate for the country as a whole.
variables explain the proportion of the population I looked for answers to four questions having to
which uses welfare, how much they receive, and how do with the receipt of welfare over the long run (1968-
often they receive it.4 1972) :
Data and Research Design 1. How many households mixed income from
work and income from welfare over time, and
It is now recognized that cross-sectional data tend according to what patterns?
to underestimate the probability that a person will have
2. For the entire sample (extract) of 2,688
contact with the welfare system at some point in
any interval of time, just as the proportion of the labor cases, how many and what kinds of households
force that experiences unemployment some time over received welfare at least once, and why?
the course of a year averages two-and-a-half to three 3. Of these ever-welfare households, how
times the proportion reported unemployed in any many and what kinds experienced multiple spells,
monthly Current Population Survey. Unlike many and why?
previous studies based on data from administrative re- 4. What was the magnitude of welfare receipts
cords or snapshots from the CPS, my data - which for these ever-welfare households, both abso-
come from the first five years of the University of lutely and relative to earnings, and what deter-
Michigan’s Survey Research Center Longitudinal mines those magnitudes?
Panel Study of Income Dynamics (PSID) - provide in-
formation on sources and levels of income for 5,060 I pursued the first question - about work/welfare
American households over time.5 The same house- mixing over time - by constructing transition matrices
holds, oversampled for the low end of the income dis- and extracting marginal, joint, cumulative, and condi-
tribution, were interviewed in five successive years, tional probability distributions from them (this really
1968-1972, with the income variables referring to the isn’t as complicated as it sounds, and will be fully
previous year.6 explained in a moment). The results are displayed in the
In this study, the unit of analysis is the individual form of diagrams that divide the population into sub-
woman aged 24-54 in 1968 and the households sets according to the way in which earnings and wel-
&dquo;around&dquo; her during the five-year period. There are fare are mixed (or not mixed) over the five-year period
2,688 such cases in the PSID. In earlier work with covered in this study.
Martin Rein, we used the entire family as the unit of For the last three inquiries, multiple regression
analysis, but when reorganization occurred, it was un- analysis was used to test hypotheses, derived from both
2
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human capital and labor market segmentation theory, adds up to the population of households which re-
about the significance of particular variables in explain- ceived welfare at least once over the five years. These
ing variation in each of the welfare or work/welfare data indicate that almost 18% of all American house-
indicators. These explanatory variables represent four holds received welfare at least once between 1968 and
categories of causal factors: class inheritance (e.g., 1972. For minority-headed households, the incidence
economic condition of the household head’s parents); of welfare utilization was more than twice as great, or
the household head’s human capital; household 40%. About a third of those households in which the
eligibility for welfare; and conditions in the labor woman was ever the head received welfare at some
market(s) to which the head had the greatest access.8 I time. The ratio of line three to line six gives the propor-
was especially interested in the partial effects of this tion of the everwelfare population that ever had earn-
last set of variables; that is, in the relative importance ings in addition to welfare. We can see that, over the
of labor market conditions exogenous to individuals or five years 1968-1972, 92% of those households that
households in affecting welfare status and the pattern ever received welfare also had some earnings. For
of the work/welfare mix, after accounting for class, minorities, this proportion was 84%, and for ever-
human capital, and welfare eligibility criteria. female-headed households, its was 91%.9
TABLE 2:
Mixing Income from Work and Income from Welfare
ANNUAL PROBABILITIES OF RECEIPT
OFEARNINGS AND WELFARE
In any given year, households may acquire income
in several different ways: from the work of the head,
from welfare payments, or from either or neither of the
two (e.g., when household income comes entirely from
spouse’s or child’s earnings and social security pay-
ments). Over time, as households change their struc-
ture and as individuals enter and leave jobs or the wel-
fare rolls, the probabilities of experiencing these activi-
ties cumulate.
TABLE 1:
CUMULA TIVE PROBABILITIES OF HOUSEHOLD
UTILIZA TION OF WORK AND WELFARE
*Not necessarily at the same time.
SOURCE: Author’s computations from the PSID.
SOURCE:Author’s computations from the PSID.
Table 1 shows the cumulative probabilities that,
over a five-year period, different kinds of households Table 2 displays the corresponding probabilities
will receive only earnings, only welfare, both (at some for the individual years, where [BOTH] represents
time), or neither. These four categories are mutually receipt of earnings and welfare, the latter symbolized as
exclusive and exhaustive. Together, the first and third [WEL]. The ratios, which measure the proportion of
categories add up to the population of households welfare households that also had working heads within
whose heads ever worked during the period. Similarly, the same year, are of course smaller than the five-year
p(ONLYWEL) + p(EVERBOTH) cumulative probabilities, but they are still remarkably
3
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large, ranging from a low of 43% for female-headed Earlier, we learned that - although the incidence of
households in 1969 to a high of 69% of all households welfare utilization in each of the five years averaged
in 1971.’0 The annual probabilities also suggest the only 8.4% (table 2) - there were some households that
possibility that business cycles affect the relationship experienced welfare in more than one year, so that the
between work and welfare. When the economy sample households faced a better than one out of six
expanded during 1967-1968, the probability of mixing chance of receiving welfare at least some time over the
work and welfare [p(BOTH)] declined. As the economy five years (table 1).
went into recession 1969-1970), the rate of mixing in- 14.6% of the sample households were headed by a
creased. As the recovery proceeded (1971-1972), the non-white person at least some time. The welfare inci-
probability of mixing began to decline again. What is dence of this group, as we saw earlier, was over 40%.
more, this cyclical pattern pertains to all of the demo- A quarter of the households had female heads
graphic groups shown in the table. sometime in the period 1968-72. The probability of
Such a pattern of mixing earnings and welfare their ever receiving welfare was 32.6%.
suggests the following process: eligible households To estimate the significance of class inheritance,
move onto and off the welfare rolls according to the human capital, welfare eligibility, and labor market
stringency or leniency of local administrators. At the conditions as predictors of the probability of a house-
same time they add, keep, or give up work according to hold’s experiencing at least one spell of welfare from
whether they need additional income during hard times 1968 to 1972, I used a multiple regression model. The
or whether they can do without it. Also after a brief variables are defined in the Appendix Table Al; their
decline in the late 1960s when welfare eligibility rules scales and mean values are shown in the first two
were made more stringent (by requiring, for example, columns of Table A2.
all recipients to register for work), the caseload (as If poverty is at least in part transmitted intergenera-
reflected in p(WEL) ) rose again. Thus, the proportion tionally, then households whose heads grew up in poor
of welfare households which also work seems to move families should be more in need of (and eligible for)
countercyclically. During recessions, when additional welfare than other households. On the other hand,
income to supplement welfare is needed most, welfare human capital theory predicts that, when all else is
households increase their participation in the second- equal, increments in education, training (indicated by
ary labor market. When the labor market is tighter, veteran’s status as well as by completion of civilian
their need is less and they mix work with welfare to a training programs), and work experience (proxied by
lesser degree. This is undoubtedly due to the poor qual- age) will generally augment people’s productivity and,
ity of the jobs to which they have access; in 1970-1972, therefore, their &dquo;employability.&dquo; Consequently, high
for example, ever-welfare household heads’ average scores on these variables should reduced the incidence,
annual earnings were $4300-$5500, depending upon or severity, of welfare dependency. The higher a hous-
the race and sex of the head. hold head’s expected earnings opportunities, or the
These probability relationships are perhaps easier greater the household’s access to other sources of
to visualize when they are graphed. Figures 1-3 are income than welfare and head’s wages, the lower the
called Venn diagrams; they show the mutually exclus- expected extent of welfare utilization. Dummy
ive and the joint (intersecting) categories for the five- variables for whether the head grew up in the South
year period and for one of the single years (1969). Note and/or in a rural area are a way of (crudely) controlling
how, in the single year, about half of the welfare sector for the quality of schooling.
overlaps with the work sector. But over the whole five Variables having to do with dependent children
years, as the result of turnover in the labor market and must also be included: The younger a household’s
changes in family composition, nearly the entire wel- youngest child, the more likely its head (especially if
fare sector overlaps with the work sector, indicating she is a woman) will choose or be forced to turn to wel-
that nearly all ever-welfare households also have work- fare instead of work so that more time can be spent with
ing heads at some time during the five years. the child (ren). Also, in accordance with the prevailing
regulations, the more dependent children a household
has, the greater the size of its welfare checks.
The Determinants of Welfare Utilization
This data set also allows us to include as variables
For the sample of 2,688 households that contained several characteristics of the area in which the sample
women who were aged 24-54 in 1968, I wanted first to households are located. When the local (or nearest
identify the determinants of the variable: major) labor market is in a state of high unemployment,
or when prevailing wage rates are low, households are
1 if household ever received welfare at more likely to opt for - or be forced onto - welfare.
EVERWEL = least once in the five-year period On the other hand, when the head is at least partly
sheltered from the risks of unemployment or low wage
0 otherwise by membership in a labor union or is employed in an
4
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6
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7
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© 1979 Union for Radical Political Economics. All rights reserved. Not for commercial use or unauthorized distribution.
industry whose national average wage is high (the least come for households whose heads ever worked in a job
&dquo;productive&dquo; auto workers earn more than most highly (i.e., a specific industry-occupation) which nationally
&dquo;productive&dquo; un-skilled department store workers) the paid a high wage.
likelihood and level of welfare received should decline Many of the interaction terms were statistically
relative to other workers. significant as well. In particular, there is evidence of
Given the large size of the sample and the some inheritance of class for households ever headed
concomitant advantages of that size in terms of direct by women; those whose initial (that is, 1968) head had
interpretation, I chose to specify the model as inter- poor parents were nine percent more likely to go on
active in race and sex of household heads. In other welfare during the period 1968-1972 than those whose
words, each explanatory variable was permitted to head(s)’ parents were not poor. Households ever
exert both an independent effect on EVERWEL and headed by women and located in areas with a surplus of
additional effects that depend on whether or not the labor were over 27% more likely to utilize welfare than
household head was ever a woman, a minority person, similar households located elsewhere. The beneficial
or both. For the j=1, 19, explanatory variables effect of union membership was even greater for such
... ,
{xj listed in Table A1, estimate: households than for the population as a whole.
Minority households whose heads had been poor
or rural faced a greater risk of going on welfare than
white households whose heads from similar
came a
background. But minorities benefitted more from liv-
ing near a big city and from veteran’s status than did
otherwise similar white households.
For the permanently poor households (Table A2,
Columns 13-14), the signs of the various coefficients
where MIN and FEM are dummy variables for the race generally the for the pooled sample,
were same as
and sex of the head, and where the residuals,fel, are although the coefficients differed in size. Class inheri-
assumed to have zero mean. All observations are tance is much stronger for these people: if a head has
weighted by their sampling proportions.&dquo;
poor parents and a working class father, the chances
Inspection of some preliminary cross-tabs had re- that his or her household will receive welfare are in-
vealed a disproportionately high incidence of welfare creased by 20%. If the household was ever headed by a
receipt for those households whose cumulative five- woman, that differential rises to 35%. Completion of
year gross incomes placed them in the lower third of the training programs by a permanently poor household
cumulative five-year family income distribution in the head has no impact on whites; however, it raises the
United States (45.1 percent versus 17.7 percent for the welfare susceptibility of minority households by 28%.
sample as whole). Using this cutoff as an intriguing ’Permanently poor households of minority veterans, on
indicator of &dquo;long-run&dquo; (or &dquo;permanent&dquo;) poverty,12 I the other hand, are much less likely to utilize welfare
then fit regressions for the 503 &dquo;permanently&dquo; poor than otherwise similar households of white veterans.
households. The results (means and regression
Clearly, in both sets of equations (for the popula-
parameters) are shown in Columns 9-15 of Table A2. tion and for households at the bottom of the five-year
The model, as it turns out, is a somewhat better predic- U.S. distribution of family income), the human capital
htoorl dosf twhealnf afrore tuhtei lpiozpatuiloant ifoorn longw-hroulne .poverty house- variables are generally of little importance in predic-
as a ting the probability of long-run welfare utilization by
For the sample as a whole (Table A2, Columns 6- households. There is, however, evidence of inheritance
7), the class inheritance and all of the human capital
of class for the poor. Welfare eligibility, as measured
variables except age of head exert no statistically here by the presence and age of children, counts in the
significant effect on a household’s susceptibility to expected Nearly all of the labor market variables
way.
welfare. (Age does increase risk, but at a decreasing (the values of which independent of the choices of
are
rate.) The welfare eligibility variables highly
are the households in the sample, given people’s reluc-
sliagrngiefri ctahnet :n uTmhbee ry ooufn gdeerp etnhdee nyto ucnhgielsdrte nc,h iltdh,e agrneda ttehre itamnpcaec,t eodr arienaasb)i liptays, s toou r motevsets oafw asyi gnqifuiiccaknlcye aftr oomr
the chance that a household will experience welfare above the 95% level of confidence. These results
over the long run. Three of the labor market variables strongly confirm the existence of a relationship
are highly significant: Households living in high- between the welfare-susceptibility of households and
unemployment counties face a 13% greater probability the conditions of work in the places where they live.
of receiving welfare than households in low-
unemployment areas, ceteris paribus. Households Other Indicators of Welfare Utilization
whose heads ever belonged to a labor union are less
likely to go on welfare. And welfare is a less likely out- I conducted similar econometric analyses on
8
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© 1979 Union for Radical Political Economics. All rights reserved. Not for commercial use or unauthorized distribution.
variables designed to capture other aspects of welfare relationship between work and welfare when labor
utilization during 1968-72, including market conditions significantly affect the extent to
which people use welfare. This is indeed the case, even
for the pooled sample of 2,688 obervations, over 80
percent of which represent families in the upper two-
thirds of the long-run U.S. distribution of family in-
come. Local unemployment rates, the excess supply of
low-skilled labor (as indicated by data from the State
Employment Service offices), and union membeship
(53% of those who ever received welfare received it two or for household heads especially significant predic-
more times); are
tors of the absolute and relative utilization of welfare.
From their high rates of turnover, low wages
($4,300-$5,500 per year), and the low incidence of
unionization opportunities, I would conclude that the
jobs held by heads (not to mention other members) of
ever-welfare households clearly fall into what labor
market segmentation theorists call the secondary labor
market. The existence of a strong, systematic link
between the welfare system and the secondary labor
market is an important hypothesis in that theory. Our
evidence strongly supports that hypothesis.
To be more explicit, these findings constitute
important support for those (such as Piven and
Fusfeld) who have long argued that the systemic func-
(mean WELTOT for ever-welfare households was tion of welfare is to both socialize part of the costs of
$4,076; mean WELEARN was 25%). In most respects, capitalist reproduction and to regulate the supply of
the results were similar to what has already been low-wage labor. Normal economic growth creates
reported (for details, please refer to the monograph poverty, and the State is then forced to help to keep the
cited in fn. 4). Union membership, the position of the poorest workers alive. But the welfare benefits are
job in the national wage structure, and the local pegged to just below the prevailing nominal wage in the
unemployment rate are always far more important than secondary labor market in order not to create serious
education or training in explaining the frequency and labor shortages that would threaten the stability of the
extent of welfare utilization. labor process located there. Of course, under such
circumstances, secondary sector wages and working
Summing up the Findings conditions will never improve sufficiently to allow
more than a handful of workers to work their way off
We can claim to have direct evidence of a welfare permanently, even though that is the official
systematic relationship between work and welfare objective.
when people receive both earnings and welfare within So, we know that most welfare recipients can
the same time frame, either simultaneously or by mov- work, because we know that they (or others in their
ing back and forth between the two. For periods of a households) have worked. And we know - from this
year, the average incidence of mixing was only 5.3 per- research and from the work of others, including Barry
cent for the sample at large. But the transition analysis Bluestone, Peter Albin and George Treyz - that poli-
revealed a great deal of moving back and forth from cies which tighten labor demand will have at least some
year to year. Over the whole five-year sample period, impact on the welfare rolls. 13
the cumulative probability of mixing was 16.3 percent If most people on welfare can work, or live with
for the sample as a whole, and more than twice as high people who can work, and given the apparent
for minority households. A remarkable 92% of all ever- widespread concern by capitalists about the &dquo;welfare
welfare households had heads who worked at some mess,&dquo; why doesn’t the State undertake a large-scale
time or another. Moreover, this estimate must under- job-creation program to deal with the problem? Of
state the incidence of mixing since it considers only the course, the myth that welfare recipients are idlers
work experience of households heads. Since many taking handouts from those who do work for a living
other household members work as well, at some time or serves to promote dissension within the working class,
other, the true incidence of mixing must be even greater and is therefore of value to capital. Moreover, an
than 92%. In sum, welfare recipients definitely exper- employment program of adequate size and paying
ience a direct relationship to the labor market. decent wages would be very expensive, coming directly
We can say that we have indirect evidence of a into conflict with the far more profitable uses to which
9
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