Welfare Revisited: Young Men Need Incentives

August 19, 2006

The major goal of the 1996 welfare reform law was to promote work as a way to help families provide economic benefits for their children. Now, a decade later, there is widespread agreement that welfare reform achieved several important successes—notably, increased work by mothers, which in turn led to rising income and falling child-poverty rates. By the late 1990s, poverty among black children, and among children residing with their single mothers, were both the lowest ever achieved. And Census Bureau data show clearly that the higher income that contributed to the reduction in poverty was achieved because mothers worked and increased their earnings.

However, because more than 80 percent of low-income, single-parent families, both those on and off welfare, are headed by mothers, the beneficial outcomes of the welfare law have accrued primarily to mothers and children. Meanwhile, the major favor the welfare law did for fathers was to pursue them ever more relentlessly for child-support payments. In fact, the law may have intensified the already substantial problems faced by poor fathers.

Many of the nation’s most serious social problems are caused by poor young males. They are the demographic group most likely to drop out of school, commit crimes, perpetrate violence on others, including their girlfriends, and desert their children. A number of analysts, including Ron Mincy, have shown that these problems are especially serious among young black males, and that the causes for blacks form a tangled web that includes lingering effects of generations of slavery and racial oppression, high levels of school dropout, current discrimination in the job market, astounding rates of arrest and imprisonment, and, ironically, being reared in fatherless families.

The strands in this complex web of causality can be thought of in two categories: the ones over which young men have control and the ones over which they don’t. If young men could be helped to overcome their inherent disadvantages, and follow a few simple rules of behavior, they could greatly improve their own well-being and that of the women and children who are closest to them. Here are the rules: Graduate from high school, don’t commit a crime, get a job and work hard, get married, and have children.

Unfortunately, the evidence shows that young males, especially black males, are violating each of these injunctions in great numbers and, as a group, appear to be moving in the wrong direction on most of them. While these problems afflict all groups of young males, the frequency is highest among young blacks.

The secret of the success of the 1996 welfare law was that public policy employed both sticks and carrots to encourage, cajole, or force young mothers to make the right choices. If mothers did not prepare for work, look for jobs, and actually accept jobs, the law required states to greatly reduce or even eliminate their cash welfare benefit. Meanwhile, even prior to 1996, Congress and a series of presidents of both parties had created an innovative system of benefits that supported low-income working families outside welfare, thereby encouraging them to take low-wage jobs, because the combination of low-income and government work-support benefits left the families economically better off than they had been on welfare. It was the combination of low-wage work and government work supports, including the Earned Income Tax Credit (EITC), food stamps, child care subsidies, and Medicaid health insurance, that helped so many mothers pull themselves and their children out of poverty. The key ingredients of overhauling welfare were the judicious combination of sticks and carrots.

The public agenda for men includes sticks and, well, sticks. Men generally do not qualify for cash welfare, child care, or Medicaid, and they qualify for an EITC that is worth only a tenth as much as the mothers’ EITC. The only major benefit for which they qualify is food stamps—to go along with continual pressure from child support and, for many, incarceration. Thus, the carrots are missing.

Ron Mincy thinks the nation should help these men by modifying child support, offering job training, especially through the Job Corps, and by providing them with public jobs. I agree that some modification of child support is necessary. The biggest problem is that these men’s child-support debt accumulates during periods of unemployment, quickly piling up into a debt the young men could never repay.

Moreover, given the remarkable efficiency and reach of the child-support program, states will learn about almost any legal job these men might find and will notify their employer to automatically withhold wages to pay their child-support debt. It would not be unusual for these young men to, in effect, experience a 30 percent or 40 percent tax rate on their earnings just to pay child support—plus another 15 percent or more to pay state income tax and FICA taxes. Not even millionaires pay a 50-percent tax rate. Government policy, then, has the effect of creating a huge work disincentive for these struggling young men.

Rather than spending $20,000 or so on Job Corp training, or providing these men with a public job that will pay poor wages, be difficult to supervise, cost a minimum of $15,000 per job and end after a year or two, we should concentrate on increasing rather than decreasing the motivation of young men to work.

Two actions are required. First, child support officials must strike a deal with these young men that, if they accept employment and begin paying their current child support, their accumulated child-support debt will be suspended. And the suspension will continue as long as they stay current on their monthly payments.

Second, we should create a new tax credit, similar to the EITC, for single males who work at least 30 hours per week. Gordon Berlin of MDRC has recently proposed the details of such a credit in a forthcoming Brookings paper. The credit would be worth a maximum of $4,500 and would have features similar to the EITC: paying a maximum of 40 percent of wages up to about $11,000, phasing out at incomes above $14,000 or so, and reaching zero at income of about $35,000.

There are three major advantages to this policy. First, it would provide the very thing that most analysts agree is most needed—namely, work incentive. If poor males could find a job paying around $14,000 per year (about $6.75 per hour), they would actually have total income of $18,500 per year (about $ 8.90 per hour). From the perspective of a poor young man, the additional $ 4,500 per year is real money.

Second, to put it bluntly, the young man’s prospects in the marriage market would receive a nice boost. In the long run, wives and children socialize young men, especially those who have been reared by a single mother without significant influence from schools and churches. Studies show clearly that married young males are healthier, happier, less likely to commit crimes and less likely to abuse drugs than single males. Thus, to the extent that additional income increases marriage rates, the new EITC would produce fringe benefits beyond mere economic outcomes.

Third, a mother earning $10,000 a year, with a $4,500 EITC, who marries a male earning $14,000 a year, with a $ 4,500 EITC, can together form a household with combined income of $ 33,000 per year. In effect, with their combined income of $33,000, they could put themselves on the edge of the middle class.

The major argument against this proposal is cost. A back-of-the-envelope guess indicates that the cost could easily exceed $20 billion per year. Given the terrible shape of the federal budget, the nation cannot afford a new program of this magnitude—unless it is offset by cuts elsewhere in the federal budget. Here’s an idea: Eliminate most farm subsidies and save more than $20 billion. I would be willing to submit the following question to voters: Would you rather spend your tax dollars to pay wealthy farmers not to grow crops (or subsidize the crops they already grow)? Or would you prefer to spend your tax dollars to provide cash supplements to the earnings of young families struggling to make a living in low-wage jobs?