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Workfare in Germany and the US

One doesn't need to fly to Milwaukee to recognize that the model Wisconsin Works (W2) isn't a savings program. Quite the contrary! Devised and implemented by Tommy Thompson, the current Secretary of Health and Human Services is one of the most expensive and extravagant employment programs for (former) income support recipients in the US.. The short-term programs oriented in neediness.. are destructive in the long-term... Translated from the German
Workfare between Labor Market- and Lifestyle-Regulation

Work-oriented Social Policy in Germany and America

By Britta Grell (Prokla), Jens Sambala, Volker Eick

[This article originally published in: Prokla, November 29, 2002 is translated from the German on the World Wide Web,  http://www.linksnet.de/drucksicht.php?id=793.]

"Alms should not be given to people of healthy bodies who can do work to earn their living" (John II called the Good, 1351). The distinction was already made in the Middle Ages between the poor unwilling to work (beggars and vagabonds) and the decent poor unable to work on account of sickness and blows of fate who survived on communal care. This strengthened public order and morals (Castel 2000). The whole history of western welfare institutions is marked by the dialectic between social integration- and segregation. Work pressure always played a central role both as an individual-educational principle ("punish and develop" and as an instrument for the general discipline and control of gainfully employed sectors of the population (Kahrs 1998).

Concepts that limit welfare benefits to the "truly needy" for the good of the community, the national position and even the jobless enjoy astonishing success on both sides of the Atlantic. Thus workfare understood as a bundle of different regulations and practices connecting the claim of income support or unemployment benefits with rigid conditions (participation in work-, retraining- or educational programs) isn't an invention of contemporary labor market- or social reforms. The current workfare-offensive in nearly all western industrial nations in the transition to the so-called information- or service society is a relapse to past times. However unlike the 70s or 80s - thanks to the changed models of the "new social democracy" - workfare comes under the banner of "modernization" and the promise of greater "social inclusion" and "more just distribution of chances of survival".

While the US can not claim to have connected most consistently and radically its system of state support with paid work particularly since the notorious Welfare Reform of 1996, a competition around rearrangement of the relation of social policy and the labor market has broken out in Germany. The numerous social model projects, legal initiatives and reform commissions that peddle the principle "Promote and Urge" and "More Personal Responsibility" of citizens do not justify any unequivocal conclusions about the end of the journey.

1. Workfare from the Conservative to the Liberal Welfare Model

Since the end of the Cold War, the different variants of welfare state capitalism (e.g. Esping-Andersen's 1990 division of ideal types in liberal, social democratic and conservative/corporatist regimes) have been emphasized. Regimes with a strong preference for the insurance principle and orientation in the so-called normal work relation come off increasingly badly in comparative analyses. The "German model" with its Bismarckian pattern still regarded as a model and guarantor for preserving "social peace" appears today as backward-oriented, unjust and inflexible (cf. Butterwegge 2001). The view that the continuing high unemployment in Germany and other continental European states unlike the US can be explained by specific institutional rigidities among powerful international institutions (World Bank, OECD, European Commission) finds great approval (Alber, Zapf 2002). Rigid labor laws regulations and also escalating social security systems that made the factor labor too expensive for businesses through high taxes and social fees and encouraged passivity and excessive claimant attitudes in the jobless are considered central obstacles of employment (Streeck; Heinze 1999). Youth, long-term unemployed and the less qualified are disproportionately affected by these "welfare state-induced abnormal developments". These persons are intensely marginalized, robbed of their "human capital" and driven into a "poverty- or unemployment trap".

The recipients of social benefits are condemned to inactivity from which they can hardly free themselves by their own strength (ifo-Institute 2002). "The present welfare state creates more and more developed transfer cages where its clients are provided with incomes but cannot gain either self-respect or abilities" (Pfeiffer 1999).

In this analysis, activating measures for social security recipients (workfare) are emphasized first of all alongside a general reduction of insurance- and benefit levels and diverse low wage strategies (wage-opening clauses, state wage subsidies) as suitable instruments for combating exclusion and poverty (which is increasingly equated with exclusion from the labor market, cf. Levitas 1996). While the first intellectual comparisons of workfare approaches (Peck 2001, Lodemel/ Trickey 2000) stress that greater transfers and "nominal convergences" of the western systems occur in social- and employment policy, other authors point to the high stability of specific national welfare cultures in their different institutional/ legal arrangements and claims to provisions and to divergent ideas of justice and attitudes toward different areas of welfare provision (state, market, family and third sector) (cf. Kaufmann 2002). A trend to the adaptation of the three worlds of welfare capitalism is only restrictedly true (Schmid 2002) despite intensified globalization pressure and related problems (de-industrialization, changed family structures, mismatch of labor force supply and demand etc).

2. Work-oriented Social Policy in International Comparison

In comparing the development of the US social system as a prototype of a liberal welfare regime to the German development, considerable differences are striking in the degree of de-commodification (liberation from the pressure of securing existence through paid labor). The unemployment benefits largely in the legislative competence of individual states in the US are fragmentary and full of holes today. At the end of the 90s, only 30 to 40 percent of all jobless received unemployment benefits (Baldwin 2001) since a majority of employees are excluded from the first from the insurance system on account of part-time employment, irregular gainful activity and inadequate income. On average, the wage compensations only amounted to 35 percent of the last net wage and as a rule are paid for a maximum of 26 weeks. Since no supplementary unemployment benefits exist, the pressure to take a new job as quickly as possible is very strong. No "long-term unemployed" are in the benefit cycle since they are regarded as the main problem group of the labor market or the most important target group of measures promoting employment in Germany.

The US mechanism of income support is rather confusing from a German perspective since it is oriented more to particular group-referring programs and less to monetary benefits. A relatively great array of possibilities with less cumbersome administrative units is allowed. A universal insurance system has never existed in the US comparable to the "help to livelihood" in Germany. For example, there are either no monetary benefits for needy youths (over 18 years) and single adults or benefits are limited to the very meager financial cushioning programs (General Assistance or General Relief) of the states or counties or to practical benefits like food stamps. Children, above all in families without male breadwinners, who should be protected from poverty and hunger are the most important target group of state charity policy.

Under the Aid to Families with Dependent Children (AFDC) introduced in the 1935 New Deal, single mothers enjoyed an exceptional position in the US social system up to the Welfare Reform passed in 1996 under a democratic president. Alongside the sick, disabled and elderly, they were the only population group in manifest neediness that could be freed from a basic work obligation (Wilke 2002). In the framework of AFDC, low-income families with children under 18 years of age had a claim to monthly monetary- and support services comparable with the local income support despite great fluctuations in amounts and arrangements between individual states.

The new legislation (Personal Responsibility and Work Opportunity Reconciliation Act) has now annulled the limited "protection principle" for needy mothers and raised the "independent conduct of life" through gainful activity as a general guideline alongside marriage. Under the successor program of AFDC, Temporary Aid for Needy Families (TANF) which doesn't include any federally guaranteed individual legal claims any more, an obligatory participation in "work-promoting" activity is now demanded of all parents seeking help. This is different from the numerous regional model projects. Single parents with children, persons with serious disabilities or chronic sicknesses are exceptions. If those seeking help fail to meet the rigorous conditions of the authorities on accepting regular gainful activity within a fixed time period (maximum two years), they have the choice: either no support any more or acceptance of "community jobs". Altogether the law limits state transfer benefits to a maximum of five years of one's lifetime. Beyond that, the states can further reduce the duration and introduce additional restrictions in their regional TANF-programs contributing to differentiations of income support systems and an inscrutable diversity of special regulations on the local plane (Gaus 2001).

Internationally, the US-Welfare Reform with its consistent work obligation has gained great attention among some German politicians and sociologists. The income support percentages drastically lower in the US since the middle of the 90s causes much envy coupled with one of the lowest unemployment rates since the 60s even though the positive employment trend seems temporarily interrupted even for Big Brother since the beginning of the recession in March 2001. If 12.2 million persons (4.8% of the total population) still drew benefits from the AFDC program in the US in August 1996, the number of aid recipients had fallen nearly 60 percent to 5.4 million by the summer of 2000 (US Department of Health and Human Services 2000). In contrast, the number of those drawing "assistance for living" in Germany continues at a high level. In 1997 there were 2.9 million persons (3.5 percent of the total population) and in 2001 still 2.7 million...

Although the German system of social security is marked by a greater inclusivity compared to the US, all the legal changes and reform proposals aim at bringing aid recipients into the labor market as quickly as possible. The fusion of income support and unemployment benefits envisioned for sometime is at the top of the wish list of all German parties (with the exception of the PDS). In the official political party statements, the realization of synergy effects through clearer authorities of administrators and a better network of communal and national employment promotion are central. If a freezing of unemployment assistance occurs, the consequences will be very serious without a basic new regulation on sharing burdens.

Although the readiness of businesses to hire aid recipients has been trifling, the main emphasis of the communal employment initiatives since the end of the 90s in Berlin and other German cities as in the US is clearly on establishing and testing new models that bring aid recipients into the so-called first labor force (Eick, Greil 2001). In this context, both private (cooperative and commercial) employment agents and new approaches within case management, alternative financing instruments and administrators are important and innovative...

3. From Wisconsin to California and Back to Berlin

Even if these developments suggest a relevant reorientation within German social policy, applying US workfare principles in Germany seems premature. Convergences, differences and elusive problems are manifest in comparing the backgrounds, goals and concretizations of the programs for social security recipients in both countries. Several examples from the equivocal world of workfare capitalism illustrate this.

Workfare as a Fiscal-Political Instrument

Financial considerations were at the center of past (local) governmental strategies connecting income support to a work obligation in Germany. The increasing declarations of bankruptcies of the communes were catalysts. A survey of the variety of communal experiments providing "help to work" in a hierarchy of best-practice models focuses firstly on the amount of saved income support expenditures, not on successful (or long-term) labor market integration of social security recipients or the quality and salary of the created jobs.

One doesn't need to fly to Milwaukee to recognize that the model "Wisconsin Works" (W2) often cited in the German debate is not a savings program. Quite the contrary! Devised and implemented by Tommy Thompson, the current Secretary of Health and Human Services, W2 is one of the most expensive and extravagant employment programs for (former) income support recipients in the US. That the pressure to work must go along with a state obligation is a basic idea of democrats, providing Public Service employment for everyone (job-generating measures that no one wants any more in Germany).

W2 consists of a graduated system of work obligation without exemptions or gaps (Wilke 2002; Hartmann 1999). The categorization of the needy is very striking here. The first group of "persons unrestrictedly capable of employment" must accept the first best job without delay (regular employment) and are only supported in their search for work. The second group is rated as capable of work with little occupational training and experience and mobilized for state subsidized "trial jobs" in the private economy. The third group is marked by considerable deficits in soft skills. They must first work in Community Jobs (30 hours per week) and then be led to normal everyday work. In the fourth category are all persons with considerable health and psychic impairments. Employment in rehabilitation workshops or transitional jobs at least 28 hours per week are obligatory even for people with severe drug problems.

Up to a fixed income limit, all participants in the W2-program have claims to subsidization of child care- and transportation costs, food stamps and a basic medical provision (Medicaid). Although no monetary benefits are given any more since the introduction of W2 without work integration, the expenditures of administration did not fall but increased around 20 to 30 percent in the first three years (Department of Workforce Development 2001).

The drastically reduced case numbers have not changed this administrative extravagance or the decision of governments to pass a large part of the workfare business to private enterprises or nonprofits. Expenditures are borne proportionately by Washington and the individual states. The federal share of the cost was frozen to the 1994 level for the financing of the new TANF-programs. Of the $16.8 billion spent every year since 1996 by the US Department of Health and Human Services for the support of needy families, only a fraction since 1998 went directly to those seeking help as monetary expenditures.

While cash assistance was the greatest form of assistance in 1996 at 71 percent, it has shriveled in the meantime to 32 percent. When the legal package came into effect in the US as Welfare Reform, the goal was financial relief of the Federal budget (above all through savings in the food stamp program and in income assistance for disabled and elderly). Fiscal political considerations dominated. Health- and family policy considerations were seldom considered.

Workfare as an Educational Instrument

That the income support reform in the US met with considerable approval of broad parts of the population and in both large parties is owed to its strict gainful orientation and to the stigmatization of AFDC recipients for decades as part of the undeserving underclass, enriched with racist stereotypes about the reproductive behavior of single black women, their imputedly very intense promiscuity and their disproportionately high claim on social benefits. While the Clinton administration saw missing jobs, deficient vocational training and trifling financial incentives for work integration as the main causes for the increasing claims on income support at the beginning of negotiations on the organization of the new program, the Republican party with Welfare Reform wanted to promote family values and marital partnerships which from their view meant combating the growing number of illegitimate births among teenage mothers and a specific "poverty culture" (Heclo 2001). The demands of republicans for abolition of the old charity system are based essentially on the thesis of a socially harmful structure of dependence formulated in 1984 by one of the leading conservative thinkers, Charles Murray.

The social programs oriented in neediness encourages a conduct of the poor that is rational and sensible in the short-term but destructive in the long-term. A liberal management of the programs and generous transfer programs could ultimately promote the disintegration of family structures and dependence on the welfare state and thus undermine the culture and values of the middle class (Gebhardt 1998).

The advance of republicans to socially ostracize welfare pregnancies and not sanction them financially by the state side is reflected in regional TANF-programs despite numerous protests of women's associations and civil rights organizations (including the catholic church that fears an increase in abortions). For example, the California state government with its 1997 Family Cap rule obligated all social welfare offices to limit benefits to the family members registered at the time of application to reduce the "incentive" to additional births in poor families (Zellman 1999). Other states went a step further by canceling support to underage women if they became pregnant again. In California, single mothers under 18 only receive state support when they live withy their parents or relatives and commit themselves to graduating from high school (Learnfare). In addition, the authorities control whether parents receiving income support regularly send their children to school, accept legal vaccinations and lead a drug-free life. If they violate one of the numerous conditions for "responsible life", government transfer payments could be cut or entirely stopped.

Although empirical investigations hardly showed how often these rules were actually applied in practice, this rigid approach to behavior regulation of the needy is a neglected detail of US income support policy. State governments are now rewarded with billions of dollars (illegitimacy bonus) when they successfully reduce illegitimate births, provide legal initiatives for reauthorization of Welfare Reform and examine more strictly individual conduct alongside the work obligation in the center of future social programs (cf. on the different proposals www.welfareinfo.org/tanf_reauthorization.htm). The very paternalist and authoritarian model of US income support threatens to suddenly change into a stricter system of controls and sanctions. According to data of advocacy groups and welfare institutions, current programs in the US often force a large number of women and children into violent or conflict-ridden partnerships and family situations. The reasons are diverse. Firstly, the number grows of those who have partly or entirely lost their claim to income support and can no longer afford their own apartments. Different analyses assume that between 10 and 30 percent of the decline in case numbers can be referred back to sanctions of the social welfare offices (US General Accounting Office 2000). Secondly, the women brought into work or employment programs are no longer able to independently provide for their children. Both the number and quality of child care institutions is completely inadequate although the official TANF-guidelines, celebrated by different sides in relation to the old legislation, guarantee state support in child care.

Workfare between Low-wage Strategy and Combating Poverty

The close connection of workfare programs with expansion and promotion of working conditions in low-wage branches of employment is very evident in both countries. In the US, the first studies on the situation of welfare leavers showed that the hourly wage of $5.50 to $8 was usually not adequate for an independent lifestyle (US Department of Health and Human Services, 2000). Their permanent labor market integration followed loss of benefits. The percentage of aid recipients who work and have a claim to monetary benefits on account of their low gainful income has risen nationwide from 11 percent in 1996 to 33 percent in 1999 (US Department of Health and Human Services 2000). Although no systematic analyses exist on employment conditions of working aid recipients, the mediation efforts concentrate on areas where substandard wages are the rule... There is more inequality in the labor market and wage demands are lowered. Numerous experts and reform proposals document this.

"New positions are created in the low-wage sector. This assumes a reform of income support reducing wage claims and actual wages" (Scientific Advisory Board for the Economy and Technology 2002).

An exhaustive state subsidy of low wages offered analogous to the negative tax in the US by the mainstream conservative German CDU/CSU party for solving poverty problems despite work (Frankfurter Allgemeine Zeitung, September 10, 2001) is improbably on account of the expected costs in Germany.

However experiences from the US show that the promise of bringing income support recipients with pressure into work and out of poverty with state lifting of wages could not be honored even under the conditions of an extraordinary economic boom and falling numbers of the unemployed. In studies on former income support recipients, 30 to 40 percent of the interviewed women and families declared that at least temporarily they could not pay their rent or electricity. A third even complained of having to limit or cancel meals (Institute for Policy Research, Northwestern University 2002).

Welfare Reform altogether has contributed to deepending existing social inequalities. While a decline of income poverty was joined in some states with combating "income support dependence", the percentage of the population that works and nevertheless falls below the official poverty line has risen considerably since 1996 in 12 states (between 7 and 40 percent) (RESULTS 2001). With the "work-first orientation" of national programs which with few exceptions promote immediate work acceptance (Labor-Force-Attachment) over education and training (Human-Capital-Building), most women at the end still land in the dead end jobs of the modern service economy as the journalist Barbara Ehrenreich impressively described (Ehrenreich 2001). Since sectors like retail trade, gastronomy or the hotel industry which nationwide employ most (former) income support recipients in the US (Richer 2001), frequently do not offer secure jobs, between 18 and 35 percent of all women who lost their benefits between 1996 and 1999 lost their job again within 12 months and depended again on aid from the TANF-programs (Acs/ Loprest 2001).

The central question for the unions, whether lower wages and/or a substitution of employees threatens in the medium- and long-term with the legally forced work acceptance of 800,000 to 1.4 million income support recipients, has long been controversial like the question of the influence of migration on labor market development and union negotiating power (cf. Solow 1998; Bartik 2000a). In the past there were no unequivocal indications that the general wage structure would move downwards because of the legal changes. Obviously certain partial segments of the labor market and groups of employees (above all women without high school- or college diploma) are most strongly affected by the labor supply shock of Welfare Reform than the national developments would suggest (Bartik 2000b). A considerable repression effect may be striking in the coming years among the less trained (Bartik 2000b).

4. Final remarks

The longer mass unemployment continues in Germany and is accompanied by complaints about cost explosions, "social misuse" and "missing work incentives", the more strongly positions advocating an uncoupling of paid work and income or social security and question workfare strategies fall into political insignificance. Our explanations have shown that workfare is hardly suited as an instrument for combating poverty and more just distribution of chances of survival. On one hand, contrary to all civil society rhetoric ("less state, more society"), we experience in the US a revival of authoritarian-paternalist structures and models that have only traditional family values and a dubious work ethic to oppose the growing problem of the working poor.

On the other hand, the earlier achievements of welfare reform are increasingly subject to a critical examination in government-friendly circles amid the first great recession since the beginning of the 90s. Thus an influential media like the Financial Times reports that the real test for Welfare Reform is approaching in view of the increasing unemployment figures (Financial Times, November 25, 2001). Noted economists warn that every increase of unemployment in the US by one percent will cause an immediate increase of five to seven percent in the income support rate (Council of Economic Advisors 1999; Bartik 2000a). Therefore an expansion of unemployment insurance and further regulatory interventions of the central government in labor market conditions are necessary. Will unions and left-liberal supporters of the "modern welfare state" with its increasing workfare orientation, a system of social security, have to laboriously rebuild this system given the disastrous follow-up effects?

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