Choice and Change in the American Welfare System

Public welfare policy during the 1960's has come to assign priority to a cash-transfer policy. A public debate has ensued about the form that new or reformed cash transfers might take. While debating, we have introduced changes in our cash-transfer system, especially in the means-tested sector, without having explicitly chosen to take the direction which these changes imply. Thus, the changes that we have already adopted warrant serious re-examination. This article discusses two of the issues in doubt. In some states we have already assured benefit levels in public assistance at or near the poverty line and have added an incentive scheme to this guarantee. We justify this policy by our faith that "add-on" will lead to "take-off." This change in policy, however, is more likely to lead to the curious outcome that families are likely to be better off economically when they are both at work and on welfare. To avoid this dilemma, we need a wage-level policy which seeks to raise the wages in the marginal low-wage economy and to make it an alternative, rather than a supplement, to benefits. The impact which improvements in low wages would have on the rest of the economy is a critical issue, characterized more by passion than by understanding. We have been reluctant to debate a wage-level policy, and this remains the basic issue in the public review of cash transfers.—Ed.