Two Views of Poverty. When welfare policy is set by government (whether at the national, state or local level), politicians invariably search for a single, all-encompassing explanation of what the welfare program is supposed to do. As a result, they usually apply a single set of rules to all beneficiaries, regardless of individual circumstances.

It is within this context that two opposing views of poverty clash. One view defines poverty as an income problem caused by conditions over which low-income individuals have no control. The other view defines poverty as largely a behavioral problem that individuals can, in principle, control. The former view has been forcefully espoused by such contemporary writers as Michael Harrington, Sar A. Levitan, Clifford M. Johnson and John E. Schwartz. ⁷⁸ The latter has been expressed with equal vigor by Warren Brookes, George Gilder and Charles Murray. ⁷⁹

The argument that poverty is caused by conditions over which low-income people have no control is not new. Nineteenth-century critics of the Elizabethan Poor Laws, such as Charles Dickens, Arnold Bennett and George Landsbury, repeatedly emphasized this view and attacked the Poor Law system as inhumane. For example, of a visit to a workhouse for the poor, Landsbury once wrote:

Going down the narrow road, ringing the bell, waiting while an official with a not-too-pleasant face looked through a grating to see who was there, and hearing his unpleasant voice ... made it easy for me to understand why the poor dreaded and hated these places ... It was not necessary to write the words 'Abandon hope all ye who enter here' ... everything possible was done to inflict mental and moral degradation ... of goodwill, kindliness, there was none. ⁸⁰

On the other hand, there were other prominent people who devoted their lives to improving the plight of the poor, yet concluded that poverty was mainly the result of individual behavior. Charles S. Loch, secretary of the Charity Organization Society, one of the most important private charities in England at the turn of the century, wrote that "Want of employment in nine cases out of ten in which the plea is used is not the cause of distress. It is, as often as not, drink." ⁸¹ In Loch's view, it was important that the conditions under which relief was given never be perceived as more desirable than the least appealing job opportunity in the labor market.

Two Views of Welfare. These opposing views -- poverty as a condition over which people have no control and poverty as an individual behavioral choice -- have important implications for public policy.

In modern times, those who approach the problem bureaucratically tend to define it in terms of people's financial condition. Accordingly, the magnitude of the problem is "measured" by federal statisticians who attempt to count how many families have incomes that fall below the official poverty level. The bureaucratic solution is to give poor families enough money to raise their income levels above the poverty line.

It follows that the purpose of welfare is quite simple: to give away money. And, indeed, this is an apt way of describing AFDC, food stamps and other entitlement programs. The bureaucrats who run these programs are literally in the business of giving away money. By and large, the program administrators give little thought to changing their clients' behavior for the better. And defenders of the programs either minimize or ignore the negative behavioral consequences to which the programs lead.

By contrast, those who take a behavioral approach see the U.S. welfare system as one that increasingly rewards bad behavior. Why does America have more and more poverty? To Charles Murray, the answer is straightforward: we are paying people to be poor. ⁸²

A Third View of Welfare and Poverty. It is our position that neither view completely and accurately describes the welfare-poverty crisis. It is true that some people are poor due to conditions over which they have little or no control. It is also true that others are poor by choice. The U.S. welfare system gives relief to people in need. It also encourages perverse behavior.

The secret of reform is to devise a way of helping those in need without encouraging neediness. We shall argue below that the private sector already has ingenious ways of achieving this goal. But before turning to the private sector, we shall first consider what's wrong with government's practice of treating all aid recipients as if they were identical.

Long-Term and Short-Term Poverty. In a fascinating study of the poverty population, Mary Jo Bane and David Ellwood of Harvard University found striking differences with respect to the reasons why people become poor, how long they remain poor and why and how they cease being poor. ⁸³ It is precisely because of these differences that statistical generalizations about the poverty population seem contradictory.

By way of analogy, Bane and Ellwood compare the poverty population to patients in a hospital. Looking at admissions, one will see that the vast majority of patients stay in a hospital for only a short time. Based on that observation, one might conclude that there is no real problem of long-term hospitalization. Yet that conclusion is wrong. Looking at the patients occupying hospital beds on any given day, one will see that the chronically ill, whose stays are long, occupy a large portion of the beds. In other words, the chronically ill account for a small fraction of hospital admissions, but they occupy a large fraction of hospital beds.

A similar observation may be made about the "admission rate" of nonelderly poor people to the welfare rolls: ⁸⁴

• Among people who become poor at any point in time, 45 percent will be out of poverty within one year.
• About 70 percent will be out of poverty within three years.
• Only 12 percent will remain in poverty for 10 or more years.

Statistics such as these are frequently quoted by apologists for the welfare state. Yet they are misleading. The other side of the story is that:

• Among people who currently are receiving AFDC, more than half will remain in poverty for 10 or more years. ⁸⁵
• The average black child in poverty today will remain in poverty for almost two decades. ⁸⁶

Bane and Ellwood also discovered that even the short-term poor differ radically in the reasons for their poverty and in the ways they get out of poverty. "Welfare dynamics are multifaceted," the authors say, "and understanding them helps explain both the heterogeneity of the welfare population and the complexity of policy solutions." ⁸⁷

These differences are important. Continuing with the hospital analogy, no one in his right mind would recommend that the chronically ill be given the same medical treatment as the short-stay patient or that all short-stay patients be diagnosed and treated in the same way, regardless of medical condition. Yet that is precisely how our government runs the welfare state.

A Case Study: Boston And Dallas. ⁸⁸ Further evidence of the difficulties in generalizing about the effects of welfare -- even the effects of a fairly well-structured program like AFDC -- comes from a comparison of welfare mothers in Dallas and Boston who lost their AFDC benefits as a result of the 1981 program changes described above. In terms of welfare benefits, Massachusetts is one of the most liberal states in the country. Texas, by contrast, ranks near the bottom of the 50 states in AFDC payments and has a record that many would regard as stingy. The standard monthly AFDC payment to a family of three in Boston in 1981 was more than three times greater than the payment in Dallas ($379 per month versus $116). In addition, the Boston AFDC mother had many more opportunities to exploit the entire welfare system.

As Table II shows, the characteristics of welfare mothers who lost their AFDC benefits in Dallas and Boston are quite different.

• With more children and younger children than her Boston counterpart, the welfare mother in Dallas clearly was in greater need.
• After AFDC payments were discontinued, the Boston mother was three times more likely than the Dallas mother to be above the poverty level, three times more likely to have private health insurance and 38 percent less likely to turn to private charity for food.
• There also were clear differences in abilities to compete in the labor market: 29 percent of the Boston mothers had some college education, compared to only 11 percent in Dallas.

Among AFDC mothers who lost their benefits, the average loss in Boston was more than twice the loss in Dallas. In addition, about 85 percent of the Boston women also lost food stamps, compared with only 42 percent in Dallas. Yet despite the greater loss of benefits in Boston, the welfare mothers there suffered much less economic dislocation than those in Dallas.

• Total income for Boston mothers declined only 12 percent, compared to a 31 percent decline for Dallas mothers.
• Boston mothers increased the hours they worked, their per-hour earnings and, on average, their monthly earnings by 25 percent.
• Thirty-five percent of Boston mothers actually had more total income after they lost their AFDC benefits than they had had before.
• In Dallas, with a lower unemployment rate than Boston, there was virtually no increase in average hours worked and only a 6 percent increase in monthly earnings.

It appears that Boston's liberal welfare benefits, doled out to people who were not all that needy, were discouraging productive work and that removing the benefits spurred the recipients to increase their work effort . By contrast, in Dallas, where AFDC mothers had a greater need and less ability to compete in the marketplace, welfare benefits had only a moderately discouraging effect.

A very different story emerges when we look at the effects of welfare on the family.

• In Boston, 5 percent of welfare mothers increased their households by at least one adult.
• By contrast, 22 percent of Dallas mothers increased their households by at least one adult.

It appears that welfare's effect on the family is greatest where it makes the greatest financial difference.

The comparison of these two cities underscores the difficulty in generalizing about the nation's welfare system. Even generalizations about a single city are hazardous. In Dallas, for example, 24 percent of welfare mothers who lost AFDC benefits had real incomes just as high as or higher than they had had when they were receiving benefits and suffered no enduring economic hardship.

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