Welfare Can Be Reformed Without Mean-Spiritedness : Rewards: It’s a matter of marketing--encourage praiseworthy behavior by linking it to extra benefits.

What does welfare policy have in common with the sales practices of gas stations? The answer is: It’s not what you do, but also how you do it, that counts.

Some years ago, owners of gasoline stations decided to impose a surcharge on customers who paid with credit cards. The logic was simple and irrefutable. Credit-card companies charged station operators a few percent of sales--a cost cash payers did not impose.

Credit-card customers quickly got the message. They were being taxed for using credit cards, and they were outraged. Station owners immediately recognized that they had made a public-relations gaffe and rescinded the service charge for credit cards. Not losing sight of their original goal, however, many then raised gas prices and gave a discount to customers who paid cash. Thus, they retained a policy identical to the one they had just been forced to abandon, but that differed only in the manner of presentation. Few customers complained. On the contrary, cash payers felt they were being rewarded.

Whether this policy actually reduced the number of people who used credit cards to buy gasoline is unknown. Even if it did not, the policy is fundamentally fair because it charges those who impose costs for the consequences of their choices.

This scenario is similar to programs in Wisconsin and Ohio and proposals in New Jersey, California and Maryland to cut welfare benefits of parents who do not make sure that their children attend school or get basic medical care, or who continue to have more children while on welfare.

To be sure, this is a far more serious matter than how drivers pay for gasoline. But the furor these policies are arousing raises parallel considerations. Far fewer people than are now complaining about the injustice of these proposals would object if a reward--paid in the form of higher welfare benefits--were given to parents on welfare who scrupulously supervise the schooling and health care of their children, or if added benefits were paid after a time to parents, especially very young parents, who abstained from having additional children.

The currently proposed policies smack of mean-spiritedness for two reasons. The most important is that welfare payments already are now abysmally low, having fallen 40% in real terms over the last 20 years. In many states, keeping a family in food, clothing and shelter on welfare payments is almost impossible. Fifteen states pay a welfare mother with two children less than $3,600 per year. To further cut payments that are already paltry seems overly harsh, even in the name of meritorious ends and even during a period of national financial distress.

The less important reason is that penalties provoke resentment. Tangible rewards convey approval for good behavior, even if they do not change it. They engender prideand, when provided to people who engage in meritorious behavior, seem big-hearted. The substance of the policy, as in the case of the price differential at gas stations, can be identical to penalties, but the perception is everything.

In short, those who are about to reform welfare payments should keep three simple principles in mind:

--Most important, it is entirely appropriate for society to state loudly and clearly through the design of public policies that certain behaviors, which are thought to advance community values and objectives, are honored and respected and will be rewarded. Providing larger benefits to recipients who engage in socially praiseworthy behavior is no more objectionable than awarding prizes for good citizenship.

--Slashing payments that are already degradingly stingy cannot be ennobled or even justified by hortatory requirements.

--Policy-makers should apply the lesson that marketing experts, and even good parents, understand: Support and encouragement usually get better results than condemnation and punishment.

A simpler way to pursue these conflicting goals would be to freeze general welfare payments, without future adjustments for inflation. The money that would otherwise have been used to boost payments as prices rise should be used instead to provide extra benefits only for those who meet such community standards as keeping kids in school, out of trouble and under a doctor’s care. Such standards are not cruel or intrusive; they merely reflect values that every parent should embrace and the community has an obligation to promote.