Wilson Welfare Plan--Will It Reform the System? : Initiative: He says incentives will inject new work ethic. Critics call them window dressing to mask benefit cuts.

Toni Hunter believes so strongly in the work ethic that she toils at a variety of jobs even though her efforts do very little to improve the family income.

Hunter, who receives welfare, took a $5-an-hour part-time job for a while, working at the post exchange of a military base. But after the government deducted most of her earnings from her welfare check, she said she ended up with only about $82 more a month for her efforts.

Twenty-seven and the mother of a 3-year-old daughter, Hunter said she prefers working to “sitting on my butt collecting aid. . . . But every time I do get a decent job it doesn’t benefit me at all because they turn around and take away most of my money.”

Because variations of Hunter’s experience are repeated throughout the welfare system, Gov. Pete Wilson is putting a plan before voters in November that he says will inject a new work incentive for welfare recipients--along with other wholesale changes in the way welfare is administered.

To its critics, the worst thing about Proposition 165 is a substantial reduction in the basic benefits in the Aid to Families With Dependent Children program, the main source of aid for women and children. Other features, such as work incentives, they say, are only window dressing for budget cuts.

Though the governor’s plan has raised a chorus from critics, including those who suggest that he may be creating incentives for the working poor to join the welfare ranks, few would argue that the system is not badly in need of fixing.

“The current system doesn’t encourage work. It actually penalizes work,” said Thomas E. MaCurdy, an economist and senior fellow at the Hoover Institution. “People just have to work merely because they want to, because they aren’t going to get any more resources because of doing it.”

All agree that the Byzantine rules governing how much a recipient can earn and still receive benefits coupled with a decade-long decline in real wage levels for low-skilled workers have made work increasingly less rewarding for poor single women with children.

Many poor mothers find that welfare can provide more income for their families than if they were supporting them on low-wage jobs. In California, public assistance pays a mother and two children maximum food stamp and welfare benefits of $10,200 a year, while a 40-hour-a-week minimum wage job pays $8,840 a year.

The prospect of going off welfare also presents recipients with the loss of another significant benefit: free health care, which is lost one year after a recipient leaves the rolls. In the private sector, most low-wage jobs come without health benefits.

And for those who want to mix work and welfare there is little reward. At best, working nets only a few extra dollars a week. At worst, working provides less income than welfare alone. A report by the state’s legislative analyst found that a job grossing $800 a month would make a recipient “better off” by $100 a month. As a result, only 7% of the parents receiving welfare report any job earnings.

“It’s a lousy program. I’d scrap the whole damn thing,” said Leonard Schneiderman, former dean of the UCLA School of Social Work. “It’s not the kind of a program that anybody would now design that makes sense in the context of what poor people now need.”

Scrapping or reforming the system has become a popular refrain across the nation as states try to find ways to ease the costly burden of welfare and cope with some of its unintended side effects. Of particular concern in most states is the increase in welfare dependency--the long-term reliance on public assistance by poor parents and children.

In academic and political circles, there is widespread agreement that reform of welfare must be grounded in a simple philosophy: receiving public assistance must carry with it some obligation to work.

One solution that has attracted close scrutiny throughout the country is Gov. Wilson’s Proposition 165. Although it incorporates many ideas that have been introduced in other states, the package as a whole has never been tried.

Like most engaged in the welfare debate, Wilson believes that the system discourages work by severely limiting outside income. Rules require a dollar-for-dollar trade-off: After small allowances for expenses, every dollar earned cuts a dollar from the monthly grant.

Wilson wants to replace these disincentives with rules that encourage and reward recipients for working by allowing them to keep much more of their earnings. The rules would go into effect if the initiative passes.

“Welfare recipients shouldn’t be punished for working,” he says repeatedly in speeches.

The big cuts in benefits Wilson proposes are a major part of the incentive he envisions for people to leave the dole and go to work. His plan calls for a two-step reduction, beginning with an initial 10% across-the-board cut in monthly assistance. Then, to give welfare mothers time for job hunting, it provides a six-month hiatus before a second 15% cut applying to all families that include “able-bodied adults” kicks in. The Wilson Administration estimates that more than two-thirds of those receiving welfare will be subject to the additional 15% cut.

The first cut would reduce the basic monthly cash grant for a mother with two children from $663 to $597; the second to $507.

Because most families on welfare also get food stamps and those allotments are tied in part to family income, the drop in benefits would be offset somewhat by a 30% increase in food stamp allotments.

Wilson argues that the cuts would not be oppressive to families because the new work incentives would make it easier for them to get a job and earn back the lost income. The new rules would allow working families to keep the first $30 of earnings a month and one-third of any additional earnings without a reduction in welfare benefits.

“We really feel very strongly that this proposal allows families to earn and retain more income in order to provide for their families,” said Catharine Comacho, an assistant secretary in Wilson’s Health and Welfare Agency. “If families do respond to our work incentives they will be better off.”

Welfare officials calculate that a mother of two would have to work only six to 10 hours a week at a $5-an-hour job to bring the family income back to previous levels.

Hunter, the welfare mother who works part time, agreed that the incentives would make her better off when she is working. But she noted that the severe cuts would set her back even more when she is most in need--when the part-time work runs out and she is hunting for another job.

Wilson announced his plan in December and since then it has been widely studied and examined by scholars and welfare experts. Of prime concern to the experts: Will it markedly increase the number of recipients who get jobs?

They conclude that the work incentives will help a number of recipients but, they say, many more will be kept out of the job market by a shortage of geographically close low-skill jobs, health problems and especially lack of child care--a major expense for working mothers.

“One of the reasons why so many low-skilled women have difficulty working is that they have difficulty finding child care, given what they can pay for it,” said Northwestern University economist Rebecca Blank.

A survey of the cost of licensed child care completed in March by the California Child Care Resource and Referral Network found prohibitively high costs in many urban areas. In Los Angeles, the survey placed the average monthly cost of part-time child care for a preschooler at $237.

The state and federal governments spend about $500 million a year on subsidized child-care programs for poor people in California, but a 1991 study by the Child Development Division of the California Education Department estimated that those programs were meeting only 10% of the need.

Mary Hruby, program coordinator for Crystal Stairs, a nonprofit agency in Los Angeles that provides services for poor families with children, said the numbers do not tell the full story: Fewer providers are willing to offer child care for parents on a part-time basis, and there is very little care available for infants.

Comacho of the Health and Welfare Agency acknowledges that child care can be “problematic” for poor working mothers--especially the substantial number with infants--but suggests that parents can solve the problem by informal arrangements. “Co-oping is very popular,” she said, referring to arrangements where families agree to trade baby-sitting duties. Or, she said, mothers can find family members who will provide low-cost or free child care. Those with infants, she said, can earn back the cuts in benefits by providing child care for another family in their home.

Hruby said although some poor mothers do resort to unlicensed informal baby-sitting, her research has shown those arrangements to be extremely “vulnerable and unstable.”

Citing these and other problems with the Wilson initiative, few experts interviewed by The Times believe that the proposal would significantly reduce the welfare rolls or propel recipients out of poverty. Some believe that the initiative could induce some working women to cut back from full-time to part-time employment so that they can go on welfare.

“(The initiative) will have a modest effect perhaps, but it will not have a substantial effect on work behavior,” said Harvard University public policy professor David Ellwood, a harsh critic of the welfare system whose work on dependency has been cited in Wilson speeches. “What we know is that it will hurt a lot of people but ultimately will not really provide people with an alternative to welfare.”

The Administration’s estimates of budget savings from the plan bear out Ellwood’s conclusion. They show that 4% of California’s 814,068 welfare families would leave assistance after Wilson’s proposals go into effect and another 3% of the families would get part-time work. Comacho, however, believes those estimates may be too conservative.

Robert Rector of the Heritage Foundation says Wilson’s idea to “pay less to people in welfare and try to reward work and marriage is good,” but Rector says the governor makes the mistake of trying to tinker with a system that is hopelessly flawed.

“What it does is that it’s moving some people to work a little more but it’s pulling more people into the welfare system and it’s causing another group of people who are on the margin of welfare not to fully work their way off,” he said.

Rector said a mandatory work system is the only way to ensure that large numbers of recipients will get jobs. He favors a system that requires all recipients with children 5 and older to work in community service jobs.

Others cite further difficulties. Even if mothers get past the child-care obstacle, UCLA’s Schneiderman questions how many are employable. “There are no jobs,” said Schneiderman. “They do not have skills, and there are no jobs.”

In a state such as California, where the unemployment rate was 8.9% in July, low-skill welfare mothers are forced to compete with higher-skill workers for jobs, he said.

Not all welfare experts agree that low-wage jobs are not readily available. MaCurdy says the job shortage plaguing the California economy is primarily in the high-wage, high-skills sector. He argues that there are plenty of low-wage service jobs that welfare mothers could do. He said jobs are particularly plentiful at fast-food outlets.

MaCurdy said the changes Wilson is proposing would move the welfare system from one that “penalizes the working poor” to one that is much fairer to the working poor. But he added that some full-time working mothers who are not receiving assistance “will find it in their interest to go on welfare (and work part-time). . . . I’m pretty confident the caseload’s going to go up.”

Michael Wald, a Stanford University law professor and former director of the university’s Center for the Study of Families, Children and Youth, said the debate over work incentives fails to recognize the severe hardship that some families in unique circumstances would face as a result of the initiative.

A legislative committee report on the Wilson plan noted that the cuts would even apply to “a woman with breast cancer who may be far too ill to work for a period of time” but is not considered permanently disabled.

Comacho acknowledges that some recipients may suffer temporary hardship, but she says the number would be small.

“In any system you propose you can come up with scenarios that are not an ideal situation and there will be some hardship,” she said. “When you start looking at exceptions to your proposal, then it becomes a hard thing to draw that line and decide where you stop making those exceptions.”

Wilson Work Incentives

How Gov. Pete Wilson’s initiative would seek to move parents off welfare and into the job market:

Reductions: The plan calls for a two-step reduction in benefits, beginning with a 10% across-the-board cut in monthly assistance. To give welfare mothers time for job hunting, it provides a six-month hiatus before a second 15% cut kicks in for all families that include “able-bodied adults.”

Incentives: New work incentives rules would allow working families to keep a larger portion of their part-time earnings. Welfare officials calculate that a mother of two would have to work six to 10 hours a week at a $5-an-hour job to bring the family income back to previous levels.

Other provisions of Wilson’s initiative include:

Limits: Denial of benefits to children conceived after their mothers go on welfare and requirement that teen-age mothers on welfare stay at home with their parents unless they can prove in court that they have been subject to abuse.

New state residents: Those who go on welfare would be restricted to the benefit levels of their previous state--if lower than California’s--for the first 12 months of residency.

Teen-agers: Those on welfare would be rewarded for going to school and penalized if they drop out.

Pregnant women: Those pregnant with their first child would not become eligible for benefits until after the baby is born.

New powers: The initiative also grants the governor new powers in the state budget-making process. It would allow him to declare a state of emergency whenever the budget is late or he deems it to be out of balance by 3% or more. During the emergency period he would have the authority to cut state workers’ pay by 5% and reduce the budgets of legislatively enacted programs not protected by the state Constitution.