Social Merging

The heart of my proposals to facilitate social merging lies in expanding the incentives, opportunities, and capacities for self-support for those persons near or beyond the fringes of the labor market. Complementary measures are intended to enhance the capacity of the existing labor market to provide these people with full-time employment.

Incentives

In order to increase the incentives for self-support and decrease the "unintended rewards" that our current system sometimes provides for not working, I propose limiting public assistance to Supplementary Security Income (SSI) and including only persons with certifiable total physical or psychological disabilities and elderly persons not covered by social security. We should be fairly hard-nosed about admitting people to this program, but those who do meet the criteria should also be entitled to more intensive therapeutic and custodial care than is now typically available. Such care might be entrusted to private charities that accepted federal guidelines, perhaps with some public funding assistance.

Rather than terminating much of current public assistance in one motion, we could gradually phase out assistance to various categories of recipients, beginning with those who have the surest prospects for success in social merging programs.

Opportunities

First, to assist unemployed working-aged adults in increasing their opportunities for self-support, we can reinvigorate our system of public employment services so that they serve more adequately as labor exchanges.

Second, to facilitate parents in entering the labor force and contributing to the support of their households, I recommend establishing a social insurance program of universal supplementary chid

allowances. In contrast to the social insurance programs mentioned in the preceding sections, these allowances would be sharply income-variable and would involve substantial vertical redistribution. Since this is the least conventional of my proposals, I will describe it in greater detail.

Let us consider a program that would provide income-variable supplementary benefits for up to three children per household. This program would cover all American households, including the vast majority of the children now served by AFDC, without subsidizing undesirably high birthrates. Households with annual pretax incomes up to that resulting from full-time work at the minimum wage (currently about $6,700) would be eligible for the full benefits; there would be no work disincentive for these low-income families. Benefit levels would be sharply staged so there would be minimal incentives for new births. And benefits would be taxed as income, further reducing the income-variable benefits for middle-and upper-income families.

Full benefits would be set at $175 a month for the first child, $125 a month for the second child, and $75 a month for the third child—for a maximum of $375 a month, or $4,500 a year. Thus a household with wages equal to those derived from full-time employment at the minimum wage and three children would have a total pretax income of $11,200 ($6,700 + $4,500), placing it at approximately the current federal poverty level for households of this size.

Households with income above the level provided by full-time employment at the minimum wage would see their benefits reduced dollar-for-dollar down to a universal minimum benefit of $75 a month for three children ($35 for the first, $25 for the second, and $15 for the third).^[9] This scaling would keep benefits extremely modest for middle- and upper-income families, although it might reduce incentives for low-income families to increase wages modestly. But these graduated levels of benefits would concentrate public social provision on households with the greatest need for child allowance supplements; that is, this program would have high target efficiency.

This program would be financed by a progressive payroll deduction on all wage earners. In addition to involving a substantial degree of vertical redistribution, this program presents an unusual

case of life-cycle redistribution, since child-rearing characteristically comes fairly early in adulthood.

It is possible that the benefit levels I have suggested would allow some rural households to subsist with little or no labor-market participation or would encourage families to migrate to rural regions.^[10] Should these consequences become problematic, benefits could be adjusted to discourage such activities, although moderate levels of migration might well be preferable to current inner-city conditions.

There are other means of striving to assure minimum levels of support to children. Indexing the minimum wage to the consumer price index and enforcing child-support court orders to noncustodial parents are frequently discussed. While neither of these options would contradict the general principles of the investments approach, neither would as efficiently and thoroughly accomplish the ends served by the child allowance system I have described. Indexing the minimum wage is not likely to concentrate resources such that single parents with limited skills can support more than one child. Increasing the rigor of child-support payments, as Wisconsin and other states are doing, will not facilitate household support for children whose noncustodial parent is unidentified, incommunicado, unemployed, or destitute. Thus I see these two options less as alternatives to child allowances than as sensible additional measures serving related, but distinct objectives.

My third concern regarding opportunities is that we cannot reasonably insist that parents, particularly single parents, work full time unless affordable child-care is available to them. Here, we have several alternatives in addition to commercial child-care centers: subsidies to employers who create child-care facilities in their workplaces, public child-care extended through the public school system, and reimbursements to parents for the costs of paying relatives or neighbors to look after children. The crucial point is that, while child-care raises the costs of social merging, many parents—especially single parents—cannot contribute to the support of their households in the absence of some provision for child-care. Whatever specific measures we adopt, we must make child-care available at subsidized rates for low-income families.

Collectively, the proposals in this section are designed to enhance individual opportunities by: (1) improving information about work

opportunities, (2) supplementing the financial returns of work on the fringes of the labor market for households with children, and (3) facilitating employment through the provision of adequate, affordable child-care.

Capacities

My recommendations here comprise measures intended to improve unemployed and underemployed workers' capacities for greater labor market participation. First, we need public work programs for young unskilled workers. Such programs could take many forms, including the model of the Civilian Conservation Corps (CCC). These would not be expensive or extensive training programs designed to teach sophisticated skills, but rather programs intended to instill basic work habits (attendance, punctuality) and to provide participants with an employment history.^[11] In effect, these programs would certify participants as good bets for subsequent employment and training by private employers. Small-scale work programs would be particularly appropriate in remote areas; in that context programs would be minimally disruptive of local economies.

Second, we should offer sophisticated training, retraining, or education programs to adults with satisfactory records of employment (say, encouraging work histories of at least five years) who face sudden labor market problems—such as layoffs in declining industries—and to parents (generally mothers) in households that experience changes in membership that compel them to enter the labor market. Giving individuals in these two categories opportunities to upgrade their labor market capacities is a social investment more than likely to return its costs, as participants' subsequent income tax payments are apt to exceed training expenditures. Among all high-unemployment groups, for example, single-parent homemakers have been the most successful in taking advantage of training opportunities to move on into full-time employment.^[12]

By satisfactory progress in these training programs, participants would also earn temporary income-maintenance support, in effect a scholarship to subsidize their vocational education. The amount of this support would equal that provided for unemployment or family dissolution under social insurance.

Complementary measures

To further expand the demand for unskilled, semiskilled, and entry-level workers, the federal govern-

ment could create more low- and midlevel positions as well as provide subsidies for state and local governments that wish to do the same. These efforts would help to replace the decent-paying jobs lost in manufacturing and thus increase the capacity of the labor market to provide positions capable of supporting households, particularly for the residents of central cities.

Demand could also be enhanced by offering employers in the private sector tax incentives for creating new low- and midrange positions. For example, a sharp tax break could be available to employers who increased their payrolls by a small percentage. This percentage would deliberately be relatively small to minimize displacement and training problems.