Texas, TANF`s 2004 Lone St r State

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Features of Full Employment
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The Institute’s goal is full employment - universal access to jobs with
career potential for all who can work, especially those who are receiving public assistance as a substitute for the opportunities and rewards
of paid work.
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a Full Employment Program. Consulting services include: program
design, training workshops and establishment of performance criteria.
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F O R F U L L E M P LOY M E N T
2636 Biehn Street, Klamath Falls, OR 97601
800-562-7752
w w w. f u l l e m p l oy m e n t . o r g
S T E P S
T O
E M P L O Y M E N T
For Participants
• Immediate placement in unsubsidized jobs, or temporarily
subsidized, training-oriented jobs for those unable to get unsubsidized employment. Wage subsidies are paid from the
pool of public assistance benefits.
• A ladder of job opportunities, with rising spendable income
at each step.
• Guaranteed support services throughout the transition to
self-sufficiency.
For Employers
• A larger workforce from which to recruit workers.
• The chance to try out new workers in new jobs at little or no
wage cost.
• The opportunity to contribute to reducing the public assistance burden, and provide the unemployed with the many
benefits that only employment provides.
For the State
• A stronger state economy.
• Happier, more productive citizens.
• Reduced costs of welfare and other related social costs of
unemployment and dependency.
P R O S P E R I T Y
& S U C C E S S
S T E P S
T O
A
B
L
E
O
F
1-2 Texas, TANF’s
PAID
THE AMERICAN INSTITUTE
FOR FULL EMPLOYMENT
P.O. Box 1329
Klamath Falls, OR 97601
P R O S P E R I T Y
& S U C C E S S
3 Reduce
Unemployment
Through Auto
Ownership
Lessons for the
United States
N
6 Social Security
T
Questions &
Answers
S
alone. It truly has lived up to its motto as the “Lone (shining) Star” in
sufficiency and in assisting recipients find work and jobs.
t
Texas’ welfare reform performance has been quite mixed in the last 10 years. In
January 1993, AFDC caseload stood at 278,146. At that time, one in every 22
Texans received a welfare check.
Texas began instituting several welfare reform initiatives in the mid-90s and these,
E
T
When it comes to TANF performance in the last year, Texas stands
TANF. The state has made incredible strides recently in increasing self-
4-5 European
Unemployment:
N
2004
Texas, TANF’s 2004
Lone St★r State
2004 Lone Star
State
O
KLAMATH FALLS, OR
PERMIT NO.304
E M P L O Y M E N T
Summer
T
C
NONPROFIT
U.S. POSTAGE
for Full Employment
combined with the implementation of TANF in 1997, resulted in significant caseload
7 Outdated Ideas
Have Made Social
Security Unfair to
Working Couples
reduction. By July 1999, TANF caseload had been reduced to 106,142, a decrease of
over 62%. At that point, Texas was one of the top TANF performers in the country.
However, as was typical of a number of states at the end
of the 90s, caseload began trending upward. By the end of
2001, TANF caseload had increased to over 138,000—a
What is Full
Employment?
30% increase in a little over two years! One of the key problems with Texas’ reform efforts was the inability
Full Employment is a welfare, unemployment, and food stamp benefit
replacement concept that moves
public assistance recipients into the
active workforce by converting
public assistance benefits to wage
subsidies for transitional, training
oriented jobs, predominantly in the
private sector.
2 6 3 6
B i e h n
of the state to move TANF recipients to work.
Bureaucratic tension between the Department of
Human Services (DHS) and the Texas Workforce
Commission (TWC) contributed to the problem.
But this was all to change. Last year, Larry
Temple took over the reigns as Executive Director of
S t r e e t
continued on page 2
K l a m a t h
F a l l s ,
O R
9 7 6 0 1
8 0 0 - 5 6 2 - 7 7 5 2
Texas… continued...
TWC. Larry, who as Deputy Executive Director of TWC, had begun to
implement sweeping reforms of the employment programs of the commission,
worked hard to strengthen performance accountability of local workforce
boards and instituted innovative policies and procedures to attach unemployed Texans to work quickly. Working closely with Jim Hine, the new
Outdated Ideas Have Made Social Security
Unfair to Today’s Working Couples
commissioner of DHS, Larry began to focus on TANF, implementing policies
to insure full engagement and mandatory work after job search. In addition,
UNEMPLOYMENT
INSURANCE
Texas has also made great first
strides to improve its unemployment insurance program. In May,
the US Department of Labor held
a national conference on claimant
reemployment and highlighted the
work of Texas. Initiatives include:
the state implemented full-check sanctions of non-participation in required
same total monthly income of $3,000. However in the Smith house-
work activities.
Require work and true work activities,
and clients become motivated
to get jobs, become self-sufficient,
and leave welfare behind.
And the results? Incredible! Mandatory for work TANF caseload dropped
★ all staff working with unemployment claimants make at
least one customer call each
week (nearly 1,000 calls)
from 55,000 to 40,000 between July 2003 and February 2004, a drop of over
★ minimum work search requires
three activities per week with
the option for local workforce
boards to increase the requirement
vated to get jobs, become self-sufficient, and leave welfare behind.
26% in less than eight months. Just as impressive, the number of TANF
clients in work components increased by 8% simultaneously. Does this sound
familiar? Require work and true work activities, and clients become moti-
hold only Mr. Smith works while in the Green household both Mr. and
Mrs. Green work with Mr. Green earning $2,000 per month and Mrs.
Green $1,000. Since both couples have the same household income,
and both pay the same amount in payroll taxes, wouldn’t you think that
THE SMITHS
at retirement they would receive the same Social Security benefits? No.
At retirement, Mr. Smith would be eligible for a monthly benefit of
around $1,300 and Mrs. Smith a spousal benefit of around $650, for a
In addition, while sanction rates prior to the implementation of full-check
sanction averaged 23,050 in fiscal year 2003, once TANF clients realized that
total of $1,950. By contrast, Mr. Green would be eligible for a monthly
Texas was serious about work, the sanction rate fell to 4,400 by February
2004. Contrary to the often-voiced but wrong-headed concerns of poverty
★ regional performance goals
include market penetration of
services to employers (job
orders as a percent of total
hires), repeat customers and job
opening fill rate
Consider two couples, the Smiths and the Greens. Both have the
benefit of around $1,000 based on his earnings and Mrs. Green a bene-
THE GREENS
advocates and some gullible legislators that serious sanctions for non-performance will “leave families on the streets,” data shows that full-check sanctions
actually reduce the numbers of those sanctioned, and usually does so dramati-
fit of $650 based on her earnings, for a total of only $1,650 per month.
Social Security’s outdated benefit structure means
cally. A serious full-check sanction policy motivates clients to find work or
participate in work activities that will lead to timely and beneficial employ-
that two families can pay the exact same amount in
ment.
Look for Texas to be a model state
for unemployment claims in years
to come.
While some states are beginning to re-invigorate their TANF programs,
Texas’ is leading the way with some amazing results. The secret? To paraphrase Lyle Lovett’s ode to Texas: “You may not be from Texas, but Texas
wants you (to work) anyway.”
2
taxes yet receive very different benefits.
That’s not fair.
★
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
7
Q&A
Reduce Unemployment Through Auto Ownership
Questions & Answers
What is Social Security?
Social Security provides retirement,
disability, and survivors insurance to
American workers, who pay for this out of
a specific tax on their wages - the FICA
tax. Employers also support social security
by matching employee contributions. The
tax is levied on the first $87,900 of a
workers earnings for a combined
worker/employer contribution of up to
$10,900 per year. It is the largest government program in the world. Nearly a
quarter of every dollar collected by the tax
man goes to pay Social Security.
How does Social Security work?
It is a pay-as-you-go system. This
means that taxes from today’s workers pay
benefits for today’s retirees.
Your payroll taxes aren’t invested in an
account for the future. Each generation
must support the generation that came
before it.
So what is the problem?
Today there are fewer workers supporting more retirees. When Social Security
was created, having more workers than
retirees wasn’t a problem. For example, in
1950 we had 16 workers for every retired
person. But, our senior citizen population
has grown while the number of our workers has gotten smaller. So today there are
around three workers for each person
receiving Social Security, and when people
born in the 1960s retire, there will be just
two workers to support their retirement.
So there are fewer workers to pay
for current retirees. What does
this mean for the system?
Soon the amount of benefits promised
to retirees is going to be more than workers’ payroll taxes can support. Today Social
Security is collecting more money than it
needs to pay benefits, but by 2018 it will
begin running a deficit—collecting less in
taxes than it pays out in benefits.
6
Won’t the trust fund help pay
benefits and put off the need for
tax increases or benefit cuts?
Not really. The trust fund consists of
nothing but IOUs that the government
has written to itself. And when Uncle Sam
goes to repay those IOUs, you know who
pays the bill: we do. In order to repay
those IOUs, the government will have to
either raise taxes or cut programs. What’s
more, even if the trust fund were real, it
would only last until 2042.
Is there more to the problem?
Yes, Social Security is unfair to certain
workers. It’s unfair to single workers and
families where both spouses work; they
receive little from Social Security’s spousal
benefits. It’s also unfair to those with short
life expectancies who don’t live long
enough to collect the retirement benefits
they’ve paid for. It’s unfair to younger
workers, who will pay an eighth of their
wages all their lives into a program that
won’t be able to pay them back. Plus all
workers are denied a true legal right to
their benefits. The United States Supreme
Court found that workers have no legal
right to a benefit from Social Security.
That’s not fair to anyone who has paid
into the system for years.
So what can we do to fix Social
Security for the future?
1. We could raise taxes. But we’ve done
that 30 times before and Social Security is
still going broke. Social Security is already
the biggest tax that most workers pay, but
to keep the system afloat payroll taxes will
have to rise even higher-to 20 percent of
each worker’s wages. And that’s before
income taxes, or Medicare taxes, or state
and local taxes. Is this what we want for
our kids and grandkids?
2. We could cut benefits. We’ve tried
that, too. But Social Security already leaves
millions of seniors in poverty. Do we want
to make that even worse?
3. What about personal retirement
accounts? Workers could invest a portion
of payroll taxes in an account, similar to
an IRA or 401(k). Their employer could
continue to pay the matching portion in
order to continue funding the transition
between the old system and the new
system.
How would Personal Retirement
Accounts work?
As a worker, you could choose to deposit
your Social Security taxes in a personal
retirement account. These accounts would
hold simple, broadly diversified investments: stocks and bonds. Personal
accounts would build value over time. At
retirement, the annual income from your
investment would pay you a monthly
benefit, instead of being reinvested each
year. The investments themselves would be
owned by each worker and could provide
an additional source of funds and be given
to the workers’ chosen beneficiary upon
death.
But how would Personal
Retirement Accounts help Social
Security?
It’s simple: every dollar of retirement
benefits paid from a personal account is a
dollar the traditional system doesn’t have
to pay. Accounts cost more in the short
term since we have to build up account
balances while still paying benefits to
current retirees, but when workers with
accounts begin to retire, the pressure on
Social Security is reduced.
How would reforms affect my
grandparents?
The first rule of Social Security reform:
we cannot take away grandma or grandpa’s
check. We must guarantee full benefits to
those who are currently retired and to
those who are near retirement.
v i s i t u s o n l i n e a t : w w w. c h o o s e y o u r f u t u r e . c o m
By John A. Charles
i
In December 2003, Oregon had an
unemployment rate of 7 percent,
third-highest in the country. What can
be done to improve this dismal ranking? One new idea is to get transitdependent job-seekers into a set of
private wheels.
Automobiles have become critical for
commuters because most jobs are not in
downtown centers. As economists at
Metro noted recently, “The trend in
employment growth shows that more and
more jobs are located in adjacent or neighboring counties as compared to the
region’s central county. Between 1970 and
1997, Multnomah County’s share of
regional jobs fell from 67% to 47%.”
Job dispersal trends are not a problem
for many households that can and do
choose to move away from central cities.
The vast majority of suburbanites own
cars. For the poor, however, job dispersal
poses a major employment barrier.
Nationally, three-fourths of welfare recipients live in central cities or rural areas,
while two-thirds of new jobs are located in
the suburbs. Those jobs may not be far
away in terms of geography (frequently 515 miles), but they are so inaccessible by
public transit that they may as well be on
the moon.
“Car ownership improved
the likelihood of being
employed by 80 percent.”
This problem has gained the interest of
scholars and a number of studies now
show a stunning relationship between car
ownership and employment. Kerri
Sullivan of Portland State University
recently examined the effects of car ownership on employment and wages for adults
without a high school diploma in
Portland. Ms. Sullivan found that, “Car
ownership improved the likelihood of
being employed by 80 percent. The effect
on average weekly wages was approximately $275, and the effect of weeks
worked was approximately 8.5 weeks.”
Her work showed that auto ownership
was much more important than education.
In fact, the study found that a high school
diploma/GED played no significant role
in explaining differences in employment
rates.
Steve Raphael of University of
California-Berkeley looked at how car
ownership might lower the unemployment
rate gap between whites and minorities.
He concluded that, “Raising minority carownership rates to the white car-ownership
rate would eliminate 45 percent of the
black-white employment rate differential
and 17 percent of the comparable Latinowhite differential.”
One would think that in light of these
and other similar studies, Oregon policymakers would begin developing strategies
to promote auto ownership. Yet public
officials have spent the better part of the
past decade waging a cultural war on cars.
Portland officials in particular have
attacked motorists with a vengeance. The
city’s anti-mobility policies have included
parking surcharges to pay for the Portland
streetcar, parking restrictions at new highdensity projects, prohibitions on parking
lots near light rail stations and downsizing
of Portland roads in order to create bike
lanes.
At the same time, the region has
squandered billions of dollars on fixed rail
transit, which is irrelevant to the urban
poor seeking work in the suburbs. Rail is
primarily used by affluent commuters who
already own a car. This creates something
of a reverse Robin Hood effect, in which
poor people are taxed to supply train rides
for the rich.
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
A better solution has been initiated by
the Metropolitan Family Services (MFS)
through a new program called Ways to
Work. This program provides loans for
low-income parents at risk of losing their
jobs due to unexpected expenses related to
transportation. Most of the applicants will
be single, working mothers with dependent children. MFS is partnering with
Albina Community Bank, which will
provide in-kind services for loan processing. Initial grant funds have come from
the US Department of Transportation,
Meyer Memorial Trust ($120,000 three
year grant) and The Oregon Community
Foundation ($30,000).
These are impressive numbers for a
small non-profit but they are dwarfed by
public expenditures for light rail. TriMet
spent about $325 million to build the
North Interstate light rail line, which will
serve no purpose other than replacing
existing heavily-used bus service. For less
than the cost of one mile of train track
($58 million), we could have purchased
serviceable used cars for 10,000 transitdependent residents and still had $8
million left over to help with insurance
and operating costs. For poor families, this
would probably have been the single most
empowering thing anyone could have
done for them.
Oregon’s apparent transit goal is to
provide expensive public transit to virtually everyone who needs it. That goal
should be changed. We should try and get
as many people as possible to become car
owners and make transit an amenity, not a
necessity. This would dramatically lower
the cost of transit while improving the
quality of life for Oregon’s poorest families.
John Charles is senior policy analyst at Cascade
Policy Institute. This article is reprinted with
permission by Cascade Policy Institute, Portland,
Oregon.
3
William B. Conerly, Ph.D.
one country with shorter duration
does not have to remain unemployed
Unemployment averaged 8.8% in Europe last year, compared to
to receive this benefit.
labor market here in the states in the last few years, but put this into
perspective: Over the last 12 years, America’s worst unemployment
rate was better than Europe’s best unemployment rate.
i
In the recent economic downturn,
Americans have been concerned
with the length of time it has taken
Country Average
duration of unemployment
(months)
10
ers are entitled to a lump sum from
Europe is a great place to visit—but don’t try to find a job there.
8
6
4
A second factor in Europe’s high
2
unemployment rates is the long period
0
of time for which benefits are paid.
Europe
U.S.
12
than ours. In Mexico, dismissed worktheir former employer, but the worker
6.1% in the United States. We have been disappointed with a weak
Unemployment
replacement rates rise. Note also the
percent
European Unemployment:
Lessons for the United States
impetus to find another job falls as
1991
1996
2001
source: OECD
Unemployment insurance benefits in
the U.S. typically are exhausted after
Europeans dislike layoffs, and they
the unemployed to obtain work and
six months. However, a number of
make it very costly for companies to
low levels of active intervention to
One is the more generous unemploy-
European countries pay over 40% of
dismiss workers. The result is actually
increase the ability and willingness of
ment insurance benefits offered on the
previous wage in the second and third
harmful to the unemployed. Because it
the unemployed to work.”
Continent. The “replacement rate” is
year of unemployment. A few coun-
is so expensive for companies to termi-
America can take some lessons
unemployed people to find new work.
Australia.............................7.1
the portion of previous income
tries keep the benefits flowing even
nate an employee, they are very hesi-
from the European experience.
Although our own performance is less
Canada...............................4.3
replaced by unemployment insurance
into the fourth and fifth years of
tant to hire one. In contrast, American
Unemployment insurance benefits
benefits. A study by the Organization
unemployment.
companies will test the market by
must be accompanied by a strong
expanding their work forces. If the
work-search expectation. Rapid reem-
than we could—and should—strive
for, it’s better than Europe by a country kilometer. The table to the right
Switzerland ......................14.0
Czech Republic ................20.3
for Economic Cooperation and
Also hurting European workers is
Development (OECD) found that in
wage inflexibility. In the U.S., wage
expansion doesn’t work out, employees
ployment is best for the unemployed
shows how long people spent looking
Spain................................19.0
1995, replacement rates in the U.S.
growth is depressed in recessions.
will be let go. It sounds cold and
person, and best for the economy as a
for work in different countries in
Finland ............................10.5
averaged 25% to 29%. (Statutory
Because wage inflation has slowed, the
heartless, but it has resulted in stronger
whole. The worst case scenario would
2002. (2003 data are not available for
France ..............................12.8
formulas in the U.S. often provide for
number of workers hired increases.
employment growth in the U.S. than
be for states to increase unemployment
all countries; in the U.S., average dura-
Hungary...........................15.8
about 50% replacement, but ceilings
Wages tend to be more rigid in
in Europe.
benefits while reducing the expectation
on benefits cause the replacement rate
Europe, often set by union bargaining
to be much lower for high-income
with an entire industry. As a result,
factor? Economist Stephen Nickell has
workers.) In comparison, a number of
wages are not lower when labor is in
surveyed the research on European
European countries offer much higher
surplus, limiting the demand for labor.
unemployment. His top concern:
tion rose to 4.4 months.)
What’s wrong with Europe? Why
should unemployed people living in
such civilized countries as France or
Switzerland take so long to find work?
There are a number of reasons for
Europe’s disappointing performance.
4
Mexico ...............................1.9
Norway ..............................4.0
Poland..............................15.5
Which is quantitatively the greatest
that recipients go out and find work.
*William B. Conerly is a consulting economist in
Portland, Oregon, whose clients include the
Slovak Republic ...............16.5
benefits: 51% of former earnings in
United States......................3.8
Belgium, 71% in Denmark, 58% in
unemployment is complete without
are allowed to run on indefinitely,
He is also a senior fellow at the National Center
France, 70% in Switzerland. The
mention of employment protection.
combined with little or no pressure on
for Policy Analysis.
Finally, no discussion of European
“generous unemployment benefits that
American Institute for Full Employment.
5
William B. Conerly, Ph.D.
one country with shorter duration
does not have to remain unemployed
Unemployment averaged 8.8% in Europe last year, compared to
to receive this benefit.
labor market here in the states in the last few years, but put this into
perspective: Over the last 12 years, America’s worst unemployment
rate was better than Europe’s best unemployment rate.
i
In the recent economic downturn,
Americans have been concerned
with the length of time it has taken
Country Average
duration of unemployment
(months)
10
ers are entitled to a lump sum from
Europe is a great place to visit—but don’t try to find a job there.
8
6
4
A second factor in Europe’s high
2
unemployment rates is the long period
0
of time for which benefits are paid.
Europe
U.S.
12
than ours. In Mexico, dismissed worktheir former employer, but the worker
6.1% in the United States. We have been disappointed with a weak
Unemployment
replacement rates rise. Note also the
percent
European Unemployment:
Lessons for the United States
impetus to find another job falls as
1991
1996
2001
source: OECD
Unemployment insurance benefits in
the U.S. typically are exhausted after
Europeans dislike layoffs, and they
the unemployed to obtain work and
six months. However, a number of
make it very costly for companies to
low levels of active intervention to
One is the more generous unemploy-
European countries pay over 40% of
dismiss workers. The result is actually
increase the ability and willingness of
ment insurance benefits offered on the
previous wage in the second and third
harmful to the unemployed. Because it
the unemployed to work.”
Continent. The “replacement rate” is
year of unemployment. A few coun-
is so expensive for companies to termi-
America can take some lessons
unemployed people to find new work.
Australia.............................7.1
the portion of previous income
tries keep the benefits flowing even
nate an employee, they are very hesi-
from the European experience.
Although our own performance is less
Canada...............................4.3
replaced by unemployment insurance
into the fourth and fifth years of
tant to hire one. In contrast, American
Unemployment insurance benefits
benefits. A study by the Organization
unemployment.
companies will test the market by
must be accompanied by a strong
expanding their work forces. If the
work-search expectation. Rapid reem-
than we could—and should—strive
for, it’s better than Europe by a country kilometer. The table to the right
Switzerland ......................14.0
Czech Republic ................20.3
for Economic Cooperation and
Also hurting European workers is
Development (OECD) found that in
wage inflexibility. In the U.S., wage
expansion doesn’t work out, employees
ployment is best for the unemployed
shows how long people spent looking
Spain................................19.0
1995, replacement rates in the U.S.
growth is depressed in recessions.
will be let go. It sounds cold and
person, and best for the economy as a
for work in different countries in
Finland ............................10.5
averaged 25% to 29%. (Statutory
Because wage inflation has slowed, the
heartless, but it has resulted in stronger
whole. The worst case scenario would
2002. (2003 data are not available for
France ..............................12.8
formulas in the U.S. often provide for
number of workers hired increases.
employment growth in the U.S. than
be for states to increase unemployment
all countries; in the U.S., average dura-
Hungary...........................15.8
about 50% replacement, but ceilings
Wages tend to be more rigid in
in Europe.
benefits while reducing the expectation
on benefits cause the replacement rate
Europe, often set by union bargaining
to be much lower for high-income
with an entire industry. As a result,
factor? Economist Stephen Nickell has
workers.) In comparison, a number of
wages are not lower when labor is in
surveyed the research on European
European countries offer much higher
surplus, limiting the demand for labor.
unemployment. His top concern:
tion rose to 4.4 months.)
What’s wrong with Europe? Why
should unemployed people living in
such civilized countries as France or
Switzerland take so long to find work?
There are a number of reasons for
Europe’s disappointing performance.
4
Mexico ...............................1.9
Norway ..............................4.0
Poland..............................15.5
Which is quantitatively the greatest
that recipients go out and find work.
*William B. Conerly is a consulting economist in
Portland, Oregon, whose clients include the
Slovak Republic ...............16.5
benefits: 51% of former earnings in
United States......................3.8
Belgium, 71% in Denmark, 58% in
unemployment is complete without
are allowed to run on indefinitely,
He is also a senior fellow at the National Center
France, 70% in Switzerland. The
mention of employment protection.
combined with little or no pressure on
for Policy Analysis.
Finally, no discussion of European
“generous unemployment benefits that
American Institute for Full Employment.
5
Q&A
Reduce Unemployment Through Auto Ownership
Questions & Answers
What is Social Security?
Social Security provides retirement,
disability, and survivors insurance to
American workers, who pay for this out of
a specific tax on their wages - the FICA
tax. Employers also support social security
by matching employee contributions. The
tax is levied on the first $87,900 of a
workers earnings for a combined
worker/employer contribution of up to
$10,900 per year. It is the largest government program in the world. Nearly a
quarter of every dollar collected by the tax
man goes to pay Social Security.
How does Social Security work?
It is a pay-as-you-go system. This
means that taxes from today’s workers pay
benefits for today’s retirees.
Your payroll taxes aren’t invested in an
account for the future. Each generation
must support the generation that came
before it.
So what is the problem?
Today there are fewer workers supporting more retirees. When Social Security
was created, having more workers than
retirees wasn’t a problem. For example, in
1950 we had 16 workers for every retired
person. But, our senior citizen population
has grown while the number of our workers has gotten smaller. So today there are
around three workers for each person
receiving Social Security, and when people
born in the 1960s retire, there will be just
two workers to support their retirement.
So there are fewer workers to pay
for current retirees. What does
this mean for the system?
Soon the amount of benefits promised
to retirees is going to be more than workers’ payroll taxes can support. Today Social
Security is collecting more money than it
needs to pay benefits, but by 2018 it will
begin running a deficit—collecting less in
taxes than it pays out in benefits.
6
Won’t the trust fund help pay
benefits and put off the need for
tax increases or benefit cuts?
Not really. The trust fund consists of
nothing but IOUs that the government
has written to itself. And when Uncle Sam
goes to repay those IOUs, you know who
pays the bill: we do. In order to repay
those IOUs, the government will have to
either raise taxes or cut programs. What’s
more, even if the trust fund were real, it
would only last until 2042.
Is there more to the problem?
Yes, Social Security is unfair to certain
workers. It’s unfair to single workers and
families where both spouses work; they
receive little from Social Security’s spousal
benefits. It’s also unfair to those with short
life expectancies who don’t live long
enough to collect the retirement benefits
they’ve paid for. It’s unfair to younger
workers, who will pay an eighth of their
wages all their lives into a program that
won’t be able to pay them back. Plus all
workers are denied a true legal right to
their benefits. The United States Supreme
Court found that workers have no legal
right to a benefit from Social Security.
That’s not fair to anyone who has paid
into the system for years.
So what can we do to fix Social
Security for the future?
1. We could raise taxes. But we’ve done
that 30 times before and Social Security is
still going broke. Social Security is already
the biggest tax that most workers pay, but
to keep the system afloat payroll taxes will
have to rise even higher-to 20 percent of
each worker’s wages. And that’s before
income taxes, or Medicare taxes, or state
and local taxes. Is this what we want for
our kids and grandkids?
2. We could cut benefits. We’ve tried
that, too. But Social Security already leaves
millions of seniors in poverty. Do we want
to make that even worse?
3. What about personal retirement
accounts? Workers could invest a portion
of payroll taxes in an account, similar to
an IRA or 401(k). Their employer could
continue to pay the matching portion in
order to continue funding the transition
between the old system and the new
system.
How would Personal Retirement
Accounts work?
As a worker, you could choose to deposit
your Social Security taxes in a personal
retirement account. These accounts would
hold simple, broadly diversified investments: stocks and bonds. Personal
accounts would build value over time. At
retirement, the annual income from your
investment would pay you a monthly
benefit, instead of being reinvested each
year. The investments themselves would be
owned by each worker and could provide
an additional source of funds and be given
to the workers’ chosen beneficiary upon
death.
But how would Personal
Retirement Accounts help Social
Security?
It’s simple: every dollar of retirement
benefits paid from a personal account is a
dollar the traditional system doesn’t have
to pay. Accounts cost more in the short
term since we have to build up account
balances while still paying benefits to
current retirees, but when workers with
accounts begin to retire, the pressure on
Social Security is reduced.
How would reforms affect my
grandparents?
The first rule of Social Security reform:
we cannot take away grandma or grandpa’s
check. We must guarantee full benefits to
those who are currently retired and to
those who are near retirement.
v i s i t u s o n l i n e a t : w w w. c h o o s e y o u r f u t u r e . c o m
By John A. Charles
i
In December 2003, Oregon had an
unemployment rate of 7 percent,
third-highest in the country. What can
be done to improve this dismal ranking? One new idea is to get transitdependent job-seekers into a set of
private wheels.
Automobiles have become critical for
commuters because most jobs are not in
downtown centers. As economists at
Metro noted recently, “The trend in
employment growth shows that more and
more jobs are located in adjacent or neighboring counties as compared to the
region’s central county. Between 1970 and
1997, Multnomah County’s share of
regional jobs fell from 67% to 47%.”
Job dispersal trends are not a problem
for many households that can and do
choose to move away from central cities.
The vast majority of suburbanites own
cars. For the poor, however, job dispersal
poses a major employment barrier.
Nationally, three-fourths of welfare recipients live in central cities or rural areas,
while two-thirds of new jobs are located in
the suburbs. Those jobs may not be far
away in terms of geography (frequently 515 miles), but they are so inaccessible by
public transit that they may as well be on
the moon.
“Car ownership improved
the likelihood of being
employed by 80 percent.”
This problem has gained the interest of
scholars and a number of studies now
show a stunning relationship between car
ownership and employment. Kerri
Sullivan of Portland State University
recently examined the effects of car ownership on employment and wages for adults
without a high school diploma in
Portland. Ms. Sullivan found that, “Car
ownership improved the likelihood of
being employed by 80 percent. The effect
on average weekly wages was approximately $275, and the effect of weeks
worked was approximately 8.5 weeks.”
Her work showed that auto ownership
was much more important than education.
In fact, the study found that a high school
diploma/GED played no significant role
in explaining differences in employment
rates.
Steve Raphael of University of
California-Berkeley looked at how car
ownership might lower the unemployment
rate gap between whites and minorities.
He concluded that, “Raising minority carownership rates to the white car-ownership
rate would eliminate 45 percent of the
black-white employment rate differential
and 17 percent of the comparable Latinowhite differential.”
One would think that in light of these
and other similar studies, Oregon policymakers would begin developing strategies
to promote auto ownership. Yet public
officials have spent the better part of the
past decade waging a cultural war on cars.
Portland officials in particular have
attacked motorists with a vengeance. The
city’s anti-mobility policies have included
parking surcharges to pay for the Portland
streetcar, parking restrictions at new highdensity projects, prohibitions on parking
lots near light rail stations and downsizing
of Portland roads in order to create bike
lanes.
At the same time, the region has
squandered billions of dollars on fixed rail
transit, which is irrelevant to the urban
poor seeking work in the suburbs. Rail is
primarily used by affluent commuters who
already own a car. This creates something
of a reverse Robin Hood effect, in which
poor people are taxed to supply train rides
for the rich.
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
A better solution has been initiated by
the Metropolitan Family Services (MFS)
through a new program called Ways to
Work. This program provides loans for
low-income parents at risk of losing their
jobs due to unexpected expenses related to
transportation. Most of the applicants will
be single, working mothers with dependent children. MFS is partnering with
Albina Community Bank, which will
provide in-kind services for loan processing. Initial grant funds have come from
the US Department of Transportation,
Meyer Memorial Trust ($120,000 three
year grant) and The Oregon Community
Foundation ($30,000).
These are impressive numbers for a
small non-profit but they are dwarfed by
public expenditures for light rail. TriMet
spent about $325 million to build the
North Interstate light rail line, which will
serve no purpose other than replacing
existing heavily-used bus service. For less
than the cost of one mile of train track
($58 million), we could have purchased
serviceable used cars for 10,000 transitdependent residents and still had $8
million left over to help with insurance
and operating costs. For poor families, this
would probably have been the single most
empowering thing anyone could have
done for them.
Oregon’s apparent transit goal is to
provide expensive public transit to virtually everyone who needs it. That goal
should be changed. We should try and get
as many people as possible to become car
owners and make transit an amenity, not a
necessity. This would dramatically lower
the cost of transit while improving the
quality of life for Oregon’s poorest families.
John Charles is senior policy analyst at Cascade
Policy Institute. This article is reprinted with
permission by Cascade Policy Institute, Portland,
Oregon.
3
Texas… continued...
TWC. Larry, who as Deputy Executive Director of TWC, had begun to
implement sweeping reforms of the employment programs of the commission,
worked hard to strengthen performance accountability of local workforce
boards and instituted innovative policies and procedures to attach unemployed Texans to work quickly. Working closely with Jim Hine, the new
Outdated Ideas Have Made Social Security
Unfair to Today’s Working Couples
commissioner of DHS, Larry began to focus on TANF, implementing policies
to insure full engagement and mandatory work after job search. In addition,
UNEMPLOYMENT
INSURANCE
Texas has also made great first
strides to improve its unemployment insurance program. In May,
the US Department of Labor held
a national conference on claimant
reemployment and highlighted the
work of Texas. Initiatives include:
the state implemented full-check sanctions of non-participation in required
same total monthly income of $3,000. However in the Smith house-
work activities.
Require work and true work activities,
and clients become motivated
to get jobs, become self-sufficient,
and leave welfare behind.
And the results? Incredible! Mandatory for work TANF caseload dropped
★ all staff working with unemployment claimants make at
least one customer call each
week (nearly 1,000 calls)
from 55,000 to 40,000 between July 2003 and February 2004, a drop of over
★ minimum work search requires
three activities per week with
the option for local workforce
boards to increase the requirement
vated to get jobs, become self-sufficient, and leave welfare behind.
26% in less than eight months. Just as impressive, the number of TANF
clients in work components increased by 8% simultaneously. Does this sound
familiar? Require work and true work activities, and clients become moti-
hold only Mr. Smith works while in the Green household both Mr. and
Mrs. Green work with Mr. Green earning $2,000 per month and Mrs.
Green $1,000. Since both couples have the same household income,
and both pay the same amount in payroll taxes, wouldn’t you think that
THE SMITHS
at retirement they would receive the same Social Security benefits? No.
At retirement, Mr. Smith would be eligible for a monthly benefit of
around $1,300 and Mrs. Smith a spousal benefit of around $650, for a
In addition, while sanction rates prior to the implementation of full-check
sanction averaged 23,050 in fiscal year 2003, once TANF clients realized that
total of $1,950. By contrast, Mr. Green would be eligible for a monthly
Texas was serious about work, the sanction rate fell to 4,400 by February
2004. Contrary to the often-voiced but wrong-headed concerns of poverty
★ regional performance goals
include market penetration of
services to employers (job
orders as a percent of total
hires), repeat customers and job
opening fill rate
Consider two couples, the Smiths and the Greens. Both have the
benefit of around $1,000 based on his earnings and Mrs. Green a bene-
THE GREENS
advocates and some gullible legislators that serious sanctions for non-performance will “leave families on the streets,” data shows that full-check sanctions
actually reduce the numbers of those sanctioned, and usually does so dramati-
fit of $650 based on her earnings, for a total of only $1,650 per month.
Social Security’s outdated benefit structure means
cally. A serious full-check sanction policy motivates clients to find work or
participate in work activities that will lead to timely and beneficial employ-
that two families can pay the exact same amount in
ment.
Look for Texas to be a model state
for unemployment claims in years
to come.
While some states are beginning to re-invigorate their TANF programs,
Texas’ is leading the way with some amazing results. The secret? To paraphrase Lyle Lovett’s ode to Texas: “You may not be from Texas, but Texas
wants you (to work) anyway.”
2
taxes yet receive very different benefits.
That’s not fair.
★
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
v i s i t u s o n l i n e a t : w w w. f u l l e m p l o y m e n t . o r g
7
American Institute
Features of Full Employment
Institute Mission
The Institute’s goal is full employment - universal access to jobs with
career potential for all who can work, especially those who are receiving public assistance as a substitute for the opportunities and rewards
of paid work.
Consulting
The Institute offers consulting to any state that wishes to implement
a Full Employment Program. Consulting services include: program
design, training workshops and establishment of performance criteria.
Contact Us
THE AMERICAN INSTITUTE
F O R F U L L E M P LOY M E N T
2636 Biehn Street, Klamath Falls, OR 97601
800-562-7752
w w w. f u l l e m p l oy m e n t . o r g
S T E P S
T O
E M P L O Y M E N T
For Participants
• Immediate placement in unsubsidized jobs, or temporarily
subsidized, training-oriented jobs for those unable to get unsubsidized employment. Wage subsidies are paid from the
pool of public assistance benefits.
• A ladder of job opportunities, with rising spendable income
at each step.
• Guaranteed support services throughout the transition to
self-sufficiency.
For Employers
• A larger workforce from which to recruit workers.
• The chance to try out new workers in new jobs at little or no
wage cost.
• The opportunity to contribute to reducing the public assistance burden, and provide the unemployed with the many
benefits that only employment provides.
For the State
• A stronger state economy.
• Happier, more productive citizens.
• Reduced costs of welfare and other related social costs of
unemployment and dependency.
P R O S P E R I T Y
& S U C C E S S
S T E P S
T O
A
B
L
E
O
F
1-2 Texas, TANF’s
PAID
THE AMERICAN INSTITUTE
FOR FULL EMPLOYMENT
P.O. Box 1329
Klamath Falls, OR 97601
P R O S P E R I T Y
& S U C C E S S
3 Reduce
Unemployment
Through Auto
Ownership
Lessons for the
United States
N
6 Social Security
T
Questions &
Answers
S
alone. It truly has lived up to its motto as the “Lone (shining) Star” in
sufficiency and in assisting recipients find work and jobs.
t
Texas’ welfare reform performance has been quite mixed in the last 10 years. In
January 1993, AFDC caseload stood at 278,146. At that time, one in every 22
Texans received a welfare check.
Texas began instituting several welfare reform initiatives in the mid-90s and these,
E
T
When it comes to TANF performance in the last year, Texas stands
TANF. The state has made incredible strides recently in increasing self-
4-5 European
Unemployment:
N
2004
Texas, TANF’s 2004
Lone St★r State
2004 Lone Star
State
O
KLAMATH FALLS, OR
PERMIT NO.304
E M P L O Y M E N T
Summer
T
C
NONPROFIT
U.S. POSTAGE
for Full Employment
combined with the implementation of TANF in 1997, resulted in significant caseload
7 Outdated Ideas
Have Made Social
Security Unfair to
Working Couples
reduction. By July 1999, TANF caseload had been reduced to 106,142, a decrease of
over 62%. At that point, Texas was one of the top TANF performers in the country.
However, as was typical of a number of states at the end
of the 90s, caseload began trending upward. By the end of
2001, TANF caseload had increased to over 138,000—a
What is Full
Employment?
30% increase in a little over two years! One of the key problems with Texas’ reform efforts was the inability
Full Employment is a welfare, unemployment, and food stamp benefit
replacement concept that moves
public assistance recipients into the
active workforce by converting
public assistance benefits to wage
subsidies for transitional, training
oriented jobs, predominantly in the
private sector.
2 6 3 6
B i e h n
of the state to move TANF recipients to work.
Bureaucratic tension between the Department of
Human Services (DHS) and the Texas Workforce
Commission (TWC) contributed to the problem.
But this was all to change. Last year, Larry
Temple took over the reigns as Executive Director of
S t r e e t
continued on page 2
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F a l l s ,
O R
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