Aid to corporations with dependent workers

The government is reviving the dole at least in part because American corporations wash their hands of low-wage workers.

The politics of the dole are more contradictory than is generally acknowledged. The liberal social reformer Jeremy Bentham invented the poorhouse. The conservative Charles Murray, after publishing a book, Losing Ground, arguing that cash welfare wrecked the work ethic, came out in favor of a universal guaranteed income. Republicans press to have government benefits means-tested, to eliminate wasteful spending. But after they succeed, they reclassify these programs as “welfare” and urge their elimination.

For the past quarter-century, the trend has been to reward work by directing government aid to the working poor. In the New York Times, Jason DeParle cites a Brookings study that shows that nearly all increases since 1990 in spending on children went to working families. A persistent problem with this approach is that the invisible hand is not especially keen to reward work. Barbara Ehrenreich made this argument quite powerfully in her modern classic, Nickel and Dimed, simply by trying to survive as a single woman (her kids were grown) working various poverty-wage jobs. She couldn’t, even though she performed this experiment in the middle of the tech boom, which created the hottest labor market of recent times.

The problem isn’t globalization, because rock-bottom jobs are nearly always in the service sector, not manufacturing. A burger-flipper at McDonald’s or a retail clerk at Walmart isn’t competing against lower-waged burger-flippers and retail clerks in Bangalore. Amazon, the company that represents the biggest threat to bricks-and-mortar retail in the U.S., isn’t some Third World upstart. It’s headquartered in Seattle. It’s just really good at union-busting.

The ingenuity of American corporations in finding ways not to reward work begins with keeping them the hell off the payroll. As Brandeis economist David Weil observed in his book The Fissured Workplace, the much-discussed “gig economy,” which takes employees and reclassifies them independent contractors to whom not even the hourly minimum wage is owed, is only one of several means by which corporations wash their hands of low-wage workers. It isn’t even the most commonplace method. More typically, corporations use subcontractors and franchisees to make low-wage workers somebody else’s problem, then apply their market power to minimize how much profit those subcontractors and franchisees will have to spend on labor. Franchising, as I wrote eight years ago in Pacific Standard, is really just a modern equivalent to sharecropping.

The result of all this fissuring is that you can work your ass off and still require food stamps to feed your kids and Medicaid to take them to the doctor. A GAO report in October found that 70 percent of all beneficiaries of those programs worked full-time. Walmart, McDonald’s—these are the companies where bottom-rung workers require the government to supplement their income because their employers, or effective employers, won’t pay them a living wage. And many of these companies pay above the hourly minimum wage, which has been stuck at $7.25 for more than a decade.

The conservatives who like to complain about lazy people on the dole seldom point out that to a great extent it’s hugely profitable corporations that are placed on the dole when the federal government has to extend assistance to their underpaid workers. This problem is one reason why America has fallen out of love with the idea of ending welfare as we know it.

Now Congress is about to revive something that vaguely resembles the Aid to Families with Dependent Children that Bill Clinton eliminated in 1996, and the Republican minority isn’t even all that upset. In Politico Magazine, I explain why.