Real Welfare Reform

August 26, 1994|By HOWARD P. RAWLINGS

As Congress begins its deliberations on President Clinton's welfare reform proposal, the public and the media will once again focus on the growing frustration over the number of people dependent on government assistance.

Despite the fact that welfare programs are only a small portion of total government spending on entitlements, they will be scrutinized more than the billions spent on farm subsidies and middle-class homeowners.

The frustration caused by the failure of many welfare programs will result in calls for a tougher system, complete with time limits and caps on family size. The goal will be to encourage or require as many recipients as possible to find work in the private sector. Unfortunately, this is easier said than done.

Although the economy has been growing at a steady pace recently, new job creation has been lagging. Additionally, many of the new jobs are out of the reach of most of those receiving public assistance. This puts recipients and the government in a potentially costly predicament.

The president's plan requires recipients to work after 24 months on Aid to Families with Dependent Children (AFDC is the nation's primary welfare program). But if private employment is unavailable, recipients will be placed in community service jobs with non-profit groups or public agencies. The goal of the community service requirement is to provide participants with real world experience that can be used in finding private sector jobs.

However, if private sector employment remains elusive, thousands of people required by the federal government to be working for their assistance will need to be accommodated by a large public works agency. In attempting to control one government program, we may be creating another one of equal size and cost.

The only way to prevent the creation of another large government agency would be to ensure that good new jobs are available. Fortunately, in Maryland there is a group developing a method to combine skills training for AFDC recipients with job creation.

This private-public partnership is the American City Manufacturing Company, a non-profit corporation that is the brainchild of Baltimore entrepreneur Doug Becker. The president Sylvan Learning Systems Inc., Mr. Becker approached Mayor Kurt Schmoke two years ago to begin work on a plan to train AFDC recipients while at the same time repatriating jobs that had been lost overseas.

Since then, a collaborative effort between Mr. Becker, Mayor Schmoke, the Baltimore Economic Development Corporation, the Maryland Department of Economic and Employment Development and the Abell Foundation has resulted in the creation of American City.

The charter of American City is to provide a vehicle for incorporating unemployed inner-city residents into the mainstream economy. It will establish cost-competitive manufacturing facilities that offer job training, education and work experience to unemployed Baltimore City residents. Yet it will be a completely privately owned not-for-profit business.

The staff will be a mix of privately paid and publicly subsidized workers. The subsidized workers will be AFDC recipients participating in training through Maryland's existing training program, Project Independence. As such, they will receive all their current AFDC, medical and food stamp benefits.

Subsidized employees also will be eligible to earn additional in come through their jobs that will not be counted against their grant. Current regulations deduct $1 from AFDC assistance for each dollar earned in wages. By disregarding some training wages, recipients will earn additional income by working instead of being penalized for it.

From a business standpoint, this is an excellent opportunity. American companies will be able to hire and train staff right here in Baltimore at wage rates comparable to those found overseas. The companies also will be eligible for financial assistance from state economic development programs. It's a great package designed to bring American-owned manufacturing back to Maryland.

The state does not want to get into the business of subsidizing corporate payrolls indefinitely, however. Thus the subsidized placements will last only 18 to 24 months. After that, it is expected the company itself will hire the trained employees at its regular wage rate, or the trainees will find other employment based on their newly acquired skills.

To help transition trainees into the private work force, American City will establish placement centers and develop hiring networks for its graduates. These services will help recruit and retain participants by making private placements more likely.

Similar programs have been successful in other cities. In Detroit, a not-for-profit training company called Focus:HOPE has been manufacturing automobile manifold covers for several years. Recently it was awarded a $30 million contract from Ford Motor Co.

In Seattle, Pioneer Industries provides similar training in a for-profit setting. Pioneer is involved in a range of services from construction to aircraft parts manufacturing.

It is time for Baltimore to start experiencing this type of success. American City currently is in negotiations to start up its first business venture. If all goes well, 50 AFDC recipients could be starting work by the end of the year.

While this number is small, it is a first step in helping break the bonds of dependency. It is also an excellent example of the kind of thoughtful, innovative program that will end welfare as we know it. It is the right program at the right time.

Howard P. Rawlings is chairman of the Appropriations Committee in the Maryland House of Delegates.

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