Welfare in the U

Welfare in the U.S. and the Informal Economy for Low-Income Women

Marcia Bok Professor Emeritus University of Connecticut School of Social Work

Introduction

Low-income women in the U.S. are often caught between two untenable worlds: the world of low-wage work and the world of welfare – both inadequate as a source of economic self-sufficiency and each with its own set of rules and restrictions which are often difficult to comply with (McInnis-Dittrich, 1995). Growth of the informal economy is one response to this difficult situation. While the prevalence of the informal economy is widely acknowledged throughout the world, there is less information about the informal economy in the U.S., particularly in relation to public policy.

It is helpful to begin to differentiate the informal sector that is social and communal, from the informal sector that is more closely tied to the formal economy. It is in the latter situation that more abuse and exploitation might be expected. While the former situation usually involves mutual aid, mutual caring, and important aspects of communal life, in this situation there are also risks, as well as opportunities. There are many other variations of the informal economy that also affect the lives of poor people in negative and positive ways. We define the informal economy as activity for monetary gain or barter, usually unregulated and outside the law and public policy. Thus, employers may fail to pay minimum wage or contribute to federal payroll taxes and state unemployment insurance. Employees are generally not eligible for social security or other worker protections. The total political economy of the nation is impacted by loss of

1 revenues, such as income taxes, corporate taxes, and payroll taxes generally paid by workers and employers; this is somewhat compensated by receipt of sales taxes, but the balance is definitely negative.

In his book Off the Books, Venkatesh (2006) refers to the informal economy as the underground economy, not necessarily because it is illegal, but because it is invisible, has a different set of rules from the formal economy, and while basically reciprocal in the community he studies, it is often dangerous and illicit, as well as protective and necessary for survival. He also refers to the informal economy as a shadow economy.

The welfare system disingenuously investigates fraud when almost all welfare recipients are receiving some form of financial assistance outside of welfare in order to survive (See Edin and Lein, l997). In this paper, we provide a brief history of welfare that focuses primarily on the ways that welfare, established more than 70 years ago, has contributed to exclusion of low-income women from the mainstream and thereby reinforced participation in the informal economy; and how the formal economy and public policy have perpetuated this situation. Characteristics of the informal economy that have both positive and negative consequences for low-income women are described.

All race/ethnicity/gender and social classes are involved; both legal and illegal activities are included with documented and undocumented workers and many different occupations. Acknowledging the complexity of the informal economy, the paper focuses on three components of the system, with an emphasis on low-income women: 1) mutual aid and social networking of relatives and friends; 2) vendors and entrepreneurs; and 3) informal activity within the formal system. While it is not always possible to separate mutual aid from vendors and entrepreneurs, for example, it is helpful to understand

2 different functions and outcomes. Geographic mobility and migration often play a major role in the informal economy. We also acknowledge, briefly, illegal activities outside the formal sector, such as drugs and prostitution, and corruption in government to illustrate the pervasiveness and complexity of the subject matter. The paper concludes by suggesting the kind of changes in public policy and in the work environment that are needed to enhance the self-sufficiency, economic security and economic mobility of low- income women.

Background

Beginning with New Deal programs in the 1930s, there is a history of exclusion of domestic workers and farm labor, as well as women, people of color and immigrants, from government programs. There is exclusion from educational opportunities throughout the history of welfare in the U.S. Under current welfare reform, since l996, very low welfare cash assistance, time-limits for receipt of welfare, exclusion of immigrants, and mandated work, however inadequate, have all contributed to participation of low-income women in the informal economy. At least since welfare reform, there has been increased open acknowledgement that welfare recipients make ends meet through cash assistance, jobs, and in-kind services which are unreported to welfare officials.

The formal economy and public policy intersect by maintaining the invisibility of low-wage workers in the informal economy, thereby suggesting that the welfare system and the formal economy are doing their job and don’t need to change. With caseload reduction and labor force attachment, rather than poverty reduction, as primary welfare

3 reform goals, there is general belief that welfare, as we know it, has been successful. We know that the transgressions of employers who hire undocumented workers are generally overlooked. We also know that even legal immigrants are often ineligible for welfare and health benefits. From a political point of view, conservative Republicans generally hate to pay taxes. They utilize and reinforce the informal economy – it is part of the “culture of the rich”. Unforunately, this often generalizes to other sectors of the population, as well.

Characteristics of the informal system are extremely varied. Boy friends, relatives, friends, jobs off the books, unreported overtime work, cash and in-kind assistance, social agencies, self-help groups, and illegal activities may be involved.

Although this paper deals with low-income women, participants come from all ethnic, racial and social groups. For individuals and families living in low-income communities, reciprocity and mutual aid are basic sources of help. Because social networks play such an important role in the informal system with low-income women, those who do not have these networks for a variety of reasons, such as substance abuse, mental illness, overcrowding, may end up in dire economic circumstances. While informal help may be an obstacle, as well as an opportunity, families with children who become homeless are often those for whom social networking and informal help are not an option.

Geographic mobility, both within the U.S. and internationally, often plays an important role, particularly in the free-trade climate of globalization. The informal economy is cultivated in this environment. Immigrants, both legal and illegal, may be particularly vulnerable to the exigencies of the informal economy. Massey (2008) points out that many industries, including meatpacking and other food processing, taxi driving, custodial services, construction and, in a big way, agricultural and domestic services, are

4 dependent on immigrant labor. Often these jobs are unattractive and unstable, with temporary and contract work, without benefits, replacing full-time employment. Farrell

(2004) notes that in some industries, such as retailing and construction, the informal economy can account for as much as 80 percent of employment.

The informal economy is cultivated in an unregulated global economy that favors the rich. We see that the informal system is highly complex and, in combination with many formal work environments and the public welfare system, major change is needed.

New York State is proposing a Domestic Workers Bill of Rights (See Ratner, Sept. 28,

2009); worker centers and legal aid organizations advocate to reduce exploitation and abuse within the informal sector. From a welfare point of view, low benefits, time limits, work first principles, limited educational opportunities and limited child care subsidies all contribute to the inability of low-income women to make ends meet in the welfare system. Adequate work in the formal sector is becoming harder and harder to come by; and without an adequate safety net, the informal system might be expected to grow

(Vogel, 2006). Thus, possible changes include: the need to change perceptions and educate the public to the realities of hardships and consequences within the welfare system; the need to reduce invisibility and acknowledge and work to improve conditions in the informal economy; the need to advocate with grass-roots organizations, government and labor unions to improve jobs with benefits; and to include low-income women in economic development, job creation, and vocational, career ladders and higher education opportunities.

5 Although these distinctions are not always clear-cut, in proposing solutions, it is helpful to differentiate the informal economy based on social and community life from informal work tied more strongly to the formal economy, including social agency help and illegal activities, both within, and outside of the formal work environment. The goals are to improve economic conditions for low-income women and their families through a variety of progressive work and safety net programs, while taking into account the positive interpersonal and communal aspects of ties related to the informal economy .

Social Welfare Policy in the U.S.

When the Social Security Act was enacted in 1935, in the midst of the Great

Depression, it was mainly helpful to elderly Americans who were experiencing poverty levels of about 50 percent. As it turned out, despite great controversy, the legislation had, and continues to have, its greatest legacy of lifting the elderly out of poverty. This is less true for other groups, for whom social security legislation was, and continues to be, more limited.

Most women and minorities were excluded from the benefits of unemployment insurance and old age pensions. Employment definitions reflected typical White male categories and patterns (Mink, 1995). Job categories that were not Covered by the act included workers in agricultural labor, domestic service, government employees, and many teachers, nurses, hospital employees, librarians and social workers (Quadagno, 1994). The act also denied coverage to individuals who worked intermittently. These jobs were dominated by women and minorities. For example, women made up 90 percent of domestic labor in 1940 and two- thirds of all employed black women were in domestic service. Exemptions Excluded nearly half the working population. Nearly two-thirds of all African-Americans in the labor force, 70 to 80 percent in some areas of the South, and just over half of all women employed were not covered by Social Security (Katznelson, 2005).

Social security reinforced traditional views of family life. Women generally Qualified for insurance only through their husband or their children.Mothers

6 Pensions (Title IV) based entitlements on the presumption that mothers would be unemployed (Wikipedia, consolidated from various sources).

As part of the Social Security Act of 1935, public assistance -welfare –was enacted, which allowed widowed mothers to remain home to care for their children.

Means-tested, rather than universally available, and targeted primarily to white widows with children, welfare had the effect of marginalizing low-income women who did not meet the original prescriptions for welfare eligibility. The programs of the SSA originally excluded populations such as domestic labor and farm workers and African-Americans; and as the population of welfare changed to include more recipients who were African-

American with children born out of wedlock, public support for welfare recipients and the welfare system became increasingly negative. With WWII, and the increase in women working outside the home, sentiments toward women not working outside of the home eroded even further. Backlash from the 1960s and the War on Poverty, and public belief that African-Americans had gained disproportionately from government interventions during this period, gradually led to increased political conservatism and the election on Ronald Reagan as President in 1980. President Reagan famously said that in the War on Poverty, poverty won. He also labeled welfare recipients as “welfare queens”.

Writing in 1992, Conniff observed the conservative and punitive environment in which welfare was administered (See also Davies and Derthick, 1997).

It is within this backdrop that welfare reform was enacted. According to President

Clinton in l996 when he signed welfare reform into law, the new legislation was meant to end welfare as we know it. Building on the distinction between the deserving and the undeserving poor (with welfare recipients in the latter group) the legislation was designed to redeem the status of welfare recipients who had fallen into disfavor as a result of

7 allegedly not upholding American values of: 1) work; 2) personal responsibility; and 3) marriage. It should also be noted that welfare is no longer an entitlement, with stringent federal guidelines of 60 months of lifetime benefits which are allowed to be reduced by state statutes. Thirteen years since the passage of the legislation, and with reauthorization of TANF (the cash assistance portion of welfare reform) scheduled for 2010, these three principles noted above continue to dominate the generally accepted conservative debate around safety net programs for low-income women.

But according to writers such as Sheldon Danziger of the University of Michigan, if you are out of work, the welfare system in a time of recession doesn’t have anything to offer. A study by the Center of Budget Priorities found that as aid programs were increasingly aimed at supporting work, fewer of the worst-off, jobless families were pulled out of the deepest poverty, defined as an income below half the poverty line of

$18,310 for a family of three in 2009. (Eckholm, 2009).

In the first nineteen months of the current recession, the national TANF caseload increased only 6.6 percent. Over the same nineteen month period, Food Stamp recipients increased 27.4 percent and unemployment increased 80 percent. Excluding California, the TANF caseload increased only 3.4 percent. “Even before the recession, TANF was reaching only a minority of eligible families and an even smaller minority of poor families” (Legal Momentum, January, 2010).

There are currently about six million America receiving food stamps who report no other source of income. These individuals describe themselves as unemployed and receiving no cash aid – no welfare, no unemployment insurance, and no pensions, child support or disability benefits.

8 These numbers were rising before the recession as tougher welfare laws made it harder for poor people to get cash aid, but they soared about 50 percent over the past two years. About one in fifty Americans now lives in a household with a reported income that consists of nothing but a food- stamp card.

The main cash welfare program, Temporary Assistance for Needy Families, has scarcely expanded during the recession; the rolls are still down about 75 percent from their 1990s peak. A different program, unemployment insurance , has rapidly grown, but still omits nearly half of the unemployed. Food stamps, easier to get, have become safety net of last resort (DeParle and Gebeloff, (Jan. 3, 2010).

One in eight Americans receive food stamps (including one in four children) with some other source of income, most often irregular income from some part of the informal economy. With work as a centerpiece of welfare reform, and without effective safety net programs, the current economic downturn demonstrates the limitations of such a “one size fits all” program. Yet, despite the prolonged economic hardship for millions of

Americans, there are conservative legislators who continue to disdain individuals and families “who are just comfortable living off the government”. They believe the answer to job growth are lower taxes (DeParle and Gebeloff, p. 16)

Prior to welfare reform, the contentiousness of the program provided visibility for the very poor. Welfare reform, however, has increased the invisibility of the poor and keeps these individuals out of the mainstream of economic security, stability and mobility. Without regulation, transparency, and visibility, there is no accountability.

Poor people are caught in a bind of inadequate safety net programs, poor jobs, and dependence on the informal system for mutual help and economic support. Even if individuals want to seek other opportunities, reliance on the informal system is often central to their immediate social and economic well-being.

9 Characteristics of the Informal Economy – The Good, The Bad, and the Inbetween

Low-income Women

We have noted that at least since the enactment of the Social Security Act in

1935, low-income women have generally been outside of the mainstream in regard to economic development and economic security. Either blamed for being poor or ignored and rendered invisible, low-income women are told to work outside the home, but adequate child care is not available, wages are too low to survive, and a patriarchal social structure is a cultural lag in a society where family structure has changed and so-called male responsibilities are often unfulfilled. Women are major participants in the informal economy, with globalization and transnationalism playing an increasingly dominant role in developing and developed countries.

In writing about poor women in Appalachia, McInnis-Dittrich (1995) notes that women are likely to have limited access to an organized informal economy. She writes that the regular off-the-book employment model is more common among men, while women tend to piece it together more with small and irregular sources of income. She identifies four patterns of informal participation by women: 1) anticipatory pattern – those who take the initiative to seek informal and formal work; 2) chronically disorganized - persistent inability to plan beyond the moment: 3) the familial pattern – generally relies on support from others; and 4) the entrepreneurial pattern – proactive, always planning ahead; may derive income from illegal sources. McInnis-Dittrich generally attributes these patterns to the oppressive patriarchal social structure that affects every aspect of the lives of Appalachian women.

10 Duncan (l999) writes about the corrupt, exploitative economic and political environment in Appalachia and the rigid boundaries between “haves and have-nots” in this area. Morgen (2002) believes that the most significant roots of poverty are inequality, economic restructuring, and the ideologies of race, gender, and class that promote poverty and wealth for different social groups. And Stark ( 1974, 1996) emphasizes the reciprocal and mutual aid characteristics of poor, Black, urban populations.

Ehrenreich and Hochschild (2002) discuss documented and undocumented women in regulated, as well as unregulated work environments. In writing about nannies, these authors deal with issues of women, poverty and globalization. This has major implications for family life in developing and developed nations. Parrenas (2002) discusses the issues of gender ideology in the Philippines, for example, and notes that the migration of mothers creates a great deal more anxiety than migrant fathers in the transnational global economy; and Sassen (2002) describes the “feminization of survival” in poor countries.

Venkatesh (2006), in the poor Black Chicago community he studies, sees the role of women as basic and extensive; women are major players in every walk of community life. They take a leading role in making ends meet for those in their neighborhood. The norm is for women to change their earning profile by alternating between the underground and legitimate economic sectors, taking advantage of different opportunities that arise to generate income.

Marlene Matteson, Eunice Williams, and Baby “Bird” Harris are Maquis Park’s”soccer moms”. …. On a cold, clammy April morning, they gather in an empty lot to clear debris. In a few hours, their children will be there playing games and climbing trees. As they pick up bottles, condoms, crack cocaine receptacles, newspaper, and used car parts, they talk about their children, the week that has passed, and the spring that is dawning (p. 21).

11 ….. Bird earns her living as a prostitute…. Eunice works in the formal economy cleaning offices at minimum wage, and supplements her income by selling homemade soul food to the local lunchtime crowd. Marlene has various off-the- books jobs in the service sector; she earns most of her underground money as a $9 per hour nanny for a white family in the neighboring upper-class university district (p. 22).

An editorial in the NY Times (6/8/08) writes about the national organizing efforts of domestic workers:

Domestic workers enjoy few if any protections. They have no right to unionize under federal or state law. Laws on job discrimination and occupational Safety do not apply to them, and they cannot take time off under the Family and Medical Leave Act. They work out of sight in private homes, leaving them Extremely vulnerable to exploitation and hindering their ability to find strength In numbers.

Geographic Mobility

Although many generations of people have migrated to different geographic locations seeking economic opportunities, each generation faces new challenges involved in what is left behind and what the future holds. Stack ( 1974) writes about half a million poor rural African-Americans who left the South between 1940 and 1960 looking for economic opportunities in the urban North, only to often find continued economic hardships resulting from discrimination and racism. Stack (1996) also describes reverse migration of Black Americans, from rust belt cities in the North to the South where they have family ties, during the 1970s and 1980s, who often continue to experience persistent poverty.

Massey (2008) describes current international migration to “new destinations” in the U.S., for example, where “industrial restructuring” provides jobs – often disagreeable jobs – outside the usual urban areas of New York, Chicago, and Los Angeles. The “new economy” of reduced manufacturing in the U.S. and the enormous growth in service and

12 unskilled jobs has resulted in major changes in the economy for poor immigrants. As jobs moved from the North to the South in the U.S. and away from major urban and unionized areas, this has been followed by internal and international migration.

Vogel also discusses recent trends of worker immigration from Mexico and

Central America to other destinations in the U.S., beyond the traditional migration sites.

The phenomenal increase in immigration to the southestern U.S. is to the growing metropolitan areas where new construction and service-oriented businesses have created a huge demand for low-cost labor. We all know, however, that this has all slowed down recently as the recession has impacted jobs and the housing market (Frey, 2009).

Duncan ( l999) writes about the rural poor in Appalachia and the Mississippi

Delta whose only escape from poverty involves leaving behind the culture of oppression, corruption, and status quo that characterizes these locations. Some of these individuals may return at a later time and become agents of social change. Thus, we see the risks and opportunities of geographic mobility and the need for visibility, protection and democracy if economic conditions are likely to improve.

The “feminization of migration” is a special case of “push and pull” from poor countries to more developed nations. The push is based on the need and desire to overcome poverty through geographic mobility. The pull is the demand for child care services, primarily among women in developed countries, who are increasingly working outside the home. Parrenas (2002) writes compellingly about the care crisis in the

Philippines where thousands of women have left their own children behind to care for children in other countries:

The dominant gender ideology (in the Philippines) holds that a woman’s rightful place is in the home, and the households of migrant workers present

13 a challenge to this view. In response, government officials and journalists denounce migrating mothers, claiming that they have caused the Filipino family to deteriorate , children to be abandoned, and a crisis of care to take root in the Philippines. To end this crisis, critics admonish, these mothers must return….. Migration ….. is morally acceptable only when it is undertaken by single, childless women (stated by President Fidel Ramos) (p.40).

To call for the return of migrant mothers is to ignore the fact that the Philippines has grown increasingly dependent on their remittances. To acknowledge this reality could lead the Phillipines toward a more egalitarian gender ideology. Casting blame on migrant mothers, however, serves only to divert the society’s attention away from these children’s needs, further aggravating their difficulties by stigmatizing their family choices (p.41).

It should be noted that roughly two-thirds of Filipino migrant workers are women; and some 34 to 54 percent of the Filipino population is sustained by remittances from migrant workers. Most transnational employment is arranged through governmental and non-governmental agencies. Parrenas offers a number of concrete suggestions, as well as gender ideological changes, that can mitigate some of the challenges of transnational female employment.

Mutual Aid and Social Networks

Massey (2008) in writing about new destination areas repeatedly notes the functions of social networks and relationships that are an extremely important component of the informal system. He identifies kinship networks, mutual aid associations, religious institutions, and sports clubs. Edin and Lein (1997) include extended families, boyfriends, social agencies and formal (often temporary) work. These authors note that measures of poverty are often misleading and poor families usually have more resources than known in order to make ends meet. Without such help, these families would often be unable to maintain their households. On the downside, they also note how boyfriends may leave formal jobs to avoid child support payments.

14 Individuals and groups have moved for many generations seeking economic opportunities, primarily to geographic locations already occupied by relatives, friends, and other members of their local communities. While this has worked out well for many, these familial and other disruptions are never easy and often without reward. In the case of illegal immigrants to the U.S., for example, we know how perilous the journey can be.

Many writers, including Massey ( 2008), Ehrenreich and Hochschild (2002), Portes and

Rumbaut (2006) have written extensively on this topic and the sacrifices that are involved. On the reverse side of migration, however, are the hardships for those who do not take the risks of mobility. When poor people migrate and leave behind their social and community networks, there is great insecurity and risk that new social and economic connections may not be forthcoming.

In writing about social networks in a poor, Black northern community, Stack states that when she first started studying this population:

I began to notice a pattern of cooperation and mutual aid among kin during the migration North and formed a hypothesis that domestic functions are carried out for urban Blacks by clusters of kin who do not necessarily live together, and that the basis of these units is the domestic cooperation of close adult females and the exchange of goods and services between male and female kin…. This was the starting point for my study of the strategies for coping with poverty. ( 1974, p. 9).

Stack believes that in other studies, lower class, Black families have generally been considered outside of the mainstream; and the matriarchal structure has often been considered deviant and dysfunctional by such writers are Moynihan and Lewis, for example.. From an anthropological, ethnographic perspective, however, Stack believes the configuration of poor Black families is highly productive and functional. She notes that “the culture of poverty” notion explains the persistence of poverty in terms of

15 presumed negative qualities within a culture: family disorganization, group disintegration, personal disorganization, resignation, and fatalism…..” (p.23). But for

Stack:

Black families living in The Flats need a steady source of cooperative support to survive. They share with one another because of the urgency of their needs. Alliances between individuals are created around the clock as kin and friends exhange and give and obligate one another….. without the help of kin, fluctuations in the meager flow of available goods could easily destroy a family’s ability to survive (p. 33).

Ehrenreich (2009) writes that in the aftermath of Hurricane Katrina, the most reliable first responders were not government agencies, but family and friends. Referring to her experiences writing the book Nickel and Dimed, Ehrenreich ( 2001) was impressed by the generosity of co-workers which put the welfare state to shame.

But Ehrenreich (2009) notes that poverty itself can deplete entire social networks, leaving no one to turn to. The poor simply run out of resources and sometimes resentment develops. In addition, the hand-to-mouth existence generally supports the status quo, when social change is desperately needed. While conservative writers support marriage as an anti-poverty strategy, in relation to welfare, for example, women not only hide their financial resources, they also hide the men with whom they live.

Vendors and Entrepreneurs

It is not uncommon to be a member of a fitness center and pay monthly or annual dues. These centers have employees who work for them. But if one of these workers becomes your “personal trainer” then you are expected to pay this individual directly – and in cash – not under the table but as excepted practice in this workplace. In fact, this worker may only work in this setting, if she is knowingly allowed to supplement her income. The downside, however, in exchange for this arrangement, her salary may be

16 extremely low. Paying a baby sitter, gardener, maid, sex worker off the books has become commonplace practice in the U.S. Why is this so – and does the situation need to be fixed? When we discuss danger, exploitation, and oppression, the answer is easier. But as we have noted throughout, the situation is highly complex.

In writing about microenterprises, Wright (January-February, 2010) asks “could microloans help America’s informal entrepreneurs become business owners – and rescue urban economies in the process?” The kind of people Wright describes seem to fit the

“anticipatory pattern” identified by McInnis-Dittrich (1995) – individuals who hustle to make a living and who are successful and seem to feel comfortable in this role.

But there are those who hustle whose lives may be much more marginal. In writing about vendors and entrepreneurs who sell magazines, books or panhandle on the sidewalks of Greenwich Village in New York City, Duneier (1999) discusses how defining these individuals, mostly Black men and often homeless, as “broken windows” justifies harassment and exploitation. The “broken windows” theory holds that minor signs of disorder lead to serious crime which has to be curbed. Duneier sees this as a form of social control where the only government intervention, rather than positive, is to eradicate and punish individuals engaged in these activities.

Duneier believes that a new social control strategy is needed that will support the efforts of these individuals to make a living. He says that some behavior that appears disorderly to the casual observer is actually bringing about community controls, rather than leading to their breakdown because many of the vendors and entrepreneurs in this setting have been ostracized and excluded from the more formal economy.

Any society with high levels of economic inequality, racism, illiteracy, and drug dependency, and with inadequate transitions from mental

17 hospitals and prisons to work and home, will have vast numbers of people who cannot conform to the requirements of its formal institutions. Given this, the correct response is not for the society to attempt to rid public places of the outcasts it has had a hand in producing. It is vital to the well-being of cities with extreme poverty that there be opportunities for those on the edge to engage in self-directed entrepreneurial activity (p. 317).

The similarities between the population that Duneier writes about, and other individuals engaged in the informal economy, is the attempt to make a living and survive when avenues to mainstream activities may be partially or totally closed.

Exploitation Within the Formal Economy

The formal and informal systems are very often connected. The system is supported by small local entrepreneurs and large, major employers. Individuals may work in both and the same employers and employees may be operating in both systems. The use of temporary and contract work is pervasive.

Vogel (2006) is particularly pessimistic about the informal economy. He notes that the current boom of informal economic activity bodes ill for all working people.

Work in the informal economy contrasts sharply with formal employment: wages and working conditions are substandard; there are not guaranteed minimum or maximum hours of work, paid holidays, or vacations; gender, ethnic and racial discrimination are uncontrolled and systematically exploited; no mandatory health or safety regulations protect workers from injury or death on the job; and workers are denied the traditional benefits of employment in the formal economy …… few workers join the informal labor force voluntarily – the vast majority are recruited primarily through economic desperation unmitigated by even a minimal safety net.

In writing about revenues lost in the informal economy, Vogel (2006) cites the example of Los Angeles County. Data from Economic Roundtable researchers determined that in 2004, the informal economy produced an $8.1 billion payroll. This unreported and untaxed payroll shortchanged the public sector, and safety net services, in

Los Angeles County by the following amounts:

18 $1 billion in social security taxes; $236 million in Medicare taxes; $96 million in California disability insurance payments; $220 million in unemployment insurance payments; and $513 million is workers compensation insurance.

Vogel notes that the exploitation of undocumented workers – primarily from

Mexico and Central America - is fundamental to understanding the informal economy in

Los Angeles County. He says that while many native workers and legal immigrants participate in the informal economy, undocumented immigrants represent the majority of off-the-books workers – i.e. 61 percent of the informal labor force in Los Angeles County and 65 percent in the city. Most of these immigrant workers are not casual day laborers but work in highly structured and organized formal work environments.

The Economic Roundtable’s breakdown of earnings by gender reveals the super- exploitation of undocumented women workers in the Los Angeles informal economy.

Overall, the average wage for undocumented women workers in the informal economy of Los Angeles County was $7,630 compared to $16,553 for men. That amounts to only 46 percent of undocumented men’s annual earnings ….. and the average wage of all undocumented workers is less than one-half (41 percent) that of native workers in the same job categories in the formal economy.

In an editorial in the NY Times ( June15, 2009), the writer notes that there are more than 200,000 workplaces in New York State where fundamental labor standards do not apply. These are not sweatshops or salt mines. They are private homes, where housekeepers, nannies and caregivers for the elderly do work as important as it is isolated and unprotected. “The exclusion is a relic of the New Deal, when labor protections like overtime pay were written specifically to exclude domestic and farm labor. From exclusion it can be a short distance to abuse: to long hours, low pay, dehumanizing treatment, physical and sexual harassment”.

19 Greenhouse (2009) reports on a study of 4,387 workers in Los Angeles, Chicago, and New York where workers, among other violations, are routinely paid less than the minimum wage and work overtime without being properly paid. In reporting on this story, the NY Times says “the word sweatshop is not big enough anymore to capture the extent and severity of the rot in the low-wage workplace” (editorial, August 3, 2009).

Although we have emphasized the very negative aspects of the informal economy within the formal structure, Dodson ( 2009) writes about informal acts of benevolence in the workplace, such as allowing workers to take time off, without docking their pay, if their child is sick; or bringing a child to work if a baby-sitter doesn’t show up; or increasing a paycheck to compensate for lost time. She notes that these acts of benevolence occur as well-meaning individuals respond to the unfairness of the economic system. Dodson doesn’t write about the same kind of marginalized people described by

Duneier (1999), but many of the characteristics of the economic system are the same.

Over the last 20 years, an increasing percentage of hardworking families have been quietly and chronically eroded by a brutal economy while national and business leaders have accepted, even promoted, this kind of society. …..In an economy that impoverishes so many people even as they do the jobs of the nation, the fault line becomes a moral line too.

History teaches us that whenever people are denied access to society’s ways of self-protection and survival, they will compose alternatives….

Dodson recalls a history when market rule could justify almost anything - buying and selling human beings, sending children into coal mines, denying people the right to organize, gutting whole communities to take jobs to a cheaper elsewhere, or leaving people who have labored their long lives without a pension or a home.

There is, however, a parallel story, one about resistance. It is a new chapter In a proud history of how people will refuse to go along with economic Abuse …… (Dodson, 2009)

20 Solutions and Goals

As the U.S. becomes more like a developing country, with declining wages, major unemployment, an inadequate safety net, and social and economic inequality, these conditions threaten to undermine the democratic structure of the U.S. This is a crisis for the country, as well as for low-income individuals and families. Perhaps it is not unexpected that as the economy of the country plummets, conservative political elements become more strident. It is thus an enormous political challenge for President Obama to accomplish progressive goals. The growth of the informal economy is part of the challenge of the new social and economic environment.

Where there is widespread corruption in government, this takes the informal economy to another level. Pervasive corruption in government is an important example of the institutionalization of the informal economy. Widespread privatization of public services, in areas as diverse as social services and the military is why transparency, accountability, regulation, and monitoring are essential conditions of a democratic society. In the U.S., campaign finance reform, labor laws that protect workers’ rights, and welfare that meets self-sufficiency standards are examples of progressive legislation that addresses some of the abuses of the informal sector.

We note how complex and interconnected the formal and informal sectors are; and we realize what a major role the informal economy plays in low-income communities. There are no easy solutions. With few jobs and benefits, a shredded safety net and few options, the informal economy may be the only income poor people have.

But without regulations, transparency, and accountability this is generally a bad situation for society and a bad situation for low-income people. We are not talking about a “law

21 and order” society where differences are punished, but rather a democratic society based on equality, lack of discrimination based on gender, race and ethnicity, with good jobs and with benefits - for all people whether employed or not. But poor women are often caught in a hard place between needing to depend on the informal system and fear of alienating important components of mutual aid and support, and the need to move beyond this structure to achieve economic security, mobility and self-sufficiency. This is the dilemma of many people in the low-income community.

We also need to emphasize the importance of lost revenues to towns, states, and the federal government – revenues necessary for public services and jobs – as a result of the informal economy. In this time of large federal budget deficits, revenue short-falls resulting in massive cuts in services and jobs on the state and local levels, and public rejection of additional taxes from all sectors of the population, it is often the most vulnerable individuals and families – e.g. poor women and their children – who bear the biggest brunt of the financial crisis. Portions of the informal economy contribute significantly to this situation.

In discussing solutions and goals, we noted earlier the importance of educating the public to the realities of hardships in the welfare system and decreasing the invisibility of the informal economy. Other possible solutions include the following:

1. Understand the magnitude and impact of geographic mobility and the need to

change immigration laws to meet the realities of peoples’ lives and the

personal and financial costs of the global economy and transnationalism;

understand the global implications of the “feminization of migration”.

22 2. Provide educational opportunities, and the necessary supports, so that low-

income women can become upwardly economically mobile;

3. Organize day-laborers and worker centers; support grass-roots and union

organizing; and monitor and enforce existing public policies and violations of

these policies that affect low-wage workers; monitor the governmental

subcontracting process and hold legislators accountable for undermining

union efforts through the subcontracting process.

4. Help develop microenterprises that will enhance individual income and

contribute broadly to the growth of the economy; help channel vendors and

entrepreneurs into profitable businesses.

5. Support job creation and fair trade within the global economy. Obvious areas

of growth include new technologies and green jobs, but global change in trade

arrangements through regulation, for example, is a basic need. As Wallach

(2009) says we need to change the rules of the global economy so they no

longer “favor the few rather than the many”.

6. Include low-income women in economic development; provide low-cost

housing where there are jobs; and provide transportation and child care to

support jobs and economic development;

7. Examine the goals and outcomes of TANF from an anti-poverty perspective.

TANF reauthorization is scheduled for this year, 2010. It is important that

TANF be a part of a comprehensive safety-net policy that contributes to the

economic self-sufficiency and well-being of all low-income individuals and

families;

23 8. Reduce inequality through shared prosperity. As a result of economic policies

that began almost thirty years ago, the gap between the rich and poor has

steadily increased in the U.S. As the nation emerges from the current

recession, crucial actions must be taken to curb the excesses of Wall Street in

the interest of Main Street working and non-working individuals and families.

9. Support a 21st Century Feminism Movement, with low-income women in

leadership positions, that addresses the “feminization of survival” and accepts

differences in family structures and supports these differences with

progressive work, income supports, safety-net services, educational, and

health policies.

Conclusions

Studs Terkel’s 1974 book entitled Working is a brilliant statement of the meaning and exigencies of work, reported by over a hundred ordinary people. To paraphrase

Terkel, work is a search for daily meaning as well as daily bread; and for many, the search is not all that successful in either area. Today, this is even more true. The status of low-wage work is a crisis – for men and women. For women there are not only economic and political problems, but gender problems, as well, on a global level. In addition, poor women are maligned when they work and when they don’t work – with a social welfare system and international conditions that are not supportive or helpful.

The informal economy develops in response to economic need; but it also creates economic need through cuts in needed services and jobs and exploitation of workers. The growth of the informal economy reflects the degree to which the formal economy

24 excludes, exploits, and punishes low-income workers and other poor people. As we have discussed, there are many important and positive aspects to the informal economy, particularly in the areas of mutual aid and entrepreneurship, and these arrangements need to be respected and often nurtured. However, while the informal economy may be a necessary and intrinsic aspect of the lives of many poor people, it should not be considered an acceptable solution or alternative to current workforce and safety net problems; nor should it be a substitute for protections and regulations that should be built into the formal sector.

The informal economy exists on the individual and societal levels. Because it exists mainly in the shadows, it may seem deceptively elusive and benign. But it is not benign because the issues of transparency, accountability, and open debate are largely absent – and often violated – in its implementation. The low-wage job market is at a crucial low point in the U.S. We need to sort out the variations in the informal economy; but most importantly, we cannot expect low-income individuals and families to depend on mutual aid and social networks, individual entrepreneurship, or the informal sector within the formal economy, for their survival.

We have noted throughout this paper how important it is to understand the culture and context of the behavior of individuals and groups; and we are often confronted with the questions of supporting and maintaining the status quo or enhancing change, particularly for social, economic and health reasons. Clearly, we believe that change must come from within the group affected and grass-roots, rather than top-down, change is supported. On the other hand, however, the grass-roots need political support. The

25 challenge is to support and enhance the cultural component, while improving economic and social conditions for affected populations.

As the nation begins to recover from the economic recession, with the loss of more than 7 million American jobs in the last two years, the rate of unemployment

(currently at 10 percent –with much more for poorer people and much less for upper income groups ) and a very slow recovery, continue to be great concerns. Adequate employment is not wholly tied to local economic recovery, but is rather a product of globalization, trade policies, monetary policies, unionization, and safety net programs, such as health care, unemployment insurance and cash assistance. Thus, there is a disconnect between upswings in Wall Street, and the banking and insurance industries, for example, and the well-being of working class individuals in the society. As Naomi

Klein (2007) says, we need to tackle the essence of corporatism: privatization, government deregulation, and deep cuts in social spending. I would also add the pernicious effect of tax cuts for the rich.

There is need for a 21st Century Feminist Movement for Poor Women, with poor women in leadership positions, not alone, but with other women from different social classes. We need policies and programs for single and married women, with or without children, working or unemployed (for a variety of reasons) and immigrant and native

Americans. Poor women in leadership positions will help other poor women, through mutual aid and support, to organize and mobilize their own grass-roots and other coalitions of low and middle income people to work for and enact progressive social and economic change, with change in gender ideology included.

26 References

R. Conniff (February, 1992). Cutting the Lifeline: The Real Welfare Fraud. The Progressive. 56.2. 25-31.

G. Davies and M. Derthick (Summer, 1997). Race and Social Welfare Policy: The Social Security Act of 1935. Political Science Quarterly. 112.2. 217-235.

J.DeParle and R. Gebeloff (Jan. 3, 2010). Living on Nothing but Food Stamps. NYTimes .p. 1 and 16.

L. Dodson (January 11, 2009). The Work Around. The American Prospect. excerpted from The Moral Underground: How Ordinary Americans Subvert an Unfair Economy. NY: New Press.

M. Duneier (l999). Sidewalk. NY: Farrar, Straus and Giroux.

E. Eckholm (July 5, 2009). Safety Net Fraying for the Very Poor. NYTimes, p. 15.

K. Edin and L. Lein (1997). Making Ends Meet: How Single Mothers Survive Welfare and Low-Wage Work. NY: Russell Sage Foundation

B. Ehrenreich (2001). Nickeled and Dimed: On (Not) Getting By in America. NY: Metropolitan Books.

B. Ehrenreich and A.R. Hochschild, eds. (2002). Global Woman: Nannies, Maids, and Sex Workers in the New Economy. NY: A Holt Paperback.

B. Ehrenreich (July12, 2009). A Homespun Safety Net. NYTimes, p.9.

D. Farrell (August, 2004). The Hidden Dangers of the Informal Economy. The McKinsey Quarterly.

W. Frey (December, 2009). The Great American Migration Slowdown: Regional and Metropolitan Dimensions; and A Rollercoaster Decade for Migration. Washington, DC: Brookings Institution.

S.Greenhouse (Sept. 2, 2009). Low-Wage Workers are Often Cheated, Study Says, NYTimes,

I. Katznelson (2005). When Welfare was White: The Untold History of Racial Inequality in Twentieth Century America. NY: Norton Press.

27 N. Klein (2007). The Shock Doctrine: The Rise of Disaster Capitalism. NY: A Metropolitan Book, Holt.

Legal Momentum (December, 2009). Battered by the Storm: How the Safety Net is Failing Americans and How to Fix It. The Women’s Legal Defense and Education Fund.

D. Massey (2008). New Faces in New Places: The Changing Geography of American Immigration. NY: Russell Sage Foundation

K.McInnis-Dittrich (l995). Women of the Shadows: Appalachian Women’s Participation in the Informal Economy. Affilia, 10.4. 398-412.

G. Mink ((1995). The Wages of Motherhood: Inequality in the Welfare State, 1917-1942. Ithaca: Cornel U. Press.

S.Morgen (Autumn, 2002). The Politics of Welfare and of Poverty Research. Anthropological Quarterly. 75. 4. 745-757.

M. Nelson and J. Smith (l999) Working Hard and Making Do: Surviving in Small Town America. U-California Press.

J. Nichols (December, 2009). The Spirit of Seattle Lives On. The Nation. p. 19-20.

R.S. Parrenas (2002). The Care Crisis in the Philippines: Children and Transnational Families in the New Global Economy, in Ehrenreich and Hochschild, eds. Global Woman, A Holt Paperback.

A. Portes and R. Rumbaut (2006). 3rd ed. Immigrant America. U- California Press.

J. Quadagno (1994).The Color of Welfare: How Racism Undermined the War on Poverty. NY: Oxford U. Press.

L. Ratner (Sept.28, 2009). The New Domestic Order. The Nation. p. 13-16.

S.Ratner (Feb.2000). The Informal Economy in Rural Community Economic Development. TVA Rural Studies.

S. Sassen (2002). Global Cities and Survival Circuits, in Ehrenreich and Hochschild. Global Woman. NY: A Holt Paperback.

C.Stack (l974) All our Kin. NY: Basic Books.

C. Stack (l996). Call to Home: African-Americans ReclaimThe South. NY:Basic Books.

28 S. Terkel (1974). Working: People Talk About What They Do all Day and How They Feel About What They Do. NY: Pantheon Books.

S.A. Venkatesh ( 2006).. Off the Books: The Underground Economy of the Urban Poor. Hrvard U.Press.

R.Vogel (July-August, 2006). Harder Times: Undocumented Workers and the U.S. Informal Economy. The Monthly Review. 58.3.

L. Wallach (December, 2009). Obama’s Choice. The Nation. p.20-21.

K. Wright (January-February, 2010). On the Books, The American Prospect, 21-24.

29 WELFARE IN THE U.S. AND THE INFORMAL ECONOMY FOR LOW-INCOME WOMEN

Marcia Bok Professor Emeritus University of Connecticut School of Social Work

Paper presented at the 28th International Labour Process Conference – Rutgers U., New Jersey March 15-17, 2010