This file is a brief single-author policy essay. Written in the wake of the 1996 federal welfare reform, Sennholz offers a libertarian critique of both the welfare state and the reformers who try to discipline it without removing the labor-market barriers government itself has created.
The essay opens with a sweeping historical judgment: the welfare state is not merely inefficient but historically exhausted, tied in Sennholz’s account to socialism, class conflict, taxation, debt, and monetary debasement.
The welfare state which came into vogue during the 1930s may be with us for a while yet, but not for long.
Its central thesis is that welfare will fail not only because it is fiscally unsustainable, but because it produces dependence while simultaneously obstructing the very employment that could end dependence. Sennholz treats the 1996 act as a partial sign of retreat, but not as a true reform.
The sweeping federal welfare act of August 22, 1996 is an indication of many more reforms to come.
He notes that the law devolves authority to the states, imposes work requirements and time limits, and reduces immigrant benefits. This decentralization matters because it breaks the “monolithic” federal structure and introduces interstate comparison. Yet Sennholz expects political resistance where generous benefits and heavy taxes weaken state economies.
The essay’s key conceptual move is to shift attention from welfare recipients’ incentives to the institutional structure of the labor market. He grants that benefits can discourage work, but insists that even without such inducements, legal barriers would still prevent many recipients from being hired.
Unskilled workers face formidable barriers to the labor market.
The most important of these, for Sennholz, is the minimum wage when combined with mandated employment costs. Workfare assumes low-skilled recipients can enter employment, but wage floors price them out of the market. His criticism is aimed especially at reformers who demand work while raising the cost of hiring those least able to command high wages.
Minimum wage legislation may be the worst barrier which millions of unskilled workers, old and young, are unable to clear.
The structure of the essay then catalogs additional barriers: Davis-Bacon “prevailing wage” requirements, ERISA pension obligations, and EEOC liability risks. Together they make the employment of welfare recipients costly, legally hazardous, or economically irrational for employers. The result is a contradiction: political reformers order people into work while maintaining laws that exclude them from work.
The welfare reformers are laboring to roll the welfare stone up the mountain to the barriers they themselves erected.
Sennholz’s relevance lies in this diagnosis of failed reform. He does not defend the pre-1996 welfare system, but he also rejects reform that keeps labor-market regulation intact. His conclusion is blunt: welfare reform cannot succeed as workfare unless the state first removes the legal obstacles to hiring marginal workers.
A true welfare reform would eliminate the political barriers to the labor market.
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