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NewsHour Economics Correspondent Paul Solman looks at a different way to welfare reform.

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SPOKESPERSON: This is Dawn.

PAUL SOLMAN: Former welfare recipient Dawn Harris wants a job. America Works is committed to finding her one. This is a private, for-profit employment agency, which gets jobs for those on welfare. Back in the mid 80's America Works set up shop with a new concept, getting paid a bounty by state government for each person it moved off the dole and onto someone's payroll.

DAWN HARRIS: As you can see on my resume I know Wordperfect, Microsoft 6.0, data entry. I do 10,00 key strokes numeric.

PAUL SOLMAN: Now that the pressure's on nationwide to move people from welfare to work America Works is being touted as a model for states to embrace. And quite a model it is. The employees here actually compete with each other to place clients like Dawn Harris in jobs.

MAN IN GROUP: Dawn, I have a great position for you. You'll be involved in some of the creative end of the job, as well as dealing with their client base.

WOMAN IN GROUP: Can you interview tomorrow? I have a data entry position I'd like to speak to you about.

DARYL IMOA: My name is Daryl Imoa, and I'd like for you to speak with me also.

PAUL SOLMAN: To America Works co-founders Lee Bowes and Peter Cove the key to their employees' enthusiasm is their financial stake in the process.

LEE BOWES, Co-Founder, "America Works:" The staff that you see are all bonused quite extensively. Some of the staff double or triple their salary base with their bonuses because as we generate profit, we can pass it onto the staff. So that everybody's focused on placing someone in a job. Where--

PAUL SOLMAN: And quickly I noticed.

LEE BOWES: Yes.

PETER COVE, Co-Founder, "America Works:" And keeping them there. The reason this is successful is because the government only pays us if we succeed. We cannot afford to fail.

PAUL SOLMAN: So employees here are constantly beating the bushes for jobs in which to place their welfare clients.

MAN IN ROOM: Tracy and I have ongoing positions out at the airport, John F. Kennedy Airport, for food service positions.

WOMAN IN ROOM: I have cashiers that I need for Krispy Cream, cashier, food prep at Fruger's Bagels on 42nd and--

MAN IN ROOM: I also have accounts receivable positions with Time Long Cable.

PAUL SOLMAN: Now, of course these are preponderantly low paying jobs, be they instill somewhat cheesy Time Square or the ritzier, recently renovated Roosevelt Hotel. In March of this year the Roosevelt Hotel made the news when 4,000 people queued up for 700 job slot. America Works got right in.

KEITH CARR, "America Works:" And they value the service that we provide, the fact that they don't have to interview 10,000 people streaming around a city block. They can just call me. I'll send them two or three people that might be better suited for the position.

PAUL SOLMAN: America Works gets paid by the state--in this case New York--$5400 for each person it places in a job for at least seven months. To get welfare recipients ready for steady employment America Works, like most job placement firms, teaches interviewing skills.

MAN: What's your schedule like?

WOMAN: My schedule during as far as the daytime?

MAN: Yes.

PAUL SOLMAN: It teaches job search skills. It teaches computer skills for a fairly random subset of welfare recipients who've either heard about the program or have been referred to it. But unlike most job placement firms there's a mandatory first week of reality check with Mrs. Wiley, herself a former welfare mom.

MARGARET WILEY, "American Works:" You mention salary in an interview, never. The last thing you want to do on an interview is give these individuals the impression that you are there just to get something from them.

PAUL SOLMAN: Part schoolteacher, part drill instructor, Margaret Wiley prepares a couple of dozen people at a time for the world of work. You do dress neatly. You don't flash your gang's "hi" sign. Above all, you don't show up late.

VERON CORNELIUS: My problem is I always late every time I go some place. At my grandmother's funeral I went there late and it was--

PAUL SOLMAN: Wait. You were late to your grandmother's funeral?

VERON CORNELIUS: My grandmother's funeral, and--

PAUL SOLMAN: Veron Cornelius had the same problem her first day at America Works. Mrs. Wiley simply locked her out. Cornelius was on time the next morning, but it's a lesson some resist.

MAN: See, because like people be having to go through a lot of things to try to get here on time. Everything don't go right when you get up in the mornin' and stuff.

MARGARET WILEY: --and I worked in New York--and I've never been late to work.

MAN: You must get up at 6 o'clock.

MARGARET WILEY: I get up at five. To your employers being on time is the simplest thing you can do. What it's actually saying to them is that I appreciate that I have a job to come to and I realize how important my job is.

PAUL SOLMAN: America Works not only grooms its clients but then tends to their workaday problems on the job. Corporate representatives like Cindy Carlascio make the rounds daily, and Hanky Panky, a lingerie maker where three America Works clients were still in their trial periods, Estelle Sterling had run out of cash. Carlascio wanted to know why.

ESTELLE STERLING: See, my daughter's birthday's coming up. She'll be 16 this year. And she want--you know, the older they get, the more they want. Since she's been such a good kid and she's been on the honor roll in school and she's the student of the month, I thought she deserved a little extra.

CINDY CARLASCIO, America Works: Sweet sixteen, huh?

ESTELLE STERLING: Yes.

PAUL SOLMAN: So Cindy Carlascio actually gave Estelle Sterling $20 for the car fare to commute to work.

ESTELLE STERLING: You're very good to me.

PAUL SOLMAN: It's this "hands on" approach that sold Hanky Panky's owners, Lida Orzech and Gale Epstein on America Works.

GALE EPSTEIN, Businesswoman: They act as a buffer between the employee and employer, and they can troubleshoot or resolve problems like this that might be a little embarrassing or touchy for us.

PAUL SOLMAN: Are these people comparable to the people you were hiring before?

LIDA ORZECH, Businesswoman: In a way this might be a little better.

PAUL SOLMAN: Seriously?

LIDA ORZECH: Absolutely.

GALE EPSTEIN: Many of these women have raised children. That is probably one of the hardest jobs that there is, so they've been working all this time.

PAUL SOLMAN: Now, before this story becomes a puff piece let's introduce the down side. This job candidate is here because she failed at her first America Works job. Debrina Lynn was a telemarketer, trying to sell long distance service.

PAUL SOLMAN: What was it that didn't fit between the job that you were trying and you?

DEBRINA LYNN: Maybe I just wasn't aggressive enough for that position.

PAUL SOLMAN: Did you like doing it?

DEBRINA LYNN: Yeah. It was all right, but just people telling you no all day and hanging up the phone on you all day--

PAUL SOLMAN: The sobering fact is these aren't great jobs. Consider Sharee Brooks' gig at Ferarra's in Times Square, a fast food restaurant where she makes change customer after customer. Brooks has five kids, lives in the Bronx, and gets up at 3 in the morning to get here by 6 to earn minimum wage. When the cash register was short the previous week, she made up the difference out of her own packet.

SHAREE BROOKS, America Works Graduate: $90--$94 difference--but it was no problem because it's my responsibility.

PAUL SOLMAN: In fact, Brooks was so chained to the register we had to get special dispensation to continue the discussion about the mistakes you can make when the crowds descend and the money starts flying.

SHAREE BROOKS: I was nervous because I didn't want them to think that I took the money. That's something. That's hard because I couldn't explain it.

PAUL SOLMAN: The key to smoothing over a tough situation with the boss an America Works corporate rep like Cindy Coralascio.

EMMANUEL MARAIS, Businessman: If have a problem with one particular individual, I call Cindy and after three or four months, I am very happy. That's what happened. As of Monday I hired two people after three months of excellent performance.

PAUL SOLMAN: After three months and a lot of phone calls according to Carlascio and colleague Russell Pinta.

PAUL SOLMAN: How often do you talk to this guy?

CINDY CARLASCIO: Every Day. Definitely Every day.

PAUL SOLMAN: Every day?

CINDY CARLASCIO: Two or three times a day, yes.

PAUL SOLMAN: If it were me, I might not want to take a risk on a place like this just because I would figure the dropout rate would be too high.

RUSSELL PINTO, America Works: But you can't look at it from that way. You have to just know how to screen the candidates. You have to see and feel that this one is really going to make it. And you have to take that shot because, don't forget, you're dealing with a lot of candidates that don't have much of a work history.

PAUL SOLMAN: This is the nub of the America Works model: parent-like intervention, supposedly motivated by financial reward. But--and this would seem to be the key question--how broadly applicable is the model? According to critics not very. These candidates may not have much work history but they're the cream of the welfare client crop, just the sort of people you'd expect a for-profit firm to recruit, or so says sociologist Frances Fox Piven.

FRANCES FOX PIVEN, Sociologist: America Works selects out the people who already have the determination, who already have the motivation.

PAUL SOLMAN: Founders Lee Bowes and Peter Cove respond, however, that they don't pick only the most likely to succeed.

LEE BOWES: The city of New York is mandating about 50 people to come to us every two weeks. So about half the people he would have seen in the classes were, in fact, a mandated group. They weren't a voluntary group. And, quite honestly, I don't see a difference between the mandated group and the people who've come voluntarily.

PAUL SOLMAN: Peter Cove says that, in fact, the people who were mandated to enter the program have done even better than those who came of their own accord.

PETER COVE: What's very interesting to me is the state of New York follows our people for 15 months after they get a job. In New York City, where they haven't been mandated up until now, they're voluntary, 80 percent are still off welfare after 15 months, in Albany, where they have been mandated, they've been told you've got to come, 92 percent are still off welfare.

PAUL SOLMAN: But, maintains Piven, such numbers represent a skimming off of the most likely to succeed within America Works, itself, starting with Margaret Wiley's boot camp.

MARGARET WILEY: You cannot be absent, and you cannot be late.

FRANCES FOX PIVEN: So that's one way of screening people. Another way of screening people is after the seminar, you go on a waiting list, and they select for placement the people who are the most motivated and most talented, and then they say, 80 to 85 percent of those they place they're ignoring the fact that most people didn't get placed.

PAUL SOLMAN: To Piven, this small moment might be an example. Corporate rep Phil Jones, who while we were shooting heard from Barnes & Noble about a client who failed to show for a job interview.

SPOKESMAN: Oh, really? No shows--automatic termination--

PAUL SOLMAN: Automatic termination. So America Works is quick to drop those who won't play by its rules. On the other hand, it's very loyal to those who do. Take Renee Lawrence, who's just been fired from her second placement working for an exterminator.

RENEE LAWRENCE: I guess I've been out of the work field too long to realize that if the boss screams at you for no reason or if he says something that's his way, whether you're right or wrong, it doesn't matter; it's the boss, and that's what I consider the business politics that I've learned on the past two jobs, so I'm ready for my third and my last.

PAUL SOLMAN: To fans of programs like America Works this last sound bite is stirring testimony. The program sticks with a client even after it's no longer getting paid to do so. But, to critics, the whole operation raises another issue; that in grooming and promoting its clients America Works is simply giving them an advantage over similarly low skilled workers who aren't on welfare, in effect, helping their people cut ahead in line.

FRANCES FOX PIVEN: The people who become their clients jump the queue, the job queue, and get the jobs, whatever jobs they've been able to organize in there from their pool of employers. And once they get a job their people push their clients ahead of other people in getting child care, or getting an apartment, or solving some other problem. I don't think there's anything wrong with that. You know, somebody should go to bat for welfare clients for a change, but what is run is misleading the American public into thinking that you've changed the overall situation.

PAUL SOLMAN: Katherine Newman couldn't agree more. She studies the working poor and when we showed up to interview her actually had up on her door the story of the Roosevelt Hotel job crush, which America Works worked around.

KATHERINE NEWMAN, Sociologist: The reason I have this article on my door is to remind me every day that I look at it that there are thousands of people in cities like New York and in cities across the country who want nothing more than a decent job. There are many too many of them, and that's the biggest problem. The ratio of applicants for jobs in fast food restaurants, for example, in Central Harlem, to people who hold those jobs was fourteen to one before welfare reform.

PAUL SOLMAN: Oh, come on. You mean fourteen people for every Burger King or McDonald's job?

KATHERINE NEWMAN: It astounded me when I did the research. Now, who are we going to put into that labor market as a result of welfare reform? We're going to put people who are going to be competing for the same low wage jobs, who are also not well skilled, not well educated. And they're going to go into a labor market that already cannot absorb this huge number of people who are looking for work.

PAUL SOLMAN: Okay. Well, gentlemen, thank you both very much. I appreciate it.

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