The type of welfare-to-work reforms so loved by new Labour will not protect the poor if the economy fails, warns William Julius Wilson, the top authority on US inner-city poverty. He talks to Tim Cornwell in the second of our series on social exclusion

Two years ago sociologist William Julius Wilson blamed much of the urban social ills in the United States on the disappearance of work. For the first time in the 20th century, he argued, a significant majority of adults in mostly black inner-city neighbourhoods were not working a typical week. The root of the problem was not the disincentive of government handouts, the breakdown of old-fashioned family values, gangs or teenage mothers. It was joblessness, as employers moved away from urban centres and demanded ever higher levels of education and training.

This argument was the main thrust of Wilson's book, When Work Disappears: The World of the New Urban Poor. It was published in 1996, the same year Time magazine called its author one of America's 25 most influential people. The book was Wilson's answer to growing demands for reforms to push people off welfare and into the job market - the same kind of reforms Tony Blair's new Labour government is poised to implement in Britain. "There is harsh talk about work instead of welfare," Wilson wrote, "but no talk of where to find it."

Professor Wilson concedes that work is now reappearing in the US for those most in need of it. The unemployment rate for high-school drop-outs, he notes, is down to 7 per cent from 12 per cent in 1992, much of the decrease having taken place in the past year. The number of long-term unemployed, those out of work for more than six months, was falling by about 75,000 a month in early 1997, and probably at a faster pace now. But he cites these figures hand in hand with a warning of a catastrophe waiting to happen. The reason: if the economy goes into downturn, it will come just as new time limits begin to force people off welfare.

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William Julius Wilson's work from the late 1980s is credited with popularising the notion of an American "underclass". He is the US's leading authority on poverty and the inner city and one of its most prominent public intellectuals. After a quarter century at the University of Chicago, he was recruited to Harvard as part of Henry Louis Gates's much-publicised bid to create a "dream team' for "Afro-Am", African American studies. In a telephone interview from his Harvard office, Wilson says it was the best move he ever made. But the man who has done much to remind policy-makers that inner cities exist has been out of the public eye of late.

Crime in the US is down dramatically, and the economy is up. Gangs and crack-dealers are old hat, and zero-tolerance policing is the rage. The slump of the early 1990s is beginning to feel like a bad dream. The deficit is dwindling, and Asian economic "flu" has not taken hold. Forget the million plus people locked in US jails, or the millions more who do not have health insurance: America is in a mood to enjoy the good times, watching the stock market rise and home equity rebound. In short, urban blight is not the compelling subject it was in the early 1990s, when the Los Angeles riots demanded answers to the violence and destitution of inner-city life.

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Wilson is completing two books, one on the use of multi-ethnic coalitions to bridge racial divides, the other on race and the social organisation of neighbourhoods. He arrives in London this month for a short stay at the London School of Economics, to meet British scholars in his field, give them the low-down on the US welfare reforms so popular over here and assess the workings of the British job market.

Both the US and United Kingdom have lately had sharply falling jobless rates, but the gap between haves and have-nots continues to grow in both countries, he will warn. Continental Europe, meanwhile, still has double-digit unemployment despite economic growth.

Wilson says: "I want to review, much more carefully than before, changes in safety-net requirements and the extent to which there are incentives to create jobs in Britain as compared with France and other places. I'm talking about the extent to which the jobs being created in Britain have to cover unemployment compensation, health care, fringe benefits, all these things. In the US, many low-paid jobs have no health insurance, no vacation leave, so the cost of creating jobs is not great."

Wilson counts himself an "informal adviser" to President Bill Clinton. He joined the economic conference in Little Rock that Clinton mounted before the start of his first term. He sends the president about three memos a year, he says, and is encouraged by hand-written notes in reply. But he was deeply disappointed, as were many liberal Democrats, by Clinton's signing of a conservative welfare reform bill that limited state payments to the unemployed to two consecutive years, with a five-year maximum limit. Although Clinton is "better than the Republicans", Wilson was only partly mollified by the $3 billion welfare-to-work programme intended to soften the bill's impact.

President Clinton bragged of the "rather stunning results" of his welfare reforms, combined with the rising economy, in a speech last month. He described the new laws as tough love: that "after a certain amount of time, people who could go to work, had to go to work". When he took office, Clinton claimed that there were 14 million people on welfare, or 5.5 per cent of the population. Now there were fewer than nine million, or 3.3 per cent, the lowest percentage since 1969 - "a very hard-won victory for everybody who was a part of it". A welfare-to-work partnership with private firms, meanwhile, has moved 135,000 welfare recipients into employment in the past year, Clinton said. (Though on Wilson's figures this equates to only a small fraction of the long-term unemployed.) Wilson's economics colleagues tell him that the US recovery will last several more years. In the past eight years it has already generated 13 million jobs. If it ran five more years, he says: "It would be great. You would see some really significant reduction in the jobless rate in inner-city neighbourhoods." In the past, tight labour markets have been of relatively short duration; if they last, they could draw back discouraged workers who have dropped out. Communities could reorganise around work. Crime would fall further, along with "social dislocations" such drug use, and better race relations would result as middle-class people lost their fear of the inner cities.

But against this picture of hope, Wilson returns to a disturbing long-term trend: the decreased relative demand for low-skilled labour. The spread of computer technology and the growing pool of college graduates are to blame. In addition, the growing internationalisation of economic activity has thrown low-skilled workers in the US into competition with others overseas.

The US, for example, has seen imports hit hardest in labour-intensive industries such as textiles, shoe manufacturing and clothing, all of which employ large numbers of African-American workers. In the US, 40 per cent of all clothing workers are black.

These trends have been muted by the economic recovery, but they continue. If the economy falters sooner rather than later, Wilson says, the time limits on welfare will see hundreds of thousands of welfare recipients looking for jobs, pushing them into a market already flooded with the jobless. "We are not thinking about the worst-case scenario," he says. "We somehow believe that the state we are in is going to last indefinitely. We have no contingency plan, and we could face a real catastrophe." They are warnings that Britain would do well to heed.

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The remedy that Wilson offers lies in old-fashioned public-sector jobs modelled on the Work Projects Administration launched by President Franklin Roosevelt in 1935. He believes there is more enthusiasm for such an idea than in the past, but admits it will not be taken seriously while the economy is in such good shape.

Debates on social and economic inequality in the United States inescapably return to race. Although Wilson was a player in Clinton's much-hyped but fizzled race initiative, he has long argued that people are too quick to fall back on race. It is race-neutral economics that has lowered the demand for the less skilled, in his analysis. But the resulting rise in black unemployment leaves the left talking about racial discrimination, and the right complaining about the work ethic and using code words such as "welfare mothers", which are heavy with racial overtones. Wilson bluntly dismisses symbolic racial issues, like a proposed apology for slavery, as a "waste of time"; instead, he says, the US needs to bridge the racial gap through small, grassroots, multi-ethnic coalitions in local communities.

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Wilson, however, is a child of affirmative action, and deeply concerned by its demise, in California and elsewhere, which has already sharply reduced the number of black admissions to top universities and graduate schools. He was himself recruited to Chicago when its sociology department set out to find a black academic with a doctorate. One answer, he says, lies in looking at candidates' "potential to succeed", and not just at the scores on their college entrance tests or law exams.

The debate over affirmative action also needs to be rephrased away from "preferential treatment" for minorities and towards "opportunities", he says. While white Americans cringe at the word "quotas", "an overwhelming majority support college scholarships for black kids who maintain good grades in school I An overwhelming majority support training and education for blacks so that they can get good jobs."

According to the Bureau of Labor Statistics:

* US unemployment has fallen to 4.3 per cent, a 28-year low.

* From May 1997 to April 1998, the total number of unemployed fell from 8.8 million to 7.4 million.

* The numberof long-term unemployed, those out of work for weeks or more, fell from 1 million to 833,000.

* The numberunemployed for15 to 26 weeks dropped from 1million to 584,000.

* The number ofthe short-termunemployed (fewer than five weeks) was roughly stable at about 2.5 million.

According to the Economic Policy Institute think-tank: * Since 1979, earnings of low-wage workers have fallen by 19 per cent for men and 8 per cent for women.

* In 1979, 23 per cent of the US workforce held jobs in manufacturing; in 1996, that figure was 15.2 per cent.

* Figures for August 1996 to July 1997 showed general unemployment rates of 5.2 per cent.

* For white males with a high-school education, the unemployment rate was 4.5 per cent. For black males with a high-school education, however, unemployment was 11.1 per cent.

* At the bottom of the scale, for black males with less than high school education, aged 16-25, unemployment was as high as 39 per cent.

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