(FORTUNE Magazine) – LISTEN: % ''He made me scared, so I pulled the trigger. So feel sorry? I doubt it. I didn't want to see him go down like that, but better him than me.'' ''I'm gonna work 40 hours a week and bring home maybe $100, $150, when I can work 15 minutes and come back with $1,000 tax-free?'' ''I ain't working for no minimum wage.'' ''Man, you go two, three years not working, and hanging around and smoking reefer or drinking, and then you get a job -- you can't handle it. You say, 'I don't want to get up in the morning, get pushed and shoved. I'm gonna get on welfare.' '' ''Everybody else I knew was having babies, so I just went along.'' ''It just seems that everybody here is down on their luck.'' The voices, reported in the press, are the voices of the underclass, and their message is that the troubles of this group at the very bottom of the American social ladder need fixing fast. For beyond the misery they occasion in underclass communities -- urban knots that threaten to become enclaves of permanent poverty and vice -- these are troubles that can reach out and grab the larger society, literally, by the throat. They impose costs not just in crime but also in taxes for welfare, drug programs, police, and prisons, not to mention the loss the economy suffers when an able-bodied population produces little. For business there's yet another cost: An increasing fraction of the shrinking pool of new labor force entrants between now and the year 2000 will be underclass youth, deficient in the skills companies will need in an ever more knowledge-intensive industrial order. Add also the intangible costs: the sharpened anxiety of urban life, for instance, or the disquieting sense that something is fundamentally wrong in a rich society that allows an underclass to fester. For all its gravity, though, the plight of this group isn't hopeless. The problems are correctable, in ways outlined below. Who are the underclass? They are poor; but numbering around five million, they are a relatively small minority of the 33 million Americans with incomes below the official poverty line. Disproportionately black and Hispanic, they are still a minority within these minorities. What primarily defines them is not so much their poverty or race as their behavior -- their chronic lawlessness, drug use, out-of-wedlock births, nonwork, welfare dependency, and school failure. ''Underclass'' describes a state of mind and a way of life. It is at least as much a cultural as an economic condition. After all, the requirements for escaping long-term poverty in America today are straightforward: Finish high school, get any job (even at the minimum wage) and stay in the labor market, get married as an adult and stay married, even if it takes more than one try. ''These are demanding, although not superhuman, tasks,'' remarks the recently published report of the Working Seminar on the Family and American Welfare Policy, a group of scholars and former government officials. From a uniquely comprehensive tracking of the incomes of a wide array of people through the Seventies, the group concluded that just earning a high school diploma helped keep all but 0.6% of adult men and all but 2% of adult women out of poverty. Even people familiar with the statistics on the behavior that defines the underclass feel overwhelmed when they review them. That behavior, as black social psychologist Kenneth B. Clark described it 25 years ago, comprises a tangle of pathologies that reinforce each other to keep the underclass imprisoned in poverty and dependence. Though free public education is the traditional vehicle of American upward mobility, 40% to 60% of high school students in inner cities drop out before graduation. Though an income from full-time work at the minimum wage is enough to support a single person above the poverty line, and two such incomes can keep a family of four out of poverty, the underclass works little. In the absence of specifically underclass numbers on all this, statistics on blacks have to serve as rough guideposts. In the Fifties, black and white men participated in the labor force, either as workers or active job seekers, at the same rate. By the late Seventies black participation was 7.7 percentage points lower than white participation, a difference that statisticians deem huge. Today, only 44% of black men age 16 to 24 are employed, down from 59% a quarter-century ago. In some areas that's because jobs are scarce or require skills underclass applicants lack. But neither the statistics nor the testimony of underclass youths themselves suggest that these are the prime reasons for such extensive joblessness, though some poverty experts debate this issue ferociously. After all, black participation in the labor force declined most sharply in the economically expansive Sixties, especially in that part of the decade when jobs were most plentiful. And over 70% of the out-of-work inner city black youths whom Harvard economist Richard B. Freeman surveyed in 1980 said they could easily find a job. But they generally disdained the readily available hamburger flipper or checkout clerk jobs as low paid or leading nowhere -- even though tens of thousands of recent Asian immigrants have been finding menial jobs their gateway to the American dream. A recent ghetto renovation project in Newark, New Jersey, couldn't attract local workers at $5 to $6 an hour and ended up importing union labor from the suburbs. In underclass communities a man who doesn't work has two principal alternatives. One is hustling -- practices ranging from the shady, like hawking base-metal jewelry as silver, to the illicit but supposedly victimless, like pimping or selling drugs on the street. The other is hard- core crime, whose explosion in the Sixties and Seventies gave early evidence of the underclass problem. Robbery and rape rates nearly quadrupled between 1963 and 1980; burglary and assault rates roughly tripled; the murder rate more than doubled. The result is that a 12-year-old American boy has an 89% chance of becoming a victim of violent crime in his lifetime, and an urban household has a 93% chance of being burgled sometime during the next 20 years. HOWEVER bad the danger of robbery for middle-class whites, poor blacks get robbed four times as often, and the leading cause of death among young black men is murder. No wonder fear pervades underclass areas, deterring the law- abiding from working the late shift or attending night school. As for the matrimonial part of the formula for escaping poverty -- the breakdown of the black family that Daniel Patrick Moynihan deplored two decades ago has sharply worsened for the underclass. In 1960 three-quarters of young black men reported themselves as never having been married; that's true of 93% today. But they nevertheless go on making babies. While one black child in almost six was born illegitimate in 1950, every second one was illegitimate in 1980, and today in ghettos like New York's Central Harlem, around 80% of all black babies are illegitimate. Worse, two of every five of those illegitimate babies have teenage mothers, scarcely able to take care of themselves, much less raise a child. Half of all poor families are headed by women. By definition these families provide the clientele for the largest welfare program, Aid to Families With Dependent Children, started during the New Deal to help widows and orphans but now swollen to include families lacking male heads because of divorce or , illegitimacy. True, most people who go on AFDC get off fairly soon. But the long-termers -- the 10% to 15% who stay on the rolls eight years or more -- account for over half the people on AFDC and consume more than half of all welfare payments. The great paradox is that the underclass is a byproduct of two decades of extensive black success. Once civil rights laws and the War on Poverty expanded housing and job opportunities for blacks, middle-class and solid working-class inner city minorities fled their ghettos, leaving the unsuccessful behind. Economically diverse communities turned almost overnight into homogeneous enclaves of poverty. The stranded suffered in their isolation. Their culture became one- dimensional, demoralized, with few hard-working role models to show that striving in school and getting up in the morning to go to work are normal activities that often produce success. No solid, respectable contingent remained to assert working-class and middle-class values authoritatively, keeping at least some underclass behavior in check with a good example or a sharp word. No large group of workers remained to alert youngsters to job openings and help them apply, says University of Chicago sociologist William Julius Wilson, who is black. Basic community institutions -- schools, churches, stores, recreation centers -- lost the support of the stable families that kept them viable, Wilson says. Crime and vandalism further hastened business flight, reducing employment and leaving little but the culture of failure, unemployment, hustling, drugs, and welfare. All these things reinforced each other, the pathological became the norm, and individual deviants solidified into an underclass. What is to be done? Turning the welfare system inside out is the most important first step. The current national welfare reform push, though it could end up changing only the jargon rather than the reality, so far seems to promise genuine improvement. For if the welfare system doesn't cause the underclass problem, it surely is one of the conditions that permits it to exist, as political scientist Charles Murray of the Manhattan Institute for Policy Research showed in a pioneering book, Losing Ground. MURRAY argues that welfare, because of the reworking of benefits and regulations in the Sixties, gives the poor ''incentives to fail.'' Since 1970, AFDC -- together with food stamps, Medicaid, and other benefits -- has provided most women with more purchasing power than a minimum-wage job. If an income is the consequence of having a baby, why should women worry about getting pregnant? Once in the welfare trap, why should they prefer an entry- level job to having another baby -- especially since welfare so crushes self- esteem and initiative that those wedded to it can't see any alternative to their admittedly unsatisfactory existence? Why should they get married, since living together unmarried allows their boyfriends to work without affecting their welfare benefits and keeps control of the purse strings in their hands? A welfare mother's child ''provides her with the economic insurance that a husband used to represent,'' says Murray. Leaving aside the breakdown of the work ethic and the development of a culture of poverty among the underclass, he says, the system itself encourages the nonmarriage, illegitimate births, and nonwork central to underclass pathology. Among today's crop of welfare reformers, the almost universal solution is to replace AFDC with a workfare system. The best blueprint for such a system, sketched in a much discussed New Republic article by journalist Mickey Kaus, reasonably requires junking AFDC altogether. In its place, Kaus would offer anyone who wanted it, male or female, a government job cleaning offices, repairing school playgrounds, and the like -- not excluding jobs currently limited to members of government employee unions. The pay would be less than the minimum wage to encourage quick movement to private sector employment. The immediate goal is to avoid giving out checks and then trying to make recipients ''work them off,'' a system open to endless abuse. The larger point is to end the option of an indolent life on welfare, to remove the inequity of giving someone who does nothing as much as the lowest-paid worker makes, and to break entirely with a system that, for all its benevolent intentions, has produced -- according to the treacherous Law of Unintended Consequences -- more evil than good. BUT THAT'S not the workfare we're likely to get. The havoc it would inflict on current welfare recipients is enough to make lawmakers blanch. Still, among workfare systems that legislators are likely to swallow, some can be made to work, albeit gradually rather than all at once. To choose among them, just ask how well they'll reduce dependency and nonwork. Says black economist Walter Williams of George Mason University: ''When we set out to help, we must always ask, 'What is the effect my helping this person will have on his helping himself?' We have ignored that question.'' Proposed solutions will fall somewhere between two existing programs -- California's new GAIN, at the effective end of the scale, and Massachusetts's Employment and Training Choices, nicknamed ET, at the dubious end. The first of GAIN's many virtues is compulsion. To get your check, you theoretically must be in a workfare job or in county-provided training in the state junior college or high school adult-education system. You'll learn reading and writing, job search and interview skills, and a trade that matches your aptitude and the labor needs of your community. If you can't find a job after all this training, the county will give you work matching your new skills until you find your own job. If you won't take the training seriously, then you'll have to take work unrelated to your training program, and often of the leaf-raking variety. If you won't comply at all, your grant will be progressively reduced. So the system has teeth, however blunt. All laudable. But GAIN has flaws. The system isn't quite closed enough, despite being the toughest of existing workfare programs. Mothers with children under six -- 45% of the caseload -- are exempt: You can evade GAIN by just having another baby. What's more, you don't have to take a job that pays less than the value of your welfare package, which includes Medicaid along with child care and transportation allowances while you are in training or a workfare job. Many people just coming off welfare will have trouble finding the $13,000-a-year jobs that can equal this deal. As for the county-provided workfare jobs -- to satisfy the government employee unions, most of them are in nonprofit organizations like YMCAs and day-care centers. Not enough are in state agencies where, arguably, there's more real work instead of make-work. Any of these defects could stymie GAIN. So could the impulse of caseworkers to expand the various exemptions written into the program, out of misplaced kindness or fear that reduced caseloads might mean fewer social workers. And the program won't work unless California businesses prove willing to hire GAIN grads. So far, though, people are complying and penalties are infrequent. California welfare officials think they see faint signs that the program is already pushing people to get off the rolls. So while it is too soon to know, GAIN could be on its way to effecting a gradual solution to the welfare | component of the underclass problem, a solution that will take more than one welfare generation to accomplish. GAIN DOES more than move people into the job market. It begins to change the norm for existing and potential welfare clients, which will change all the more decisively if GAIN gathers momentum. It announces that while society helps the unfortunate, it also expects them to get back on their feet and not vegetate -- especially when these days most mothers of even very young children go to work. Says New York University political scientist Lawrence M. Mead, whose Beyond Entitlement is one of the landmarks of the welfare reform debate: ''One thing we should do that we haven't been doing is set standards. We talk politically only about rights, but obligations are just as important.'' The public has always expected people to earn a living and support their children; Mead thinks it's time the government did the same. And not only because it is simple justice to welfare clients to treat them as citizens rather than as inferiors from whom normal behavior can't be expected. After all, how a society treats individuals on the periphery affects not only those people but also the people in the mainstream. It defines the society's values for everyone. It shows what the community requires from everyone. Exempting this class of able-bodied people from the common obligations and compromising the idea of equal treatment by the state weakens the larger society. It calls into question the sense of obligation for everybody, making all rules seem less than absolute and so easier to bend or break. And it devalues the achievement of those who fulfill their obligations. Says Harvard economist Glenn C. Loury, who is black: ''We can't have the reward system such that people who are doing the right thing are told that they are chumps.''

Most of all, exempting the welfare class from the common responsibilities of citizenship devalues the efforts of the respectable poor. Back in the Sixties, policymakers decided that the long-term poor were victims, their poverty not the result of their own actions but of a system that was arrayed against them. For blacks, with their added burden of discrimination, that was doubly true. To hold a chronically poor person in any way responsible for his condition -- and ultimately for any of his actions -- was ''blaming the victim,'' in the jargon of the time, and thus cruelly inappropriate. Those views not only changed welfare in ways that fostered the explosive growth of the underclass; they also tended to strip the life of each poor person of its moral significance. Says Loury: ''When we told all poor people that your poverty was someone else's fault and there was nothing you could do wrong, we took something away from the poor who were doing the right thing, because they are now no different from the poor who are doing wrong.'' That made it all the harder for the working poor to bring up their children to be as straight as they are. The reason ET, by contrast with GAIN, is unlikely to make inroads on the underclass problem is that it is all rights and no obligations. It leaves welfare class norms intact. Really not a workfare program at all, despite its billing, ET provides the same training smorgasbord that GAIN lays out, along with child care and Medicaid for months after you've found a job. But there are no government workfare jobs, and all that's compulsory about ET is filling out a form to register. Though there's no way of knowing for sure, many poverty experts feel all but certain that most of the 30,000 people ET exultantly claims to have placed in jobs were hardly underclass but rather those who land on welfare after a divorce, say, and quickly pull themselves together to find a job without something like ET -- or the child care and so on that Massachusetts taxpayers now provide them. Sometimes it is hard to share Massachusetts welfare officials' exultation. Take the case of one graduate recently exhibited as an example of ET's success. Margarita Mejias quit her $4-an-hour job in a Holyoke shoe factory in 1984 because she saw she could do better on welfare, with Medicaid and food stamps for herself and her child. After living at state expense for two years, she moved off the rolls when ET helped her find an $11,500-a-year job. That the toiling $4-an-hour shoemakers of Holyoke should be taxed to let a proven, able-bodied worker take a vacation and then get babysitting services while training and looking for a job at leisure is an outrage. That ET sends the right signals to society strains credulity. FOR LEGISLATORS eyeing workfare solutions, here are three politically feasible suggestions for improving on California's model. First, put a time limit on training so mothers can't be perpetual students. Second, require participation of all mothers whose children are over three, or even over two. This will require nearly two-thirds of current AFDC clients to be in the program, providing the critical mass that will make work seem the normal thing rather than the exception. Finally, don't allow the system to set up clients who are under 18 in their own apartments, as often happens now. If they don't want to stay at home with their mothers, provide them group shelters with rules and child-rearing classes. Underclass teens have babies for a host of reasons, of which ignorance of birth control appears to be only a minor one. A 16-year-old girl in a Washington ghetto told reporter Leon Dash in an interview for a Washington Post series on pregnancies among young blacks : ''When girls get pregnant, it's either because they want something to hold on to, because of circumstances at home, or because they don't really have anyone to go to. And some of them do it because they resent their parents. None of that is an accident. Every teenage girl knows about birth control pills. Even when they 12, they know what it is.'' States should not give girls the option of having babies to flee their parents and establish themselves as independent adults with their own welfare checks. Workfare strives to make able-bodied mothers, rather than the state, responsible for the support of their children. Wisconsin tries to make the fathers responsible too. Armed with a new law, the state courts now try aggressively to determine paternity, an easier task than one might think. ''In the overwhelming majority of cases, the mothers know who the father is,'' says Irwin Garfinkel of the Wisconsin Institute for Research on Poverty. ''This myth about promiscuity is a myth -- and a racist myth.'' The courts then assess child-support payments -- 17% of the father's income for one child -- and the state attaches his paycheck to assure compliance. If he has no income now, the state attaches it whenever he starts having one. The support payment goes directly to AFDC. Says Garfinkel: ''We should be getting the message across to young men that if you play the game, you gotta pay.'' YOUNG underclass men also need to get that message about crime. Because most of them aren't on welfare -- a program primarily for women and children -- society has no carrot to use to direct their behavior, as it does with underclass women. Nor have any voluntary programs notably succeeded in helping them into the mainstream. But to influence the most destructive feature of their behavior, society does have a stick -- which it hasn't used very well. Crime has soared largely because few criminals have been made to pay a penalty. In the Sixties, when crime doubled, the number of state and federal prisoners fell. In the mid-Seventies, the average youthful offender in the Chicago area was arrested more than 13 times before being sent to reform school. Today, fewer than a third of those convicted of a serious crime against persons or property go to prison, and of the many who walk away with only probation, 65% get picked up for similar crimes within three years. In addition to jailing criminals, juvenile ones included, and building prisons when necessary, communities need to reassert the sense of public order in inner cities. In Cleveland a group of civic leaders has formed a Task Force on Violent Crime for just this purpose. By vigorously publicizing Ohio's eight-year mandatory sentence for using a gun to commit a crime, the group has helped lower the armed robbery rate by 30% in three years. In high-crime areas, especially in housing projects, the group has helped set up mini-police stations, which have pushed down the crime rates. Economists have a vision of man as a rational calculator, scurrying among available options maximizing gain, driven hither and yon by this incentive or that disincentive. This way of thinking, to be sure, has a real usefulness in grappling with the underclass problem. Where incentives for failure exist -- welfare and the unwillingness to punish criminals are the two luminous cases in point -- then of course the community has to change the calculus. But the kind of solution most people want for the underclass problem is larger than this vision. The ultimate goal isn't a brigade of hamburger flippers and nursing home attendants obediently going through the motions with the sullenness of Moscow street sweepers. It is to release underclass people from their imprisonment in so shrunken and self-defeating a version of humanity and to restore them to the community -- to the commonplace relations and activities and aspirations that generations have deemed the source of much of life's meaning and dignity. To do that requires not a new calculus but something like a cultural revolution. What can be done for the adult underclass in this respect is meager. But children are another matter. Education can rescue them en masse. Not easily -- the goal after all is to nurture citizens, not just raise reading scores -- but it can be done. The earlier the effort begins, the better, preferably with Head Start-like ! day care. One of the many welfare shibboleths is that institutional day care isn't good for AFDC kids, depriving them of much better nurturing from their mothers. The truth is that many underclass children, already deprived of a father, also suffer bad mothering from harried, ignorant, isolated, impoverished women, often still teenagers. That's partly why underclass children are so frequently injured, burned, unimmunized; why their mothers so routinely hit them; why four out of five families reported for child abuse are welfare families. That's why so many arrive in school unable to understand cause and effect, to label and classify, to see how things are the same or different, to ask a question and trust that an adult will answer helpfully, not push it aside. For irrefutably eloquent testimony that a well-run developmental day care program can tackle these deficiencies, look at what the High/Scope Educational Research Foundation achieved with the celebrated early education project it began for underclass 3- and 4-year-olds in Ypsilanti, Michigan, in 1962. It randomly divided the children into a group of 58 who went through the two-year program and a control group of 65 who didn't. It then followed every child in both groups for the 19 years since the project ended. The numbers speak for themselves: Two-thirds of the program kids finished high school, compared to half the control group. Thereafter, nearly twice as many went on to college or job training, and by age 19 they were dramatically more law-abiding and self- supporting than the control group kids, who were twice as likely to have illegitimate children and be on welfare. It makes sense to proliferate programs like this, and states that require workfare for mothers with children over 3 should use those programs as the day-care component. Though the programs are costly, the High/Scope Foundation calculates that every dollar it spent on its target group saved society $7 in subsequent welfare, crime, lost taxes, unemployment compensation, and remediation. These programs won't work unless they have skilled staffs and rich curricula, according to High/Scope President David P. Weikart. ''Otherwise we will have wasted the money,'' he says, ''and we should've built prisons instead.'' UNDERCLASS children are still salvageable by the time they get to the public schools, but the schools save few of them. After conducting so many minorities into the American mainstream, why have the schools failed with this group? Unfortunately, just as the underclass problem began to inundate inner city schools, the same revamping spirit that was about to create the welfare mess was also depriving schools of the tools they needed to cope. ''If there was a bad idea that came down the pike then, the first place it fell out was in an American school,'' says Secretary of Education William J. Bennett. Order and authority gave way to disruption and fear, as judges decided that school discipline was properly their business and education experts preached that orderly schools were like prisons and authoritative principals like wardens. Standards -- serviceable if usually not distinguished -- disintegrated as differences in test scores and promotion rates were deemed indicative only of discrimination. When pupils needed a clear statement of right and wrong, the larger culture was saying that everything is relative, so let it all hang out. When they desperately needed to be socialized into the mainstream, mainstream values were branded racist, elitist, and oppressive. Subject matter that could teach children anything larger and finer than the little they already knew went overboard in favor of a specious ''relevance.'' As people with political instead of educational agendas took over school boards, teachers lost interest and grew sullen. Civility, reading scores, basic skills, and the ability to imagine the varieties of human achievement deteriorated together. Returning the schools to competence means reversing all this by keeping the heat on educators and school boards. Education Secretary Bennett, who has incited controversy by turning his office into a pulpit, exemplifies the appropriate kind of pressure. He holds up examples of inner city schools that do work. As he describes it, the formula for success starts with an independent, high-powered principal and dedicated teachers who stick to educational basics, set high standards for achievement and conduct, articulate what's right and wrong, nurture character, try to involve parents in their children's education, and believe and preach that all children can learn. Won't all this send inner city kids racing for the door? Thankfully, no. Bennett reports of schools he has visited: ''The higher the standards, the lower the dropout rate.'' State governors, too, have brought effective pressure, for instance by pushing through teacher competence testing and pay scales based on teacher performance or allowing qualified applicants who haven't taken education courses to be hired for teaching jobs. Local groups -- from the Allegheny Conference, an assemblage of many of Pittsburgh's business and civic leaders, to a commission set up by the Chamber of Commerce in Savannah -- have begun to work closely with school boards and superintendents to monitor and upgrade their schools, for example by giving grants to teachers and principals for innovative projects. BOOMING local economy increases the leverage of such groups. It has allowed Boston business leaders to deliver on their part of a 1982 deal made with all the city's high schools, 70% of whose pupils are poor and minority. Get your act together, the business leaders told the schools; if you improve your attendance and test scores, get more students to graduate and more grads to go on to college or full-time jobs, then we will give your graduates priority for our entry-level jobs. The schools adopted annual improvement plans, toughened promotion and graduation standards, went after truants, and delivered on all counts except for cutting dropouts. Last year Boston's big corporations hired nearly a third of the graduating class at an average wage of $5.40 an hour. Remember the story of the impulsive millionaire, Eugene M. Lang? Looking down from the podium of his old grammar school in East Harlem at the 61 black and Hispanic graduates he was addressing in 1981, the technology entrepreneur realized how hollow they must be finding his exhortation to have a dream and to go to college to achieve it. Fat chance, they must be thinking. So on the spur of the moment he said: ''If you want to go to college, you can go, because I promise you if you do I will give you the necessary scholarship support.'' Stunned silence; then pandemonium. This June, more than half of them will be getting their high school diplomas, and most of the rest will graduate by December. Around two-thirds will go to college, some to top schools -- this in a neighborhood where the high school dropout rate is 75% and almost nobody goes to college. But note: So far Lang hasn't spent a dime of the promised scholarship money. Money isn't primarily what accomplished this success. What these kids needed -- what underclass kids need most -- was to be restored to full membership in the larger community. ''It's important that they grow up to recognize that they are not perpetuating a life of the pariah,'' Lang says, ''but that the resources of the total community are legitimately theirs to take advantage of and contribute to and be a part of. It's a question of outlook, of self- expectations, of knowing alternatives that are available to them.'' Lang's real contribution to these kids was to get involved in their lives. He made time for them and their parents to visit his office. He took the kids to restaurants, the opera, the theater. He advised them, explaining what it takes to become a success like him. He hired a full-time social worker to watch over them during the week, plan activities, iron out problems with school, and keep them together as a mutually supportive peer group who increasingly came to feel special. ''These kids have a substitute -- not an ideal substitute -- for what every reasonably affluent middle-class child has,'' he says. ''I'm to these kids the same person I was to my own children.'' Hearing about his program, one men's clothing manufacturer offered to give each of Lang's boys a suit. ''My youngsters get nothing that they don't earn,'' Lang explained, but went on to say he'd be glad to have four suits to give as prizes to his most outstanding boys. At a reunion of all the kids, the four winners arrived in the suits they had chosen. ''I looked for the bright colors, the signs of youth,'' says Lang, ''and here these four boys came in, each wearing blue or charcoal pin-stripes, as though they were walking out of the training program at Morgan Stanley. I can't tell you how good I felt, because one could see what had happened inside these youngsters. Just that one thing alone to me was a silent justification of the program.'' Lang has enlisted tycoons in 11 cities to take sixth-grade classes under their wings. In Detroit and Boston, black executives and professionals visit schools trying to imbue underclass youth with the goals, values, and character strength necessary to succeed. Companies including AT&T and the Chase Manhattan Bank sponsor experimental job training programs. Not that it takes a millionaire or a corporation to give underclass kids what they need. Marva Collins does it at Westside Preparatory School, her Chicago private school for 244 mostly poor black children, a quarter of them from the notorious Cabrini-Green housing project. She teaches them everything from manners to mythology, Latin, and Shakespeare. She inculcates the lesson that if you don't work, you don't eat. ''You can't decide at age 40, after having come out of prison and a drug program, that you want to be President,'' she tells them. ''You have to plan for it, work toward it.'' Her 3-year-olds read at first-grade level, and all -- 100% -- of her graduates go to college. Kimi Gray does it on a bigger scale at the 464-unit Kenilworth-Parkside housing project in Washington. Fed up with dirt, crime, no heat, no hot water, Gray got herself elected head of the project's residents' council in 1972 as a 25-year-old welfare mother with five kids. She and her council immediately organized tenants into committees, started cleanup brigades, and appointed safety officers to keep front doors locked and hall lights on. Whereas Kenilworth residents once had displayed their feelings about the police by turning over their cars, Gray and her supporters fostered cooperation and got residents and officers to view themselves as allies against criminals. After she persuaded tenants not to buy stolen goods, housebreaking plummetted, since you can only lug a hot TV so far. When drug pushers infested the neighborhood, she organized tenant marches to drive them out and told resident pushers and addicts that if they didn't quit in 30 days she'd have them evicted. ''Crime is down 85% to 90% since we started,'' says Gray. SHE encouraged residents to take over the neighborhood PTA. Gradually their children's test scores rose, and since 1975, 582 of them have gone to college. She threatened to take some residents to court for neglecting their children. ''If a white social worker said that, he'd be called racist,'' says Cicero Wilson, author of an American Enterprise Institute study of Gray's accomplishments. ''If your neighbor says it, you can't hide behind the same slogans.'' Gray took over management of the entire project in 1982, arming her efforts with economic power. She gave residents jobs, raised money to start small businesses like a screen repair shop, and used rent receipts to organize an employment agency to get tenants jobs outside the projects. After living on $4,000 a year in welfare payments, residents found themselves earning a $7,000 annual salary by working for Gray, perhaps supplemented by the $4,000 wage of their teenage child whom Gray had encouraged to work at McDonald's. ''That's how people get out of poverty,'' says Cicero Wilson. Nearly 85% of Kenilworth families were on welfare in 1972; only 20% are today. Some of the project's households earn over $30,000 a year. ''It works,'' says Wilson, ''if people are required by their peers to be better.'' Some poverty experts argue that the underclass problem is getting worse. Though the evidence is inconclusive, it doesn't seem that substantially more people are falling into the underclass, nor that its poverty is becoming more grinding, for food stamps and Medicaid have made poverty a shade less grim than it was. But every day, the underclass becomes more concentrated and isolated, its pathologies deepening. However, with a fast-strengthening consensus on welfare reform, a nationwide clamor to improve the schools, and impending labor shortages that make expanding and upgrading the work force crucial, this is also the moment when the beginning of a solution seems in reach.