When Welfare Pays Better than Work

(by Michael D. Tanner, NY Post) – The federal government funds 126 separate programs targeted towards low-income people, 72 of which provide either cash or in-kind benefits to individuals. (The rest fund community-wide programs for low-income neighborhoods, with no direct benefits to individuals.) State and local governments operate more welfare programs.  Of course, no individual or family gets benefits from all 72 programs, but many do get aid from a number of them at any point in time.

While that might not sound overly generous, remember that welfare benefits aren’t taxed, while wages are. So someone in New York would have to earn more than $21 per hour to be better off than they would be on welfare.  That’s more than the average statewide entry-level salary for a teacher.

Plus, going to work means added costs such as paying for child care, transportation and clothing.Not to mention that, even if it’s not a money-loser, a person moving from welfare to work will see some form of loss – namely, less time for leisure as opposed to work.

Is it any wonder, then, that, despite the work requirements included in the 1996 welfare reform, only 27.6 percent of adult welfare recipients in New York are working in unsubsidized jobs?(Another 13 percent are involved in the more broadly defined “work participation,” which includes job search, training and other things.)

Welfare is slightly more generous in Connecticut, where benefits are worth $38,761; a person leaving welfare for work would have to earn $21.33 per hour to be better off.  And in New Jersey, a worker would have to make $20.89 to beat welfare. …

Of course, not everyone on welfare gets all seven of the benefits in our study. But, for many recipients – particularly the “long-term” dependents – welfare clearly pays substantially more than an entry-level job.

To be clear: There is no evidence that people on welfare are lazy. Indeed, surveys of them consistently show their desire for a job. But they’re also not stupid. If you pay them more not to work than they can earn by working, many will choose not to work.

While this makes sense for them in the short term, it may actually hurt them over the long term. One of the most important steps toward avoiding or getting out of poverty is a job.  Only 2.6 percent of full-time workers are poor, vs. 23.9 percent of adults who don’t work. And, while many anti-poverty activists decry low-wage jobs, even starting at a minimum-wage job can be a springboard out of poverty.

Thus, by providing such generous welfare payments, we may actually not be helping recipients.

There should be a public-policy preference for work over welfare. And while it would be nice to raise the wages of entry-level service workers, government has no ability to do so. (Studies have shown that attempts to mandate wage increases, such as minimum-wage hikes, primarily result in higher unemployment for the lowest-skilled workers.)

If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening work requirements in welfare programs, removing exemptions and narrowing the definition of work.

In New York, lawmakers should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.

Michael Tanner is a senior fellow at the Cato Institute and author of “Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.”

Published Aug. 19, 2013 at The New York Post. Reprinted here March 6, 2014 for educational purposes only.