Why Americans don’t work: Welfare pays better than minimum-wage

This morning’s devastating news from the U.S. Census Bureau:

Americans on welfare (108,592,000) now outnumber Americans who work full-time (101,716,000).

They also out-numbered the total population of the Philippines.

For every 1 person working full-time year round, there’s 1.07 people getting some form of means-tested government benefit. In fact, the labor force participation rate under the POS is the lowest in U.S. history.

And the reason?

Welfare pays better than a minimum-wage job in 33 of America’s 50 states.

That’s what libertarian think tank Cato Institute senior fellow Michael Tanner found in his study.

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Below is Tanner’s essay in the New York Post of Aug. 19, 2013:

When Welfare Pays Better Than Work

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.

Today, the Cato institute is releasing a new study looking at the state-by-state value of welfare for a mother with two children. In the Empire State, a family receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities (like milk and cheese) would have a package of benefits worth $38,004, the seventh-highest in the nation.

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.

Nationwide, our study found that the wage-equivalent value of benefits for a mother and two children ranged from a high of $60,590 in Hawaii to a low of $11,150 in Idaho. In 33 states and the District of Columbia, welfare pays more than an $8-an-hour job. In 12 states and DC, the welfare package is more generous than a $15-an-hour job.

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.

Click here to watch Fox Business’ interview with Tanner.

~Eowyn

7 responses to “Why Americans don’t work: Welfare pays better than minimum-wage

  1. Very revealing! Thank you for this article, Dr. Eowyn. 😦

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  2. Thank you Dr. Eowyn for this revealing post, and for sharing Mr. Tanner’s essay with us. Slothfulness is a grave sin. It also means that people are not using the gifts God gave them to help others and themselves.

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  3. when these politician don’t need these welfare recipient any more they drop them like hot rock

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  4. The best way to prove this point would be for Congress to reinstate Glass Steagall and stop the welfare they dole out to the banksters, which is many many orders of magnitude greater and more than the benefits that the poor enjoy. Once the welfare for banksters is stopped and the FED which is the one providing their welfare is in bankruptcy protection, then Congress can utter credit for projects that will give people jobs. If they don’t have skills then they can make sure they aquire skilsls. We need to transition to a nuclear fusion economy, so that will take time and a lot of investment and many people will have to work like billyO to get there. We have to get back to nuclear fission for energy requirements and desalinate sea water so we can irrigate our farms and stop using our crops for ethanol. We are subsidizing corn growers to burn as fuel, we are farming wind, instead of nutritional crops. Photosynthesis is far more efficient than solar panels. Altogether the people at the bottom of the totem pole are miserable in their hell holes of places to live in and believe me they are fed up with pizza and pepsii and lousy cheap street drugs which is what they have available to them. There are no jobs. Even if someone gets a college degree they are deep indebt and can’t get a real good paying job, because blue collar jobs are outsources. The politicians who take money from the oligarchs and want to compromise with the slaves to the oligarchs are traitors to the United States, and they should be ashamed of themselves. How dare they give banksters trillions of dollars to prop up their toxic assets and start saying it’s the fault of the lower classes. What makes those banster elit? What would they do if they ad to do a real days work. They wouldn’t like it,k and they would laugh at the money they would earn. Everthing is out of wack and saying unkind things about people who are truly victims of this situation we find ourselves in isn’t the right place to point. We need to shut down the oligarchs who were meant to have been defeated in the War of Independence. They and their monetary system is glasphemy against God. HE wants the very best for all of us. HE is the provider, not the Social Security office.

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  5. Great graphics ! Short , sweet , and to the point !!!………Looks like S.S. ( only in reverse )………The ultimate ponzi scheme !

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  6. Pingback: Social Security Disability will be bankrupt in 3 years |

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