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Welfare Can Make More Sense than Work

August 13, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

Most decisions in life are the result of a cost-benefit analysis. When residents in Connecticut consider getting a job, they assume they would be better off having a job than not. They’d be wrong. Because in Connecticut, it pays not to work.

Next Monday, the Cato Institute will release a new study looking at the state-by-state value of welfare. Nationwide, our study found that the value of benefits for a typical recipient family ranged from a high of $49,175 in Hawaii to a low of $16,984 in Mississippi.

In Connecticut, a mother with two children participating in seven major welfare programs (Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, housing assistance, utility assistance and free commodities) could receive a package of benefits worth $38,761, the fourth highest in the nation. Only Hawaii, Massachusetts and the District of Columbia provided more generous benefits.

When it comes to gauging the value of welfare benefits, it is important to remember that they are not taxed, while wages are. In fact, in some ways, the highest marginal tax rates anywhere are not for millionaires, but for someone leaving welfare and taking a job.

When residents in Connecticut consider getting a job, they assume they would be better off having a job than not. They’d be wrong. Because in Connecticut, it pays not to work.”

Therefore, a mother with two children in Connecticut would have to earn $21.33 per hour for her family to be better off than they would be on welfare. That’s more than the average entry-level salary for a teacher or secretary. In fact, it is more than 107 percent of Connecticut’s median salary.

Let’s not forget the additional costs that come with going to work, such as child care, transportation and clothing. Even if the final income level remains unchanged, an individual moving from welfare to work will perceive some form of loss: a reduction in leisure as opposed to work.

That’s not to say welfare recipients in Connecticut are lazy — they aren’t. But they’re not stupid, either. Surveys of welfare recipients consistently show their desire for a job. There is also evidence, however, that many are reluctant to accept available employment opportunities. Despite the work requirements included in the 1996 welfare reform, only 24 percent of adult welfare recipients in Connecticut are working in unsubsidized jobs, while roughly 41 percent are involved in the broader definition of …read more

Source: OP-EDS

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