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When Welfare Pays Better than Work

August 19, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

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.

Congress and state legislatures should consider strengthening work requirements in welfare programs, removing exemptions and narrowing the definition of work.”

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 …read more

Source: OP-EDS

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