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New York Welfare: More Generous than Sweden or France

August 26, 2015 in Economics

By Michael D. Tanner

Michael D. Tanner

When they hear the term “welfare state,” most people think of Europe — especially Denmark or France. No doubt those countries offer a wide range of benefits targeted to the middle class, retirees and so forth. But according to a study released by the Cato Institute this week, someone who is poor might just be better off here in New York.

The federal government currently funds more than 100 anti-poverty programs. While no one participates in all of them, many can and do collect assistance from multiple programs.

In New York, a mother with two children under the age of five who participates in six major welfare programs (Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, housing assistance, the Low Income Home Energy Assistance Program, the Special Supplemental Nutrition Program for Women, Infants, and Children and free commodities would receive a total benefits package with a value of more than $27,500 per year.

Using a similar measure, Cato found that benefits in Europe ranged from $38,588 per year in Denmark to just $1,112 in Romania. In fact, New York’s welfare system can be more generous than every country in Europe except Denmark and the United Kingdom. New York is much more generous than such well-known welfare states as France ($17,324), Germany ($23,257) and even Sweden ($22,111).

If welfare pays better than work, people on welfare will be less likely to work.”

Moreover, this benefit comparison doesn’t include Medicaid, which would be worth roughly $10,460 for this household, because Europe’s health-care systems are not targeted to the poor, unlike Medicaid.

One of the problems with these welfare systems is that they can reduce the incentive to increase work effort because beneficiaries would stand to lose most of their earnings through lower benefits or higher taxes, while also having to bear the costs associated with going to work, like transportation.

These people would see little tangible improvement in their standard of living by working more hours or moving up the job ladder.

They’re not lazy, but they’re also not stupid. Like everyone else, they respond to incentives. If welfare pays better than work, people on welfare will be less likely to work.

Indeed, economists often discuss the danger that high marginal tax rates can discourage economic activity. But some of the highest effective marginal tax rates in the world are for someone leaving welfare for work.

By creating such a big disincentive for work, …read more

Source: OP-EDS

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