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Welfare v. Work – Welfare PAYS

Today the Cato Institute released an update to itsWork Vs. Welfare study, originally conducted in 1995.  The study evaluated welfare benefits from available programs at the federal and state level, and determined the equivalent hourly wage that a welfare recipient would have to earn in order to maintain the same lifestyle.  Some of the findings were shocking:

  • In 33 states, welfare pays more than a minimum-wage job
  • In 13 states, welfare pays more than $15 an hour
  • In 11 states, welfare pays more than the average pre-tax first year wage for a teacher
  • In 39 states, welfare pays more than the starting wage for a secretary
  • In 42 states, welfare actually exceeds the poverty level
  • In the District of Columbia, Hawaii, and Massachusetts, welfare pays more than twice the poverty level

Zero Hedge produced the chart above last year entitled “The Welfare Cliff” which shows how welfare is completely broken.

It’s enough to make taxpayers scream in frustration.  But are welfare recipients really to blame for the situation?

As Michael Tanner, one of the authors of the study, states: “Most decisions in life are the result of a cost-benefit analysis.”  People on the low end of the income scale are increasingly weighing the options of collecting benefits (which put them significantly over the poverty line) against working for pay (which could temporarily place them in much more dire conditions).  Is it all that irrational for welfare recipients to opt to remain on government assistance?  Conservatives and libertarians might not like the cost to taxpayers, or the cost to the welfare recipients’ dignity, but the fact remains that the decision is completely logical.

The federal and state governments have put these programs in place; surely they are aware of the way they pervert the incentives for people to look for work and attempt to leave the welfare system.  So why, then, do the programs remain?  Because government has no incentive to solve problems.  Government programs are not created to work until they are no longer needed; government programs are created to perpetuate government bureaucracies.  They create the need, and thus create the jobs in government to service that need.

So why does welfare, specifically, go wrong?  Having been in the welfare system myself, I can speak to that.

When my oldest child was born, I lived with my parents.  I was unable to work for a while, and my family’s income was in a pretty severe slump.  I applied for assistance to make sure my daughter had formula and diapers, and could continue to see the doctor who was monitoring her after some post-delivery difficulties.  About four months in, my old employer was asking for me to return to work, and my family arranged to help by watching The Bigun while I worked in retail.

I hated working retail, but I was very good at it.  So much so that I received a nice commission check after a couple of months back on the job.  When I say “nice” I mean a couple hundred bucks extra at most.  But it was enough to trigger the cutoff of all of my benefits.  Here I was with the opportunity to make a little headway, and the entire system closed me out.  We appealed the decision, which extended the benefits long enough to get The Bigun through a needed surgery we had been worried about (a surgery paid for by a charity, not taxpayer dollars, I might add) but after that, we gave up on the system and struggled through.  We went without a lot, and were always in peril of having the power shut off or losing the telephone, but eventually things got better.

I imagine what the system would have done had I still been in it while going back to college.  At that point I was receiving between $1-2k in financial aid (grants and loans) each semester.  By engaging in the very activity that would have enabled me both to leave the system and begin contributing to it, I would have ensured that the system would no longer backstop me.

So ask yourself, where are the perverted incentives?  Not on the part of the welfare recipients.  The system that we claim is meant to be “a hand up” is no such thing.  It’s much more attractive than working, and so people don’t even try to work, because contrary to the message of conservatives, THEY WOULD BE WORSE OFF IF THEY WORKED.  The system puts the lie to conservative tenets; they sound like empty platitudes in the face of these perverse incentives.

The better option would be a system that supports people while they train for work, attend school, or take initial low-paying jobs; then phases that support out gradually as they attain certain goals or milestones.  In that system, the incentive to join the work force would be far greater, leading welfare recipients to rely on the system in the way it was intended: as TEMPORARY assistance.

Conservatives DO need to care about these programs and how they work.  Merely complaining about the programs and the people who take advantage of them doesn’t accomplish much.  Instead, lobbying our representatives to overhaul the system so that it stops penalizing responsible behavior will pay far more benefits in the long run, and cost much less.

Read over the study from Cato, and attend your Representative’s town hall meetings armed with the facts.  Talk about welfare reform to people in your circle; not with disdain, but with compassion for people the system is screwing over – the taxpayers AND the recipients – both of whom have lost control over their lives in different ways.  Framing the debate a little differently from usual can win the kind of broad support for welfare reform that we saw in the ‘90s; it can also help real people with real struggles to climb out of the pit of dependency once and for all.