Cato Study: Welfare More Lucrative Than Working In Many States

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Welfare benefits outpace the amount of money a person can earn at a full-time minimum-wage job in 35 States, according to a study by the Cato Institute.

The study, published Monday, also reveals that welfare recipients in at least 13 States are receiving from the government the cash equivalent of a $15 per-hour full-time job. See a full PDF version of the report, titled “The Work Versus Welfare Trade-Off: 2013,” here.

An earlier iteration of the Cato study, done in 1995, already had shown that welfare benefits “greatly exceed” the poverty level and, because the payouts are tax-free, actually provide more incentive for recipients to remain unemployed than seek jobs that would earn them taxable income.

Michael Tanner, one of the study’s two authors, wrote Monday that welfare must be reformed if its recipients are to view it as a bridge to employment.

From Tanner’s study summary:

The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour. If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.

Tanner adds that the balance in the number of people who correctly use welfare to tide them over until they find a real job has most likely declined since the 1995 report.

Earning any amount of money – even minimum wage money or part-time job money – is an incentive to earn more, Tanner notes. “There is little doubt that one of the most important long-term steps toward avoiding or getting out of poverty is taking a job,” he writes. “[W]hile many anti-poverty activists decry low-wage jobs, a minimum-wage job can be a springboard out of poverty.”

However, welfare keeps many able recipients from looking for work – not because of laziness, but because of economics. “[T]he evidence suggests that many are reluctant to accept available employment opportunities,” said Tanner.

Personal Liberty

Ben Bullard

Reconciling the concept of individual sovereignty with conscientious participation in the modern American political process is a continuing preoccupation for staff writer Ben Bullard. A former community newspaper writer, Bullard has closely observed the manner in which well-meaning small-town politicians and policy makers often accept, unthinkingly, their increasingly marginal role in shaping the quality of their own lives, as well as those of the people whom they serve. He argues that American public policy is plagued by inscrutable and corrupt motives on a national scale, a fundamental problem which individuals, families and communities must strive to solve. This, he argues, can be achieved only as Americans rediscover the principal role each citizen plays in enriching the welfare of our Republic.

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  • peter

    Getting paid for doing nothing is very appealing to many people, some even manage that at the workplace! Our politicians for example!

    • laura merrone

      Amen!!!

  • Don 2

    When you have more takers than givers, is there any wonder why blue states like New York are considered to be in a “Death Spiral”? Why work when you can be a bottom-feeder?

    • Dave

      States like NY, CA, IL and NJ subsidize lazy states like KY, AL, MS, SC, AK etc… or have you not seen how much states pay in vs how much they get back from fed pork?
      If each state paid their own way, CA, NY, IL, NJ would be in a better position. But no… they have to support the loser conservative states who take.

      • http://personalliberty.com/ Bob Livingston

        Dear unhinged Dave,

        You write: ” lazy states like KY, AL, MS, SC, AK etc…” Obviously you are not aware that most if not all the so-called “subsidizing” for my “lazy state” of Alabama is funding for NASA at the Marshall Space Flight Center in Huntsville. And what are those “lazy” Alabamans doing at Marshall? http://www.nasa.gov/sites/default/files/files/MSFC_Fact_Sheet_508.pdf

        Also, lazy Alabamans contribute to the military more than 46 other states (on a per capita basis) and 12th overall. I believe Alabama pays its own way.

        Best wishes,
        Bob

        • Dave

          Dear Corporatist Bob,
          I do business in AL so I know what is in AL very well thank you.
          So you support corporate welware via a bloated military? I thought you didn’t like welfare?
          So tell your legislators to raise taxes and pay for their own infrastructure so the Fed Gov can save the 66 cents they send to your state above the dollar your state kicks in.
          Send that 66 cents to states that help subsidize your state today like NY or CA. But then your selfish state doesn’t like to help others like during Sandy because of what again? Pork in the bill? But yet your state had its hand out during Katrina and all the pork in that legislation didn’t you?
          But its nice to know that you support corp welfare… Its a new side to you Bob.

          • http://personalliberty.com/ Bob Livingston

            Dear unhinged Dave,

            You write: “So you support corporate welware (sic) via a bloated military?” Where have I stated this, mr. obfuscator?

            Best wishes,
            Bob

          • Dave

            Corporatist Bob,

            “Alabamans contribute to the military more than 46 other states (on a per capita basis) and 12th overall. I believe Alabama pays its own way.”

            Alabama does not pay its own way. Alabama has one of the worst educational systems in the whole country. So when you have so little opportunity (AL ranks towards the bottom in education) so… where is your best opportunity when your education system stinks, your state’s attitude towards education lacks…

            You join the military… Its what poor people do…

            http://www.edweek.org/ew/articles/2013/01/10/16sos.h32.html?tkn=RLRF%2B4mUV1fjxGZAPk7Od%2FfW1p2K2SFHTAx9&cmp=clp-edweek&intc=EW-QC13-EWH

            Top 10 poor states (Congrats on being the 5th)

            10. Oklahoma
            Median household income: $43,225
            Population: 3,791,508
            Unemployment rate: 6.2%
            Pct. below poverty line: 17.2%

            9. South Carolina
            Median household income: $42,367
            Population: 4,679,230
            Unemployment rate: 10.3%
            Pct. below poverty line: 18.9%

            8. New Mexico
            Median household income: $41,963
            Population: 2,082,224
            Unemployment rate: 7.4%
            Pct. below poverty line: 21.5%

            7. Louisiana
            Median household income: $41,734
            Population: 4,574,836
            Unemployment rate: 7.3%
            Pct. below poverty line: 20.4%

            6. Tennessee
            Median household income: $41,693
            Population: 6,403,353 (
            Unemployment rate: 9.2%
            Pct. below poverty line: 18.3%

            5. Alabama
            Median household income: $41,415
            Population: 4,802,740
            Unemployment rate: 9%
            Pct. below poverty line: 19%

            4. Kentucky
            Median household income: $41,141
            Population: 4,369,356
            Unemployment rate: 9.5%
            Pct. below poverty line: 19.1%

            3. Arkansas
            Median household income: $38,758
            Population: 2,937,979
            Unemployment rate: 8%
            Pct. below poverty line: 19.5% (4th highest)

            2. West Virginia
            Median household income: $38,482
            Population: 1,855,364
            Unemployment rate: 8%
            Pct. below poverty line: 18.6%

            1. Mississippi
            Median household income: $36,919
            Population: 2,978,512
            Unemployment rate: 10.7%
            Pct. below poverty line: 22.6%
            Notice all the poor states are the “takers”, have low education systems and boy do they hate paying for anything.
            You represent them well.

          • http://personalliberty.com/ Bob Livingston

            Dear unhinged Dave,

            You are certainly aware I was referring to bodies volunteering to make themselves cannon fodder for the elites, not money to prop up the military industrial complex. As for the rest of your argle-bargle, it is simply straw man piled upon red herring piled upon non sequitur. It does, however, reveal your inherent bigoted and elitist nature. I thought progressives were compassionate toward the less fortunate and tolerant of people’s differences.

            Best wishes,
            Bob

          • Dave

            Corporatist Bob,
            We have plenty of compassion for people who deserve it… Not people who take from the government by the truck load then complain about their taxes being too high.
            Its funny that a racist bigoted birther conservative calls be a bigot… But see here is the thing Bob, my distain for your racism, does not make me a bigot. My attitudes do not limit another’s freedom… you conservatives on the other hand… plenty of freedom and liberty limiting activities.
            Your state, is a poor state with an awful education system that your fellow conservatives are too happy to cut funding for which puts people in the position to volunteer to be the “cannon fodder” as you put it. It si by the warped conservative morals and plan that these kids have limited economic opportunity. That does not take away from the fact that AL for every dollar they contribute to fed coffers get back $1.66 in fed pork. That means that without the Fed Gov, AL sinks into the 3rd world. Yet you come here and have the nerve to bite the hand that feeds your community, country and state.
            Have the courage of your convictions and pay your own way for once… I know that is hard for a conservative to understand….When I see you DEMAND that AL reject that extra 66 cents on the dollar, I will think for of you than being a selfish, self-centered racist conservative.

          • http://personalliberty.com/ Bob Livingston

            Dear unhinged Dave,

            Since you are so bothered by the fact that Alabama receives more pilfered funds from the Federal Government (which, as I’ve pointed out, most of which goes to fund NASA operations at Marshall) than they have stolen from them, I’m sure you’ll join me in my efforts to repeal the 16th Amendment and end the Fed. Otherwise, you are just spouting idiocy. However, as you have proven time and again that you approve of theft–including in this thread where you moaned that Alabama’s congressional delegation voted against the spending boondoggle bill for storm Sandy–I know that that will not be the case.

            Best wishes,
            Bob

          • Dave

            Dear Corporatist Bob,
            And you want to be left alone and not not pay taxes while others pay for your infrastructure that you use everyday.
            Taxes are theft only when you have no representation… You have representation. The citizen’s of Washington DC are the only people in the 50 states that have no represntation.
            The Fed needs auditing and oversight. I do not know enough to say it needs to be disbanded… The people who call for its abolishment all seem to have their hands in the gold trade which I am sure doesn’t affect their judgement.

          • http://personalliberty.com/ Bob Livingston

            Dear unhinged Dave,

            You write: “And you want to be left alone and not not pay taxes while others pay for your infrastructure that you use everyday.” What I want is for government to return to its Constitutional parameters.

            Best wishes,
            Bob

  • red neck

    Mandatory weekly / monthly drug test for all welfare recipients.
    If this were to be enacted it would surly eliminate at least 50% of the population that are currently using welfare to fund their drug habits.

    • dan

      …I’d like to amend that and add all public servants.

    • ‘Barbara Messmer

      Actually it would eliminate 100% of all government spending since drug tests are not free and are paid for by the government demanding that the test be taken.

    • Jimmy the Greek

      And they well rob every one elce , when they get hungry , LOL

  • Doc Sarvis

    So this is why the Red States take more Federal dollars/what they pay into the Federal budget than Blue States (who pay more into the Federal Budget than they get in return. Hmmmm.

    • red neck

      Do you have any idea of what you are talking about?????… I didn’t think so…

      • Dave

        Do you? Didn’t think so….

      • Doc Sarvis

        Of course I do.

    • Jimmy the Greek

      Because most of the red states are loaded with people that should not be here , and they breed like flys ,.

  • Dave

    So raise the minimum wage to a living wage… Problem solved.
    But the greedy corporatists believe that all the money in this country belongs to the 1%. Its OK for them to make double-digit increases year over year buy lobbying and bribing Congress to lower their taxes, put in trade regs that favor their business and manipulating the system to their benefit.
    Societies fail when the few have all the money… Societies thrive when the wealth is shared… That is a fact.

    • Doc Sarvis

      You got that right Dave. The redistribution of wealth to the top 1-2% has been occurring for a long time and accelerated in the last several decades. The middle class is being choked out which weakens America.

      • red neck

        Socialism doesn’t work…. When will you understand that?
        But I suspect that you will never understand it because you are in your mommies basement living off of welfare.

        • Doc Sarvis

          No human derived system “works” perfectly all the time/in every situation. No economic system is pure or purely implemented. We do not have socialism in this country though we do (and have for most of our history) have some social programs.
          I have never taken welfare but I am glad it is there for those who need it through no fault of their own.

        • Dave

          Pure socialism does not work, as does pure capitalism and for the same reasons… the human condition… But you look at countries like Sweden, Norway, Netherlands, Germany etc who have many more social programs than we do… they have a better standard of living, they are better educated, have better HC.
          When will you understand there is no such thing as the “free market” in an industrial, global economy with multiple countries and currencies.

    • Steve Kutnar

      Raising the minimum wage will cause businesses that utilize low/minimum wage workers to re-evaluate how many of those workers they can continue to afford at the wage rate. Increasing the minimum wage does not increase the payroll dollars available for a business to spend on workers.

      • Dave

        Steve,
        The solution here is to pay our workers more, below the welfare rate, rethink our trade policies and maybe… just maybe CEO/Owners of larger companies can make a little less year over year than the double digits they are today.
        Some companies do the right thing like Costco… Others like Walmart pay workers horribly and let our tax dollars subsidize their benefits…

        • ‘Barbara Messmer

          Dave,
          You and Steve are talking two different types of companies. You talking about Wal-Mart and Steve is talking about Mom&Pop independent companies. Small companies, many with owners doing a lot of the work do not have CEO’s making double digit increases in their income every year.
          You say raise minimum wage to a living wage. Sounds great but how do you determine that? Cost of living varies by state, even by areas within the state. What do we include in the term “living”? Do we throw in cable tv as the SCOTUS did for prisoners? Do we include the cost of “organic” food which many times is 2 or 3 times the cost of regular food? How about special diets required by medical or religious reasons? How about an extra 5,000 or so for health expenses?

          • Dave

            Barbara,
            I understand what you are saying… I believe wholesale changes are required in trade, taxes, what foods are subsidized etc. The Capitalist ideal is to have a product or service that takes “X” to make so that 1) you can pay your workers enough money to buy your product or service after they pay for expenses 2) covers additional costs of doing business and 3) R&D to help make a better product or service. That dynamic gets thrown off when you introduce cheap products made in China, Mexico that are made at pennies on the dollar.
            I do believe that a minimum wage means something different in different areas of the country so that has to be taken into account. The determining factor of a living wage should be housing and food in any given area. Its not perfect but its a good place to determine the cost of living.
            I think Cap gains needs to be abolished if people can be stopped from hiding income in the company. End food subsidies to big agro that causes the bad foods to be cheaper than the good food… that helps lower HC expenses right there. HC is a whole other issue that needs to be dealt with… the insurance company and company needs to not be the end user of HC. It should be the patient/individual there is more to that but that is an 20K foot view.
            In order for any society to survive, you need a vibrant middle class. That requires economic, tax, trade policy that fosters the growth of the middle class and an avenue for poor people to move to the middle class.
            I am open to suggestions for a better way.

          • Jimmy the Greek

            Thats Right ! And top of the list to bring back jobs , Tax the hell out of all inports so they well be higher in price then the same thing made here >

          • Nadzieja Batki

            Dave is only malicious toward WalMart. They are supposedly the villains in his life.

          • Dave

            So you support WalMarts practice of letting their employees suck off your tax dollars rather than have to spend money to help pay HC expenses???
            At least your true colors are showing…

        • Nadzieja Batki

          Don’t like the wage offered by a company then don’t take the job. Instead of working you spend the time sabotaging the company.

          • Dave

            Do you live in a rural area Nads?

          • Jimmy the Greek

            Or go back and rob the jount !

        • Nadzieja Batki

          Don’t like the wage offered by a company then don’t take the job. Instead of working you spend the time sabotaging the company.

      • Jimmy the Greek

        Better to have less workers and pay them better , you well get more out of them with better pay , And If you have your office were the workers can see your car drive a full size ford , leave , the Leve the benz or M-5 home .

  • KenRad

    Problem not solved. Why work if you can sit on your butt and make the same as getting up and going to work for 8 hours. The welfare mind set in ingrained and an acceptable way of life for many. The first thing we need to do is limit the number of welfare children that we will pay for. Working people stop at the number of children that they can afford, but Welfare awards for more children. Limit Welfare kids to 2; if you have more than that, then you don’t get any more money. There are men who make a living at impregnating Welfare women and go around collecting pay each month for “their” kids.

    • red neck

      You can also add the newly legal 11 million Mexican immigrants to the welfare state thanks to obama….

      • Doc Sarvis

        Are you saying that the Republicans had no part in the Bipartisan Immigration Reform Bill?

    • Jimmy the Greek

      Ken how can i get hooked up on the baby making Job ? Hell that beats all hell out of driving truck .

  • dan

    i want a job where I can golf and vacation ….an unlimited expence account….
    bodyguards,fancey house and house servants , limo and driver , private jet,bus and helicopters …with damned near NO ACCOUNTABILITY
    I wanna be pResident

    • Dave

      Or wall street… the big banks…big oil….
      Get a CEO position with one of them, you can break all kinds of laws and you may see a fine that amounts to a day’s worth of profit.

      • dan

        …cost of business and tax deductable,I’m sure

  • Sic Semper Tyrannis

    I can’t believe they are just now figuring this out! I was taking in $330.00/week tax-free in Georgia when I lost my job. That’s $17,160/yr. If I had been making minimum wage, $7.25/hr, I would have been grossing $290/wk or $15,080/yr. The effective hourly rate for unemployment compensation in Georgia is therefore $8.25/hr.

    What is so often overlooked in the debate about unemployment compensation is that the Criminals in the District of Criminals in both “bogus parties” have sent 23,000,000 manufacturing jobs overseas and God only knows how many ancillary jobs that were either related to or dependent on those manufacturing plants for their livelihoods. Then, they have the unmitigated gall and audacity to tell us to go work when they have gotten rid of all of our good-paying jobs to please their bankster masters on Wall Street and manufacturers who asked them to send our jobs and manufacturing plants and livelihoods overseas, so they can pay slave labor wages, make exorbitant profits, and have new markets to invest in and grow their billions in capital investments. Then, to add insult to injury and insult to our intelligence, they actually have the unmitigated gall and audacity to tell us they know how to bring jobs back to the Amerikan People!!! WHO ARE THESE NUMBNUTS FOOLING??? These are the same IDIOTS who expect us to feel safe when our military is using Chinese chips in sophisticated weaponry and our manufacturing base is all but MIA. The “arsenal of democracy” is MIA and now the USSA is a sitting duck, yet these BOZOS still persist in their incessant mocking lies. Nobody with sense God gave an ant is buying the snake oil anymore.

  • KenRad

    Jimmy, my man, you just have to look around on the south side of town, but be careful.

  • Sylvin

    Its just amazing the glaring ignorance of most of the people commenting on this article, and on this website. Is it just me or is everyone dumbed down to the point where people actually believe the garbage reported in the media today?
    People complain so much about pay rates and how minimum wage doesn’t pay a living wage. DUH! Those jobs were never meant to pay a living wage! A job’s pay rate is not linked to how much someone “needs” to survive. A job’s pay rate is linked to the kind of skill set they have compared to other people, as well as how much that position contributes to the overal profitabilty of a company. If you only do rmenial labor (meaning just about anyone can easily do it) then you won’t get paid very much. These jobs allow low skilled people to develop good work ethics, habits and better skills, then move up.
    Sadly our failing education system has failed so many kids and families by pushing kids into graduation (who haven’t earned it) and attenting college for degrees that won’t help them find a job that makes enough to just pay back to the college loan. The root of all these problems lie at the feet of people who believe the solutions to human problems is controlling people.
    Don’t get paid enough – Force them to pay you more.
    Don’t like how much money others make – Force them to pay more taxes
    Don’t like the contract other people agreed to – Make that kind of contract illegal
    Don’t like what other people are doing – outlaw their ability to choose
    Don’t like the world you live in – take away as many freedoms from others to give more stuff to you
    YOU PEOPLE ARE WHAT CAUSED ALL THESE PROBLEMS! Economics is about incentives, and when you keep chaging all the laws and rules (or just making up new ones all the time) you mix and screw up the incentives. Our system today is screwed up because we’ve been told for decades that Democracy is great and if we just vote for so-and-so they will fix the problems. That was a lie and we are now reaping what has been sown for decades.
    Only you can solve your own problems. When a people look to others to solve their own problems you get a terribly corrupt system like we have now, where the solution is just more control. Control has not worked for the past 50 years and it won’t work now…
    And to the morons who say Capitalism doesn’t work, please, go learn about what Capitalism actually is. You morons who say this clearly have no understanding of what Capitalism really is, and you’ll never learn what it really is by watching TV.