Cato Study: Welfare More Lucrative Than Working In Many States
August 22, 2013 by Ben Bullard
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.