Economy & Budget

Report: In some states, welfare pays better than work

Report: In some states, welfare pays better than work

This article was originally published by heartland.org.

In more than a dozen states, a family of three can live on what is essentially a middle-class salary without holding down a job.

That’s the startling revelation at the heart of a new report from the Cato Institute, a libertarian think tank based in Washington D.C., which annually reviews the average value of welfare benefits in each of the 50 states.

A combination of food stamps, temporary cash grants, WIC (Women, Infants and Children), and housing assistance is worth a pre-tax value more than $30,000 in 16 states. In Hawaii, the most generous state, a working family of three would have to earn almost $61,000 just to be even with the $50,000 in welfare the government hands out.

The report examines the value of government assistance and whether that “help” is actually keeping people from getting a job.

Neither Lazy Nor Stupid

“Poor people are not lazy. Every survey you look at, people on welfare say they’d prefer to have a job,” said report co-author Mike Tanner, a senior fellow with Cato. “On the other hand, poor people are not stupid either. If you’re willing to pay someone two, or sometimes, three times more than they are likely to make at an entry level job . . . chances are they are not likely to work real hard to get into that job.”

The report will make anyone with a low-paying job cringe. In 11 states, welfare programs pay more than the starting salary for a teacher. In 39 states, welfare programs pay better than the starting salary for a secretary.

All told, the federal government spent $668 billion on those programs last year, according to the report, which also took into account $284 billion worth of welfare spending at the state level.

Worth $60,000 Job in Hawaii

In Hawaii, where welfare benefits are at their highest, single mothers collect an average benefit of $49,175, according to the Cato study.

Because welfare is not subject to taxes, a person would have to earn more than $60,000 annually in Hawaii to take home the same amount as someone on welfare.

State Sen. Sam Slom (R-Honolulu), minority leader of the Hawaii State Senate, and the sole Republican in the chamber, said the study’s results are “not surprising” to those who have followed recent increases in total welfare benefits and expenditures.

“I said in a public hearing several years ago that within a few years, our human services welfare costs would surpass public education in Hawaii. This came to pass late in 2012,” Slom told Hawaii Reporter. “It is a shame that Hawaii has such huge governmental costs and tax burden, which in turn creates more of a welfare class and the growing inability of a middle class to sustain themselves, let alone to privately assist the less fortunate.”

But two researchers at the Center for Budget and Policy Priorities, a liberal think tank also based in Washington, D.C., say Cato’s conclusions are based on some faulty assumptions.

In a review of the Cato report published Wednesday, Sharon Parrott and LaDonna Pavetti wrote that the welfare system serves as support for working families, not a disincentive to find a job.

The two researchers said Cato’s assessment incorrectly assumes that all single parents with two or more children would qualify for all types of benefits. They also said the report fails to account for the fact that many welfare recipients are working low-paying jobs.

“To be sure, many working families struggle because their earnings are low and the assistance they receive often isn’t enough to make ends meet, particularly if they have significant child care or transportation costs,” they wrote.

Depends on Definition of ‘Working’

Tanner points out that, officially, 42 percent of people on welfare are working.

But the Cato study notes the numbers are actually much lower. Welfare recipients can be classified as working while looking for a job, or simply taking part in a job training program. Tanner estimates only about 20 percent of people receiving welfare benefits have a non-subsidized job.

Only 17 percent of Missouri’s Temporary Assistance for Needy Families recipients have jobs, according to the report, ranking the state dead last.

“We need to tighten the work requirements,” Tanner said of how to improve those numbers. “Even in Illinois, a state that is doing much better than the national average (with) 58 percent of people working. That means 42 percent of people on welfare are not working.”

Tanner adds that states and the federal government should also cap welfare benefits, and that creating good paying jobs is the best way to get people off of welfare.

Eric Boehm (Eric@PAIndependent.com) is a reporter for Watchdog.org, where this report first appeared. Benjamin Yount (Ben@IllinoisWatchdog.org) is a reporter for Illinois Watchdog. Hawaii Reporter’s Malia Zimmerman  (Malia@hawaiireporter.com) contributed to this report.

Internet Info

“The Work versus Welfare Trade-Off: 2013,” Michael D. Tanner and Charles Hughes, Cato Institute: http://heartland.org/policy-documents/work-versus-welfare-trade-2013

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