Springboards & quicksand
By Ralph R. Reiland
Published: Sunday, Sept. 1, 2013, 9:00 p.m.
If you don't want to work, the good news is that a new study by the Cato Institute, “The Work Versus Welfare Trade-Off, 2013,” shows that welfare currently pays more than the minimum wage in 35 states, even figuring in the Earned Income Tax Credit that subsidizes low-income workers.
The study reveals that welfare in 13 states and Washington, D.C., pays more than $15 per hour — double the national minimum wage.
Not surprisingly, the study's authors, Michael Tanner and Charles Hughes, a senior policy analyst and a research assistant at Cato, respectively, conclude that the current welfare system acts as a “disincentive to work.”
Tanner and Hughes report that welfare's work disincentive, the government-erected impediment to getting on the first rung of the occupational ladder, may actually be getting worse: “Welfare benefits continue to outpace the income that most recipients can expect to earn from an entry-level job, and the balance between welfare and work may actually have grown worse in recent years.”
Similarly, Tanner and Hughes report that a previous Cato study published in 1995, “The Work vs. Welfare Trade-Off,” found that the dollar value of a typical welfare recipient's full package of benefits in all 50 states and the District of Columbia significantly exceeded the poverty level, as defined by federal government standards.
The ironic and unintended product of this ill-designed system is an anti-poverty program that expands poverty and encourages dependency by dissuading people from entering the workforce in entry-level jobs.
The government, in short, is discouraging the precise behavior that is the key step in most people's upward mobility — the willingness to work, the eagerness to become independent and self-sufficient, even if it means starting at the bottom.
Or as Tanner and Hughes put it: “There is little doubt that one of the most important long-term steps toward avoiding or getting out of poverty is taking a job. Only 2.6 percent of full-time workers are poor, as defined by the Federal Poverty Level standard, compared with 23.9 percent of adults who do not work. Even part-time work makes a significant difference; only 15 percent of part-time workers are poor. And while many anti-poverty activists decry low-wage jobs, a minimum-wage job can be a springboard out of poverty.”
In basic terms, there's the choice – springboards or quicksand.
“In 11 states, welfare pays more than the average pre-tax first year wage for a teacher,” according to the Cato study. “In 39 states, it pays more than the starting wage for a secretary.”
The three most generous welfare states are Hawaii, the District of Columbia and Massachusetts with their annual welfare packages totaling, respectively, $49,175, $43,099, and $42,515.
Pennsylvania comes in 20th at $29,817. Mississippi brings up the rear at $16,924.
Tanner and Hughes report that someone in Hawaii would have to earn a pre-tax income of $60,590 in order to match in net income the state's $49,175 welfare package. And that's unlikely, given that $60,590 is $24,315 higher than Hawaii's median salary of $36,275.
“We should,” said Ronald Reagan, “measure welfare's success by how many people leave welfare.”
Ralph R. Reiland is an associate professor of economics at Robert Morris University and a local restaurateur (firstname.lastname@example.org)
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