Welfare Can Pay More Than That Entry-Level Job

A new study from a libertarian think tank calls for further restrictions on government assistance for low-income Americans.

Carolina Fuentes and her daughter Katherine, 5, wait for an appointment at the Sacramento county welfare office in Sacramento, Calif., Monday, June 1, 2009. Facing a $24.3 billion state budget deficit, Gov. Arnold Schwarzengger has proposed ending welfare for poor mothers and their children, wiping out health insurance for 1 million children and disbanding care for people with Alzheimer's disease or other disabilities. Fuentes, 22, a newly-single mother , doesn't qualify for benefits having crossed the U.S.-Mexico border as a teenage, applied for cash assistance, food stamps and health coverage of her daughter.
National Journal
Matt Vasilogambros
Aug. 20, 2013, 8:06 a.m.

Wel­fare pro­grams pay more than min­im­um wage in 35 states.

That’s ac­cord­ing to a new study re­leased this week by the Cato In­sti­tute, a Wash­ing­ton-based liber­tari­an think tank. It’s an up­date from its 1995 study that ex­amined the same is­sues.

Its con­clu­sion this time around, ac­count­ing for the changes in the gov­ern­ment’s 126 sep­ar­ate pro­grams for low-in­come people, is that gov­ern­ment aid can be more than the earn­ings from a reg­u­lar, entry-level job. And the pay gap has in­creased in re­cent years, the study con­cludes.

Here are some of its num­bers:

Not only do gov­ern­ment-as­sist­ance pro­grams for the un­em­ployed pay more than min­im­um wage in 35 states, but they also pay more than a $15-an-hour job, ac­cord­ing to the re­port. Hawaii has the “most gen­er­ous be­ne­fit pack­age,” fol­low­ing by the Dis­trict of Columbia and Mas­sachu­setts.

In 11 states, these pro­grams pay more an­nu­ally than the av­er­age teach­er after his or her first year on the job. In 39 states, it pays more than a start­ing salary of a sec­ret­ary. And the com­par­is­ons con­tin­ue.

In total, the fed­er­al gov­ern­ment spends $668.2 bil­lion on these pro­grams an­nu­ally, while states give out an­oth­er $284 bil­lion, the re­port finds.

Cato’s con­clu­sion? Well, the study tries to prove what the in­sti­tute and oth­er con­ser­vat­ives and liber­tari­ans have ar­gued for years:

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.

By mak­ing it harder to qual­i­fy for these pro­grams and adding more eli­gib­il­ity re­quire­ments from the up­dated 1996 Tem­por­ary As­sist­ance for Needy Fam­il­ies law, states can help bridge this gap, the study says.

And rais­ing the min­im­um wage, as Pres­id­ent Obama has sug­ges­ted, is a non­starter, ac­cord­ing to the in­sti­tute, which ar­gues it raises un­em­ploy­ment for the low­est-skilled work­ers.

In the U.S., more than 100 mil­lion people get some sort of wel­fare as­sist­ance from the fed­er­al gov­ern­ment, ac­cord­ing to a 2012 re­port from the con­ser­vat­ive magazine The Weekly Stand­ard. That num­ber does not in­clude those who only re­ceive So­cial Se­cur­ity or Medi­care.

Cut­ting off be­ne­fits could have a deep im­pact on those fam­il­ies, many of which are minor­ity or im­mig­rant house­holds. Wel­fare be­ne­fits are also capped after a cer­tain amount of time, which ob­vi­ously doesn’t go for min­im­um wage.

Food stamps, hous­ing, med­ic­al, and oth­er gov­ern­ment-as­sist­ance pro­grams are of­ten dis­cussed by these groups and have been the tar­get of budget cuts from con­gres­sion­al Re­pub­lic­ans. In the House-passed farm bill last month, food stamps were left com­pletely out in or­der to help its pas­sage. The Demo­crat­ic-con­trolled Sen­ate is not likely to pass that bill.


Shar­on Par­rott, a vice pres­id­ent for Cen­ter of Budget and Policy Pri­or­it­ies, a Wash­ing­ton-based think tank, re­spon­ded to the Cato re­port, say­ing the res­ults were mis­lead­ing. She tells Na­tion­al Journ­al:

They got the com­par­is­on between work­ing and not-work­ing really skewed. The first thing that they do is they as­sume that people who aren’t work­ing have ready ac­cess to a large set of be­ne­fits that vir­tu­ally no one re­ceives all of. So, that really ex­ag­ger­ates the be­ne­fit pack­age of most fam­il­ies with kids whose par­ents are out of work. The second thing they do is they ig­nore the kinds of help that is provided and is avail­able for work­ing fam­il­ies, in­clud­ing fam­il­ies who were not work­ing and re­ceiv­ing wel­fare and trans­ition to work. And they as­sume that as soon as they trans­ition to a low-wage job, all of those kinds of sup­ports are im­me­di­ately ter­min­ated, which is also false. So when you ex­ag­ger­ate the be­ne­fits avail­able to people who don’t work and you dra­mat­ic­ally un­der­state the be­ne­fits that are avail­able to people who work, it’s not sur­pris­ing that the com­par­is­on, or the break-even point, is dra­mat­ic­ally skewed in their re­port. 

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