According to a report released in August by the libertarian Cato Institute, when the full package of benefits is taken into account, welfare pays more than a minimum wage job in 33 states. In 12 states, welfare pays more than an equivalent job that paid $15 per hour. In these states, the report notes that an individual who left the welfare rolls for a job paying the same amount would see a decline in take-home pay.
The report, the “Welfare vs. Work Trade Off,” notes that because welfare benefits are not taxable, their value is greater than the equivalent value of pay and benefits from an entry level job. This difference is partially offset by tax credits such as the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC) and various state tax credits. In some states, Cato notes, the combined value of the tax credits can be more than the value of taxes paid so the worker would receive a tax refund larger than their actual tax bill. In twelve states, however, the worker would have to earn more than the value of welfare benefits to bring home an equivalent income. These states include Hawaii, Massachusetts, Connecticut, New York, New Jersey, Rhode Island, Vermont, New Hampshire, Maryland, California, Oregon, and Wyoming, as well as the District of Columbia. In Georgia, a salary of $14,060 would replace welfare benefits.
The report also estimates the value of welfare benefits in terms of an hourly wage equivalent. In 33 states, welfare benefits are worth more than a minimum wage job. In the same 12 states and the District of Columbia, welfare is worth more than a job that pays $15 per hour. In Georgia, welfare is equivalent to an hourly wage of $6.76.
In other terms this means that in 42 states and the District of Columbia, welfare recipients live above the federal poverty level. In Hawaii, Massachusetts, and the District of Columbia, welfare recipients make more than twice the federal poverty level. In Georgia, welfare benefits are at 101 percent of the federal poverty level.
There are 126 federal programs targeted toward low-income Americans. Of these, 72 provide either cash or individual benefits. Such programs include Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Nutrition Assistance Program (SNAP) food stamps, WIC vouchers, public housing, utility assistance and cell phones. Fraud is rampant in many programs.
The Cato study comes as the Bureau of Labor Statistics reports that the Civilian Labor Participation rate fell to 63.2 percent. According to CNN Money, this is the lowest percentage of Americans “over 16 who either have a job or are actively searching for one” since August 1978.
Michael Tanner, senior fellow at the Cato Institute, notes that work imposes other costs aside from taxes and lost benefits. People who choose to work will have to pay for clothing, transportation, child care, and will have less leisure time.
“To be clear: There is no evidence that people on welfare are lazy,” Tanner said. “Indeed, surveys of them consistently show their desire for a job. But they’re also not stupid. If you pay them more not to work than they can earn by working, many will choose not to work.”
Tanner notes that even though this may make financial sense in the short term, low wages for entry-level jobs eventually lead to better paying professional positions.
Find out where your state stands on welfare benefits HERE.