When Welfare Pays Better than Work

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Photo: Emily Metcalf

By Michael Tanner – The federal government funds 126 separate programs targeted towards low-income people, 72 of which provide either cash or in-kind benefits to individuals. (The rest fund community-wide programs for low-income neighborhoods, with no direct benefits to individuals.) State and local governments operate more welfare programs.Of course, no individual or family gets benefits from all 72 programs, but many do get aid from a number of them at any point in time.


Today, the Cato institute is releasing a new study looking at the state-by-state value of welfare for a mother with two children. In the Empire State, a family receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities (like milk and cheese) would have a package of benefits worth $38,004, the seventh-highest in the nation.

While that might not sound overly generous, remember that welfare benefits aren’t taxed, while wages are. So someone in New York would have to earn more than $21 per hour to be better off than they would be on welfare. That’s more than the average statewide entry-level salary for a teacher.

Plus, going to work means added costs such as paying for child care, transportation and clothing. Not to mention that, even if it’s not a money-loser, a person moving from welfare to work will see some form of loss — namely, less time for leisure as opposed to work.

Is it any wonder, then, that, despite the work requirements included in the 1996 welfare reform, only 27.6 percent of adult welfare recipients in New York are working in unsubsidized jobs? (Another 13 percent are involved in the more broadly defined “work participation,” which includes job search, training and other things.)

Welfare is slightly more generous in Connecticut, where benefits are worth $38,761; a person leaving welfare for work would have to earn $21.33 per hour to be better off. And in New Jersey, a worker would have to make $20.89 to beat welfare.

Nationwide, our study found that the wage-equivalent value of benefits for a mother and two children ranged from a high of $60,590 in Hawaii to a low of $11,150 in Idaho. In 33 states and the District of Columbia, welfare pays more than an $8-an-hour job. In 12 states and DC, the welfare package is more generous than a $15-an-hour job.

Of course, not everyone on welfare gets all seven of the benefits in our study. But, for many recipients — particularly the “long-term” dependents — welfare clearly pays substantially more than an entry-level job.

To be clear: There is no evidence that people on welfare are lazy. 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.

While this makes sense for them in the short term, it may actually hurt them over the long term. One of the most important steps toward avoiding or getting out of poverty is a job.Only 2.6 percent of full-time workers are poor, vs. 23.9 percent of adults who don’t work. And, while many anti-poverty activists decry low-wage jobs, even starting at a minimum-wage job can be a springboard out of poverty.

Thus, by providing such generous welfare payments, we may actually not be helping recipients.

There should be a public-policy preference for work over welfare. And while it would be nice to raise the wages of entry-level service workers, government has no ability to do so. (Studies have shown that attempts to mandate wage increases, such as minimum-wage hikes, primarily result in higher unemployment for the lowest-skilled workers.)

If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening work requirements in welfare programs, removing exemptions and narrowing the definition of work.

In New York, lawmakers should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.

This article appeared on New York Post (Online) on August 19, 2013.





  1. Is Michael Tanner a rational man?

    Why doesn't he quit his job and start taking these "free" payments?

    Either he's pulling our leg, or he's too stupid to know the difference. Either way, I don't trust him.

      • Page not found, your link doesn't work….I wonder why. This article is BS there is no $64K a year cmon people see into the republican propaganda lies. Notice every article is always opinions and supposed assumptions. Where is the facts? Why are they not showing the numbers? Cause its lies you morons. Wake up these are the oil companies and rich talking to you! They dont care about welfare, they simply try to make an issue to slip by their billions in subsidies. Welfare amounts to a very small percentage of our taxes.

      • I'm pretty sure you're right. this is a cheap manipulation technique that turned out to be more successful that we expected

    • The numbers are absurd, $64K a year? I know many families on welfare, many who live in shelters or cars or subsidized housing. They would love to have a chance to work at a living wage job and improve their standard of living. The actual cash payments of TANF are small, add Food Stamps and WIC and they go up. Add health insurance and housing for those lucky to have it, and you'll get bigger numbers, still nothing in the neighborhood of his claims. Should we force poor people to go without medical care, food or housing to bring down the cost?

      The Cato Institute is a well known right wing political group, in line with Tea Party agenda. I wonder how many poor people will be flocking to Hawaii now from the mainland? I wonder how many working people are in a rage against those on welfare? Tanner, you have done us all a disservice.

  2. There are a lot of entry level jobs available in Hawaii. Check out almost any fast food chain and you will find that they need workers. If a person is unable to hold down a part-time minimum wage job, then that person is just not trying! Why should I help support someone who doesn't care enough to try?

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