WELFARE BENEFITS: DISINCENTIVE TO WORK?

From the September 2, 2013 issue of Forbes:

The welfare system, at its best, is a system that gives people a way to live when they can’t find work for themselves, when they’re down on their luck. At its worst, the welfare system rewards people for not working, and incentivizes people to develop habits that make it harder for them to find work in the future, miring them in permanent poverty.

In Cato’s new 2013 study by Michael Tanner and Charles Hughes, welfare paid more than $10 an hour in 33 states; 17 paid less than $8 an hour. Comparing the two data sets and accounting for inflation, 18 states saw a decline in the total value of welfare benefits; 32 states and the District of Columbia saw increases.

Tanner and Hughes award the national welfare championship to Hawaii, which offers $60,590 in annual welfare benefits, once you account for the fact that welfare benefits are tax-free to the recipient, compared to work-related wages. That’s the equivalent of $29.13 an hour. Rounding out the top five were D.C. ($50,820 per year and $24.43 an hour), Massachusetts ($50,540 and $24.30), Connecticut ($44,370 and $21.33), and New York ($43,700 and $21.01)

States with the lowest welfare benefits were Idaho ($11,150 and $5.36), Mississippi ($11,830 and $5.69), Tennessee ($12.120 and $5.83), Arkansas ($12,230 and $5.88), and Texas ($12,550 and $6.03).

Tanner and Hughes count 126 distinct federal means-tested anti-poverty programs in force today. For the purposes of their study, they looked specifically at: (1) Temporary Assistance for Needy Families (TANF), the post-1996 cash welfare program; (2) the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps; (3) Medicaid; (4) housing assistance; (5) utilities assistance; (6) the Women, Infants, and Children program (WIC), and (7) the Emergency Food Assistance Program (TEFAP).

Not all of these benefits apply to every welfare beneficiary, and some are time-limited, like TANF. But it remains true that an alarming number of welfare beneficiaries do not have an economic incentive to find entry-level work.

Editor’s Note: Here from the 2013 Cato study - following No. 5 New York - are other states’ welfare benefits:

6. New Jersey: $43,450
7. Rhode Island: $43,330
8. Vermont: $42,350
9. New Hampshire: $39,750
10. Maryland: $38,160
11. California: $37,160
12. Oregon: $34,300
13. Wyoming: $32,620
14. Nevada: $29,820
15. Minnesota: $29,350
16. Delaware: $29,220
17. Washington: $28,840
18. North Dakota: $28,830
19. Pennsylvania: $28,670
20. New Mexico: $27,900
21. Montana: $26,930
22. South Dakota: $26,610
23. Kansas: $26,490
24. Michigan: $26,430
25. Alaska: $26,400
26. Ohio: $26,200
27. North Carolina: $25,760
28. West Virginia: $24,900
29. Alabama: $23,310
30. Indiana: $22,900
31. Missouri: $22,800
32. Oklahoma: $22,480
33. Louisiana: $22,250
34. South Carolina: $21,910

While at first glance the totals look outrageous, it is important to note that the totals include a number of different anti-poverty programs, including Medicaid and food assistance, and that many welfare recipients do not receive their state’s total benefits. As for Hawaii, the total benefits are so high because that state has the highest cost of living of all the states.