{"id":1303,"date":"2013-09-01T07:01:59","date_gmt":"2013-09-01T11:01:59","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=1303"},"modified":"2013-09-23T07:58:01","modified_gmt":"2013-09-23T11:58:01","slug":"welfare-work-difficult-choice","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/welfare-work-difficult-choice\/","title":{"rendered":"Welfare or Work: A Difficult Choice"},"content":{"rendered":"
\"The<\/a>

The choice between wel\u00adfare and work is not always an easy one, accord\u00ading to a new study by the Cato Insti\u00adtute. (Cred\u00adit: LA<\/span> Times)<\/p><\/div>\n

(NOTE<\/span>: This post was updat\u00aded on Sep\u00adtem\u00adber 23 to incor\u00adpo\u00adrate the gov\u00adern\u00admen\u00adt\u2019s new\u00adly-released pover\u00adty rate data.)<\/em><\/p>\n

If forced to choose between a full-time job that paid $24.40 per hour and enrolling in a pack\u00adage of gov\u00adern\u00adment ben\u00ade\u00adfits that paid a com\u00adpa\u00adra\u00adble amount, which would you choose?<\/p>\n

Some res\u00adi\u00addents of the Dis\u00adtrict of Colum\u00adbia face that choice, accord\u00ading to a recent study released by the Cato Insti\u00adtute<\/a>.  Those res\u00adi\u00addents, if they signed up for all the pro\u00adgrams for which they were eli\u00adgi\u00adble, would col\u00adlect the cash equiv\u00ada\u00adlent of $43,099, the study found. A work\u00ader would have to earn $50,820 to clear that amount after pay\u00ading tax\u00ades (Table 15, p. 36<\/a>). The study\u2019s authors, Michael Tan\u00adner and Charles Hugh\u00ades, argue that ben\u00ade\u00adfits of this size dis\u00adcour\u00adage peo\u00adple from working.<\/p>\n

\u201c<\/span>The cur\u00adrent wel\u00adfare sys\u00adtem pro\u00advides such a high lev\u00adel of ben\u00ade\u00adfits that it acts as a dis\u00adin\u00adcen\u00adtive to work. Wel\u00adfare cur\u00adrent\u00adly pays more than a min\u00adi\u00admum wage job in 35 states \u2026 and in 13 states it pays more than $15 per hour \u2026 In 11 states, wel\u00adfare pays more than the aver\u00adage pre-tax first year wage for a teacher. In 39 states it pays more than the start\u00ading wage for a sec\u00adre\u00adtary. And in the 3 most gen\u00ader\u00adous states [Hawaii, DC<\/span> and Mass\u00ada\u00adchu\u00adsetts] a per\u00adson on wel\u00adfare can take home more mon\u00adey than an entry-lev\u00adel com\u00adput\u00ader pro\u00adgram\u00admer.\u201d (Exec\u00adu\u00adtive Sum\u00adma\u00adry and p. 4<\/a>)<\/p><\/blockquote>\n

The study also found that the pre\u00adtax wage equiv\u00ada\u00adlent of wel\u00adfare ben\u00ade\u00adfits exceeds the medi\u00adan income in 8 states, and is at least 90 per\u00adcent of the medi\u00adan in 16 states. (Table 4, p. 10<\/a>)<\/p>\n

This dif\u00adfi\u00adcult choice between wel\u00adfare and work may be one rea\u00adson why, after near\u00adly half a cen\u00adtu\u00adry of increas\u00ading\u00adly high\u00ader spend\u00ading on anti-pover\u00adty pro\u00adgrams, the pover\u00adty rate stood at 15 per\u00adcent for the third con\u00adsec\u00adu\u00adtive year in 2012<\/a>,<\/span> the first time it has stayed that ele\u00advat\u00aded for that long since the mid-1960s.  Last year, a record 46.5 mil\u00adlion peo\u00adple lived below the pover\u00adty line<\/a>,<\/span> accord\u00ading to the Cen\u00adsus Bureau.<\/p>\n

The Cato study is not with\u00adout its crit\u00adics, who have fault\u00aded its method\u00adol\u00ado\u00adgy. The authors assumed that ben\u00ade\u00adfi\u00adcia\u00adries received sup\u00adport from 7 of the 126 fed\u00ader\u00adal anti-pover\u00adty pro\u00adgrams \u2013 TANF<\/span> (the cash wel\u00adfare pro\u00adgram, for\u00admer\u00adly known as AFDC<\/span>), SNAP<\/span> (for\u00admer\u00adly known as food stamps), hous\u00ading assis\u00adtance, Med\u00adic\u00adaid, WIC<\/span> (a pro\u00adgram that pro\u00advides nutri\u00adtion assis\u00adtance to preg\u00adnant and post\u00adpar\u00adtum women and their infant chil\u00addren), LIHEAP<\/span> (assis\u00adtance with util\u00adi\u00adty bills) and TEFAP<\/span> (a pro\u00adgram that dis\u00adtrib\u00adutes food to house\u00adholds that states deem eli\u00adgi\u00adble). The authors acknowl\u00adedge that few peo\u00adple actu\u00adal\u00adly col\u00adlect ben\u00ade\u00adfits under all sev\u00aden pro\u00adgrams, although they argue that peo\u00adple who are on wel\u00adfare for the longest peri\u00adod of time are most like\u00adly to be receiv\u00ading ben\u00ade\u00adfits under all sev\u00aden (p. 34<\/a>). That said, when they con\u00adsid\u00ader only the three pro\u00adgrams in which vir\u00adtu\u00adal\u00adly all wel\u00adfare ben\u00ade\u00adfi\u00adcia\u00adries par\u00adtic\u00adi\u00adpate \u2013 TANF<\/span>, SNAP<\/span> and Med\u00adic\u00adaid \u2013 the pack\u00adage of ben\u00ade\u00adfits still exceeds the min\u00adi\u00admum wage in 8 states (p. 34<\/a>).<\/p>\n

The study\u2019s crit\u00adics argue that work dis\u00adin\u00adcen\u00adtives are tem\u00adpered by the fact that accep\u00adtance of a job does not nec\u00ades\u00adsar\u00adi\u00adly dis\u00adqual\u00adi\u00adfy peo\u00adple from receiv\u00ading ben\u00ade\u00adfits. You can col\u00adlect food stamps, for exam\u00adple, even if you have a job, although ben\u00ade\u00adfits for work\u00aders are low\u00ader than for non-work\u00aders. They also note that the gov\u00adern\u00adment sub\u00adsi\u00addizes work as well as inac\u00adtiv\u00adi\u00adty. Wage-earn\u00aders qual\u00adi\u00adfy for sub\u00adsi\u00addies for which non-work\u00aders are inel\u00adi\u00adgi\u00adble. The Earned Income Tax Cred\u00adit, for exam\u00adple, sub\u00adsi\u00addizes the wages of low-income workers.<\/p>\n

Crit\u00adics also point out that the wel\u00adfare reform law adopt\u00aded dur\u00ading the 1990s places work require\u00adments on recip\u00adi\u00adents. Here the authors note that wel\u00adfare recip\u00adi\u00adents are only required to engage in \u201cwork activ\u00adi\u00adties,\u201d not nec\u00ades\u00adsar\u00adi\u00adly in actu\u00adal work, and that only a minor\u00adi\u00adty of ben\u00ade\u00adfi\u00adcia\u00adries is engaged in such activ\u00adi\u00adties at any point in time. \u201cWork activ\u00adi\u00adties\u201d include job train\u00ading, edu\u00adca\u00adtion, and job search.  Nation\u00adal\u00adly, 41.6 per\u00adcent of TANF<\/span> recip\u00adi\u00adents engage in some form of work-relat\u00aded activ\u00adi\u00adties, but par\u00adtic\u00adi\u00adpa\u00adtion rates vary wide\u00adly by state (Table 17, pp. 40\u20131<\/a>). Some of the states with the least gen\u00ader\u00adous ben\u00ade\u00adfits have the high\u00adest pro\u00adpor\u00adtion of ben\u00ade\u00adfi\u00adcia\u00adries engag\u00ading in work activ\u00adi\u00adties, while states that pro\u00advide rich\u00ader ben\u00ade\u00adfits have low\u00ader work-activ\u00adi\u00adty par\u00adtic\u00adi\u00adpa\u00adtion rates. Idaho\u2019s par\u00adtic\u00adi\u00adpa\u00adtion rate, for exam\u00adple, is 87.9 per\u00adcent, while the rate in Mass\u00ada\u00adchu\u00adsetts is just 18 percent.<\/p>\n

But even con\u00adced\u00ading some of these crit\u00adi\u00adcisms, the study\u2019s cen\u00adtral point seems valid.<\/p>\n

\u201c<\/span>It is unde\u00adni\u00adable that for many recip\u00adi\u00adents \u2013 espe\u00adcial\u00adly long-term recip\u00adi\u00adents \u2013 wel\u00adfare pays more than the type of entry-lev\u00adel job that a typ\u00adi\u00adcal wel\u00adfare recip\u00adi\u00adent can expect to find. As long as this is true, many recip\u00adi\u00adents are like\u00adly to choose wel\u00adfare over work.\u201d (p. 42<\/a>)<\/p><\/blockquote>\n

That choice between wel\u00adfare and work is a crit\u00adi\u00adcal one for poor fam\u00adi\u00adlies. The dis\u00adin\u00adcen\u00adtive to work, if not over\u00adcome, makes it much more like\u00adly that ben\u00ade\u00adfit recip\u00adi\u00adents will remain poor. The study notes that only 2.6 per\u00adcent of full-time work\u00aders live below the pover\u00adty line, com\u00adpared with 23.9 per\u00adcent of adults who do not work (p. 2<\/a>).<\/p>\n

None of this sug\u00adgests that peo\u00adple on wel\u00adfare are lazy. On the con\u00adtrary, they are ratio\u00adnal. I recent\u00adly faced the choice between remain\u00ading on the job and retir\u00ading. Retire\u00adment means less income and a tighter bud\u00adget. For me, eli\u00adgi\u00adbil\u00adi\u00adty for Social Secu\u00adri\u00adty and fed\u00ader\u00adal retire\u00adment checks \u2013 both gov\u00adern\u00adment ben\u00ade\u00adfits \u2014 helped tip the scales in favor of retire\u00adment. I have less income, but a bet\u00adter qual\u00adi\u00adty of life.<\/p>\n

A poor per\u00adson faces options that aren\u2019t all that dif\u00adfer\u00adent. If their earn\u00adings poten\u00adtial is low, they face a gen\u00aduine\u00adly dif\u00adfi\u00adcult choice between enter\u00ading the work\u00adforce and remain\u00ading at home. Even if their ben\u00ade\u00adfits are some\u00adwhat less than their poten\u00adtial wages, they may under\u00adstand\u00adably be reluc\u00adtant to trade away the free\u00addom that comes with leisure for a slight\u00adly high\u00ader income. The frus\u00adtra\u00adtions and drudgery of a low-wage job \u2014 some\u00adthing with which few pol\u00adi\u00adcy\u00admak\u00aders are famil\u00adiar \u2014 and the expens\u00ades asso\u00adci\u00adat\u00aded with work\u00ading may not be worth the addi\u00adtion\u00adal income. The more gen\u00ader\u00adous the ben\u00ade\u00adfits they receive for not work\u00ading, the less attrac\u00adtive work becomes.<\/p>\n

This is not a new prob\u00adlem for pol\u00adi\u00adcy\u00admak\u00aders, but it is one that they have yet to solve. We all want to pro\u00advide assis\u00adtance to peo\u00adple who are down on their luck. But pub\u00adlic assis\u00adtance lifts no one out of pover\u00adty. It mere\u00adly makes pover\u00adty more tol\u00ader\u00ada\u00adble. The trick is to find a way to pro\u00advide assis\u00adtance with\u00adout dis\u00adcour\u00adag\u00ading peo\u00adple from tak\u00ading the step most like\u00adly to lead them out of pover\u00adty: get\u00adting a job.<\/p>\n

Instead, we have pur\u00adsued poli\u00adcies that vast\u00adly increase trans\u00adfer pay\u00adments to indi\u00advid\u00adu\u00adals with\u00adout reduc\u00ading pover\u00adty rates. The chart below (you can click on it to enlarge) illus\u00adtrates both the increase in gov\u00adern\u00adment spend\u00ading on wel\u00adfare pro\u00adgrams and the rel\u00ada\u00adtive\u00adly high rates of pover\u00adty that have sur\u00advived half a cen\u00adtu\u00adry of grow\u00ading social wel\u00adfare spending.<\/p>\n

\"Revised<\/a><\/p>\n

The green line<\/a> charts spend\u00ading on the wel\u00adfare pro\u00adgrams that the Cato Insti\u00adtute paper dis\u00adcuss\u00ades \u2013 Med\u00adic\u00adaid and pro\u00adgrams such as TANF<\/span> and SNAP<\/span>. In 1964, the year before Med\u00adic\u00adaid was cre\u00adat\u00aded, spend\u00ading on these pro\u00adgrams amount\u00aded to less than 1.2 per\u00adcent of gross domes\u00adtic prod\u00aduct (GDP<\/span>). By 2008, that had near\u00adly quadru\u00adpled to 4.6 per\u00adcent.  And then it real\u00adly took off, reach\u00ading 5.3 per\u00adcent in 2009, the first year of the Oba\u00adma Pres\u00adi\u00adden\u00adcy.  It has remained above 5 per\u00adcent ever since.<\/p>\n

The chart\u2019s red line<\/a> tracks spend\u00ading on all trans\u00adfer pro\u00adgrams, includ\u00ading those exam\u00adined in the Cato paper, as well as pro\u00adgrams aimed at alle\u00advi\u00adat\u00ading pover\u00adty among spe\u00adcif\u00adic groups \u2013 the elder\u00adly (Social Secu\u00adri\u00adty and Medicare), vet\u00ader\u00adans (VA<\/span> ben\u00ade\u00adfits) and job-seek\u00aders (unem\u00adploy\u00adment insur\u00adance). Spend\u00ading on these pro\u00adgrams has more than tripled in real terms, from 4.6 per\u00adcent of GDP<\/span> in 1964 to 14.2 per\u00adcent in 2012.  It had nev\u00ader been exceed\u00aded 12.5 per\u00adcent until 2009.  In every year since 2009, rough\u00adly $1 out of every $7 the econ\u00ado\u00admy pro\u00adduced was trans\u00adferred to peo\u00adple who did not earn it.<\/p>\n

Such a mas\u00adsive trans\u00adfer of wealth should dra\u00admat\u00adi\u00adcal\u00adly reduce pover\u00adty, if not elim\u00adi\u00adnate it entire\u00adly. It has not. The blue line<\/a> charts the pover\u00adty rate over the peri\u00adod from 1964\u20132012. That rate declined quite sharply with the cre\u00adation of Med\u00adic\u00adaid and Medicare in 1965 and the expan\u00adsion of oth\u00ader \u201cGreat Soci\u00adety\u201d pro\u00adgrams. In 1964, 19 per\u00adcent of the coun\u00adtry lived in pover\u00adty; by 1969, that per\u00adcent\u00adage had fall\u00aden to 12.1 per\u00adcent. This is the result we would expect: as the red and green lines pitched upward, the blue line sloped down\u00adward. But then progress stopped.<\/p>\n

Social wel\u00adfare spend\u00ading con\u00adtin\u00adued to rise, but the pover\u00adty rate stopped its decline. In 2012, it stood at 15 per\u00adcent for the third straight year. That is the worst three-year peri\u00adod since 1963\u20131965, when the gov\u00adern\u00admen\u00adt\u2019s \u201cWar on Pover\u00adty\u201d was in its infan\u00adcy.  Anti-pover\u00adty spend\u00ading has since risen dra\u00admat\u00adi\u00adcal\u00adly, but high rates of pover\u00adty persist.<\/p>\n

The mon\u00adey trans\u00adferred to low\u00ader-income house\u00adholds through wel\u00adfare comes pre\u00addom\u00adi\u00adnant\u00adly from the high\u00adest earn\u00aders. The Tax Foun\u00adda\u00adtion<\/a>,<\/span> using IRS<\/span> data, found that the top 1 per\u00adcent of earn\u00aders account\u00aded for over 37 per\u00adcent of fed\u00ader\u00adal income tax rev\u00adenues in 2010; the top 5 per\u00adcent pro\u00advid\u00aded 59 per\u00adcent; the top 10 per\u00adcent, 70 per\u00adcent of the fed\u00ader\u00adal government\u2019s income tax receipts. The bot\u00adtom 50 per\u00adcent con\u00adtributed just 2.4 per\u00adcent of revenues.<\/p>\n

The US<\/span> has pre\u00adcise\u00adly the sort of sys\u00adtem that is favored by most on the cen\u00adter-left \u2013 the most pro\u00adgres\u00adsive income tax sys\u00adtem<\/a> in the devel\u00adoped world, accord\u00ading to the OECD<\/span>, cou\u00adpled with a social wel\u00adfare sys\u00adtem that trans\u00adfers a sub\u00adstan\u00adtial share of the tax\u00ades gov\u00adern\u00adment col\u00adlects from the high\u00adest earn\u00aders to the poor\u00adest households.<\/p>\n

The gov\u00adern\u00adment will make near\u00adly than $2.4 tril\u00adlion<\/a> this year in trans\u00adfer pay\u00adments to indi\u00advid\u00adu\u00adals, accord\u00ading to the Com\u00admerce Depart\u00admen\u00adt\u2019s Bureau of Eco\u00adnom\u00adic Analy\u00adsis (BEA<\/span>).  Those pay\u00adments will con\u00adsume 86 per\u00adcent<\/a> of what the gov\u00adern\u00adment will col\u00adlect in income and pay\u00adroll tax\u00ades, accord\u00ading to BEA<\/span> data.  This should reduce the pover\u00adty rate and nar\u00adrow income dis\u00adpar\u00adi\u00adties. It has done nei\u00adther. Pover\u00adty not only per\u00adsists, but affects a larg\u00ader per\u00adcent\u00adage of the pop\u00adu\u00adla\u00adtion today than in the late 1960s. Income dis\u00adpar\u00adi\u00adties have wors\u00adened. It seems that the poli\u00adcies that aim to reduce pover\u00adty and income dis\u00adpar\u00adi\u00adties are hav\u00ading the oppo\u00adsite result.<\/p>\n

Nor are such dis\u00adpar\u00adi\u00adties a unique\u00adly Amer\u00adi\u00adcan prob\u00adlem. Oth\u00ader devel\u00adoped coun\u00adtries, with more ambi\u00adtious social wel\u00adfare pro\u00adgrams, are see\u00ading wealth-to-income ratios grow along with social wel\u00adfare spend\u00ading, repris\u00ading lev\u00adels of dis\u00adpar\u00adi\u00adty not seen in Europe since the 19th cen\u00adtu\u00adry<\/a>.<\/p>\n

None of this is like\u00adly to change the minds of those who are con\u00advinced that the way to elim\u00adi\u00adnate dis\u00adpar\u00adi\u00adties and alle\u00advi\u00adate pover\u00adty is to more close\u00adly align our social poli\u00adcies with those of Europe.  They want to fur\u00adther increase tax bur\u00addens on the high\u00adest earn\u00aders, while expand\u00ading social wel\u00adfare pay\u00adments to the low\u00adest. That this course of action, pur\u00adsued for near\u00adly half a cen\u00adtu\u00adry, has yield\u00aded dis\u00adap\u00adpoint\u00ading results only con\u00advinces advo\u00adcates that we need to do more of the same. Sim\u00adi\u00adlar\u00adly, the sug\u00adges\u00adtion that gen\u00ader\u00adous wel\u00adfare ben\u00ade\u00adfits might dis\u00adcour\u00adage work and trap peo\u00adple in pover\u00adty is reject\u00aded on the grounds that more gen\u00ader\u00adous ben\u00ade\u00adfits would weak\u00aden work dis\u00adin\u00adcen\u00adtives<\/a>.<\/p>\n

Polit\u00adi\u00adcal atti\u00adtudes and alle\u00adgiances are deeply root\u00aded and dif\u00adfi\u00adcult to change. Lib\u00ader\u00adals and con\u00adser\u00adv\u00ada\u00adtives alike per\u00adsist in cer\u00adtain beliefs in the face of con\u00adtrary evi\u00addence. Both sides are attached to their the\u00ado\u00adries. Since their poli\u00adcies derive from good inten\u00adtions, they believe that the poli\u00adcies achieve good results. Those who offer con\u00adtrary evi\u00addence are ignored, belit\u00adtled or ridiculed. Oppo\u00adnents of their poli\u00adcies are more than mis\u00adtak\u00aden; they are malev\u00ado\u00adlent. If they find fault with a par\u00adtic\u00adu\u00adlar pro\u00adgram or pro\u00adnounce it a fail\u00adure, they must oppose its pur\u00adpose. To ques\u00adtion a pol\u00adi\u00adcy is to ques\u00adtion the good inten\u00adtions behind it. Point\u00ading out that anti-pover\u00adty spend\u00ading has not reduced pover\u00adty is tan\u00adta\u00admount to say\u00ading that you don\u2019t care about the poor. Sug\u00adgest\u00ading that wel\u00adfare pro\u00adgrams as cur\u00adrent\u00adly con\u00adsti\u00adtut\u00aded dis\u00adcour\u00adage work is the mark of a cal\u00adloused soul.<\/p>\n

A sim\u00adi\u00adlar mind\u00adset pre\u00advails on the right. Oba\u00admacare must be reject\u00aded root and branch: repealed, defund\u00aded, expunged. Those who sug\u00adgest that the law might do some good or that some of its pro\u00advi\u00adsions might be worth pre\u00adserv\u00ading are regard\u00aded as col\u00adlab\u00ado\u00adra\u00adtors, heretics and not tru\u00adly conservative.<\/p>\n

Such is the state of our gov\u00adern\u00ading class. Any won\u00adder why our prob\u00adlems go unresolved?<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

(NOTE<\/span>: This post was updat\u00aded on Sep\u00adtem\u00adber 23 to incor\u00adpo\u00adrate the gov\u00adern\u00admen\u00adt\u2019s new\u00ad\u00adly-released pover\u00adty rate data.) If forced to choose between a full-time job that paid $24.40 per hour and enrolling in a pack\u00adage of gov\u00adern\u00adment ben\u00ade\u00adfits that paid a com\u00adpa\u00adra\u00adble amount, which \u2026 Con\u00adtin\u00adue read\u00ading \u2192<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":1313,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[479,18,17,480,15,552],"tags":[537,535,548,213,70,543,538,550,54,540,1184,1183,534,367,544,545,546,539,34,536,549,547,487,542,551,532,541,533],"class_list":["post-1303","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget","category-economy","category-entitlements","category-government-spending-2","category-public-policy","category-welfare-spending","tag-afdc","tag-anti-poverty-programs","tag-bea","tag-cato-institute","tag-census-bureau","tag-earned-income-tax-credit","tag-food-stamps","tag-income-disparities","tag-irs","tag-liheap","tag-medicaid","tag-medicare","tag-minimum-wage","tag-oecd","tag-poverty","tag-poverty-rate","tag-public-assistance","tag-snap","tag-social-security","tag-tanf","tag-tax-foundation","tag-transfer-payments","tag-unemployment-insurance","tag-veterans-benefits","tag-wealth-to-income-ratios","tag-welfare","tag-wic","tag-work"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t