The Cato Institute has released a study comparing the value of government welfare programs and working a minimum wage job. This is what they found.
- In 18 states, the total value of welfare benefits has declined in inflation adjusted terms since 1995. However, this is due to the changing composition of what we included in the package of benefits (largely reflecting a reduction in the number of people on welfare who receive public housing assistance) rather than a real decline in the value of components.
- Despite this decline, welfare currently pays more than a minimum wage job in 35 states, even after accounting for the Earned Income Tax Credit.
- Because of increases in the Earned Income Tax Credit (EITC) and the creation of the Child Tax Credit (CTC), as well as the adoption of state-level equivalents of the EITC, it is possible for an individual leaving welfare to take a job paying slightly less than welfare without a loss of income in 39 states. However, that difference is small and not likely to offset the value of leisure.
- In another 12 states, an individual leaving welfare for a job paying the same amount as welfare would see a decline in actual income.
- In 33 states, the equivalent wage value of welfare has increased since 1995. The state seeing the largest increase, by a large margin, was Vermont. Other states with significant increases include Hawaii and New Hampshire, as well as the District of Columbia.
- In fact, in 13 states, welfare pays more than $15 per hour. The most generous benefit package was in Hawaii, although that may be distorted by the state’s high cost of living. The second highest level of benefits was in the District of Columbia, followed by Massachusetts.
- In 11 states, welfare pays more than the average pre-tax first year wage for a teacher. In 39 states it pays more than the starting wage for a secretary. And, in the 3 most generous states a person on welfare can take home more money than an entry-level computer programmer.
Below is the actual monetary value of total welfare benefits if a family were to receive the full benefit payout of every program for the top 15 highest paying States.
Next is what what a family would receive from a full payout of every program as though it were a salary before taxes.
Next is the hourly wage equivalent if the family received the full payout of every program.
How do welfare benefits compare with the State’s median salary if they received the full benefit payout of every program?
Of course being eligible for some benefits reduces the amount one might receive for another. Cato explains, “In computing the total value of the benefits package that our hypothetical family receives, it is necessary to adjust those benefits to reflect the fact that receipt of one type of benefit may reduce the amount received under another program. After making all the necessary calculations, the results are summarized in Table 14.”
If, however, we consider only the three programs virtually every family who receives welfare is enrolled in, TANF (the primary cash welfare program), SNAP (food stamps), and Medicaid, in 8 States recipients make more than minimum wage.
Which political party is in charge of the top 10 States? In each category 9/10 States are run by Democrats. Apparently in many States it pays to vote for a living.