Welfare: A Better Deal than Work
America’s public-assistance system pays many people better than the jobs they’d otherwise have.


Michael Tanner

Consider this: In ten states and the District of Columbia, welfare pays more than the entry-level salary for a teacher in that state. In 38 states and the District of Columbia, welfare is more generous than the average starting salary for a secretary. And in the three most generous states, welfare pays more than the wages for an entry-level computer programmer. In eight states, welfare recipients receive benefits worth more than the median salary there.This is not even to consider the other costs of going to work. As Casey Mulligan of the University of Chicago recently testified before Congress:

Earning income requires sacrifices, and people evaluate whether the net income earned is enough to justify the sacrifices. When [welfare programs] pay more, the sacrifices that jobs require do not disappear. The commuting hassle is still there, the possibility for injury on the job is still there, and jobs still take time away from family, schooling, hobbies, and sleep. But the reward to working declines, because some of the money earned on the job is now available even when not working.

Likewise, we should consider that, as the Congressional Research Service has pointed out:

Leisure is believed to be a “normal good.” That is, with a rise in income, people will “purchase” more leisure by reducing their work effort. . . . Thus, the increase in [the value of welfare benefits] is expected to cause people to reduce work hours.

Many welfare recipients, particularly long-term ones, lack the skills and attachment to the job market necessary to obtain the types of jobs that pay average or above-average wages. Individuals who do leave welfare for work most often start employment in the service or retail industries, in positions such as clerks, secretaries, cleaning persons, salesmen, and waitresses. And, although it would be nice to raise the wages of entry-level service workers, the government has no ability to do so. (Attempts to mandate wage increases, such as increases in the minimum wage, primarily result in fewer such jobs.)

It should be no surprise, then, that, despite the work requirements put in place by the Nineties welfare reform, fewer than 42 percent of recipients are participating in broadly defined “work activities.” In some states, such as Missouri and Massachusetts, less than one out of five welfare recipients are “working.” Moreover, work activity frequently means not a job but only looking for work or participating in a job-training program. In fact, fewer than one-fifth of welfare recipients are working in unsubsidized private-sector jobs.

Of course, not every welfare recipient meets our profile, and many who meet our profile do not receive all the benefits listed. (On the other hand, some receive even more.) Still, what is undeniable is that for many recipients — particularly the “long-term” dependents — welfare pays substantially more than an entry-level job does.

Nor does our study suggest that people on welfare are lazy. Indeed, survey after survey suggests that they would prefer to be working. By not working, welfare recipients are simply responding rationally to the incentive systems our public-policy makers have established for them.

But in the long term, policies that discourage work are bad for the recipients. One of the most important long-term steps toward avoiding or getting out of poverty is employment. Only 2.6 percent of full-time workers are poor, compared with 23.9 percent of adults who do not work. Even part-time work makes a significant difference — only 15 percent of part-time workers are poor. And, while many anti-poverty activists decry low-wage jobs, even starting at a minimum-wage job can be a springboard out of poverty in the long run.

Recently, the Cameron government in Britain has introduced a cap on welfare benefits at £500 a week, or about $40,000 a year. When the British are outpacing you on welfare reform . . . 

— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution. Along with research assistant Charles Hughes, he authored “The Work versus Welfare Trade-Off: 2013.”


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