In 1995, the Cato Institute published a groundbreaking study,The Work vs. WelfareTrade-Off, which estimated the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia. It found that not only did the value of such benefits greatly exceed the poverty level but, because welfare benefits are tax-free, their dollar value was greater than the amount of take-home income a worker would receive from an entry-level job.
Since then, many welfare programs have undergone significant change, including the 1996 welfare reform legislation that ended the Aid to Families with Dependent Children program and replaced it with the Temporary Assistance to Needy Families program. Accordingly, this paper examines the current welfare system in the same manner as the 1995 paper. Welfare benefits continue to outpace the income that most recipients can expect to earn from an entry-level job, and the balance between welfare and work may actually have grown worse in recent years.
The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour. If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.
One of the things that has made America great has been the willingness of Americans to work hard, knowing their diligence would be rewarded. When the government creates a situation where staying home doing nothing pays as well as working, it undermines the work ethic in America and weakens our country. It might also be a good idea to examine the role the tax burden plays in this–does the working person earn less because of the tax burden that comes with working? Is the welfare recipient subject to a lesser tax burden?
The bottom line here is simple. People are not stupid. If a person can make as much money not working as he would working, why should he work? I recently posted a story with a striking example of this philosophy at rightwinggranny.com. We need to reinstate the work requirements to receive aid, and we need to be more aware of who is getting aid so that we can limit fraud.
It’s time to make sure that the people who are working hard are rewarded for their hard work.