Earlier this year Pennsylvania state officials traveled to the libertarian think tank, the Cato Institute, in search of a solution to a dilemma that most states have.
The dilemma, they said, was they could not find a way to transition welfare recipients to work. The average welfare recipient gets (ooops, I almost wrote “earned”) $45,000 per year in benefits, they said, and has low work skills and little job history. How do we “transition” them to work?
In August of this year the institute published a study, The Work Verses Welfare Tradeoff, on the welfare question for all 50 states. The researchers found the Federal government provides 126 separate programs targeted toward low income people. These programs provide cash or in-kind benefits such as food, housing, or medical care, directly to individuals and community wide programs for low income communities expressly for the purpose of eliminating poverty. The annual cost to the Federal government of these programs, according to CATO, is $668.2 billion. Add in State programs that cost $284 billion and the annual welfare costs in the country often exceeds $1 trillion dollars.
Cato considered only six of the Federal programs and none of the State programs to reach their “average annual welfare benefit” number. The six programs are: Temporary Assistance to Needy Families (TANF). TANF is the successor to Aid to Families with dependent Children; the Supplemental Nutrition Assistance Program, or SNAP (food stamps); Medicaid (MediCal in California); Housing assistance (public housing , Section 8 housing assistance payments, and other rent subsidies); utility assistance, such as LIHEAP or the Low Income Home Energy Assistance Program.
The women with infants and children program (WIC) is another revenue stream that provides supplemental food assistance, health care referrals, and nutrition education and support for low-income pregnant, breastfeeding, and non-breastfeeding postpartum women and to infants and children up to the age of 5.
CATO used an “average” number for each State calculating the low cost counties benefits (mostly rural) and the higher paying counties (urban) to arrive at an “average” grant for each program. Left out of the study were programs such as job training assistance and child care, such as HeadStart, which has an annual budget of $19 billion. Also left out of the calculation were the Earned Income Tax Credit (maximum benefit last year was $5,372) and the child tax credit. Although not considered in their average benefit calculation, CATO found that “there is a significant tax penalty for those leaving welfare for work.”
Study findings include:
- Welfare pays more than the minimum wage in thirty five states.
- In thirteen states welfare pays more than $15 per hour. Overall, in eleven states welfare pays more than the average pay for a first year teacher; in thirty nine states it pays more than the average starting salary for a secretary.
- Only 42% of welfare recipients are working (nationally and in California) and many of those with jobs are actually not working, but are participating in job training or “job search”. Fewer than 20% have unsubsidized private-sector jobs.
- Overall the value of the benefits received “greatly exceed the Federal 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 in an entry level job”.
Where does California stand in this nationwide study?
Overall California ranks eleventh in the study, with an average “benefit” package of $37,160 (Hawaii was first at $60,590!). This does not count State supplemental assistance, job training assistance, child care, transportation assistance, etc.
- The hourly wage equivalent for a California recipient is $17.87 or double the minimum wage.
- The average TANF grant in 2012 was $723.
- The average SNAP (food stamp) grant was $416 per month, $4,992 per year
In Medicaid payments California ranked last among all states, with an average expenditure per household of $4,459 per year. It will be interesting to see the effect of ObamaCare on this number in the next several years.
Housing assistance averaged $1,235 per month ($998 in rural areas, $1,472 in urban areas). CATO notes that only 11.4% of TANF recipients in California receive Housing assistance. The Contra Costa Housing Authority list Section 8 grants for the County as $1,225 for a two bedroom home, $1,711 for 3 bedroom home and $2,099 for a 4 bedroom home plus utility assistance for “heating, cooking, other electric, air conditioning, water heating, water, sewer, trash collection, refrigerator and range/microwave”.
The CATO Institute arrives at the conclusion that “for many recipients-especially long term dependents-welfare pays more than the type of entry level job that a typical welfare recipient can expect to find. As long as this is true, many recipients are likely to choose welfare over work”.
I agree with their conclusion. I am also disappointed that they limited their study to six out of more than 100 programs and did not consider the significant benefit of programs such as HeadStart at the Federal level and multiple child care programs at the State level.
With these considered, it would be easy to arrive at a dollar amount for California similar to Pennsylvania. Also left uncovered in the study, and the question raised by Pennsylvania State officials, is how many programs are recipients allowed to keep while transitioning to work? California allows recipients to receive lower levels of some grants while transitioning. That will be the subject of a later report.
I find another question troubling. Why don’t we know this information already? How can we have a discussion on the proper level of support in a “safety net” when we don’t know the number in-place today?
Why don’t our elected officials tell us these numbers when asking for more? Why doesn’t our news media report on these facts to help us have an intelligent discussion and make “informed decisions”?