Josh Barro: Don't Believe the Cato Institute: Welfare Does Not Really Pay Better Than Work: Noted for August 25, 2013
Josh Barro: Does Welfare Really Pay Better Than Work?:
The Cato Institute is out with an update to their 1995 study which purports to show that, in most states, welfare pays better than work. They add up benefits available through eight programs to a low-income woman with two children, and find total benefit values well in excess of full-time minimum wage work, or even, in some states, middle-skill work. The study is called "The Welfare-Versus-Work Tradeoff," and it's meant to show why people don't get off welfare. And it's B.S., for three reasons.
- Very few people actually qualify for all eight of the programs Cato looks at.
- Welfare benefits for single adults are much less generous than those for women with children.
- Not all benefits are lost when a welfare recipient starts working. SNAP benefits phase out…. People who go back to work don't necessarily lose health benefits….
That said, poverty traps are real. This is the phenomenon of people losing benefits as they earn more income of their own. It's a problem that welfare programs need to be designed around, and there are two ways of mitigating it. One is to make benefits more generous by extending their phaseout ranges, so people don't lose as many benefits as they earn more income. That costs money. The other is to reduce benefits. That reduces the standard of living for the most vulnerable people in America. It's easier to make an argument for the latter approach when you have an economy that creates broad prosperity and makes it easy for people to find living-wage jobs if they are willing to work. We don't have that economy. This is the problem that conservatives and libertarians refuse to grapple with: If you're unwilling to support policies that promote macroeconomic stability, such as counter-cyclical fiscal and monetary policies, you're only making a more generous welfare state more morally necessary. Meanwhile, Democrats have implemented a reform that actually does help to address the poverty trap issue, the Affordable Care Act.