Anyone who took an economics class would be able to know that incentives drives a person to act. If there is no incentive, there is no reason to do something. If I’m asked to mow someone’s lawn, there needs to be some kind of incentive for me to do it, whether it be financial or emotional. There has to be an incentive for me to act. The same can be said with welfare.
Ever since Charles Murray’s “Losing Ground,” the idea of welfare dependency has been furiously debated. After my professors consistently telling me that it is all flawed conservative theory, I decided to take a look into it. They probably think this because while Murray was the one who brought it to scholar’s attention, it was Ronald Reagan who adopted Murray’s idea and started his own war on welfare. Not very many studies have been able to decide whether or not there is such a thing of welfare dependency, but I believe a recent Congressional Research Service can shine some light on the issue.
Not too long ago, the CRS put out a study that states “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 people to reduce work hours.” What it is saying is that people can put a value on leisure, time to do anything you are able to do and want to do. So long as you reach an economic level of your own satisfaction, then you will stop at that level in order to obtain more free time. Does this not explain welfare dependency? People can argue yes, but who is to say that welfare programs pay out enough to reach that economic level of satisfaction? Here are some numbers, done by the Cato Institue’s “The Work Versus Welfare Tradeoff: 2013,” to show that there are, in fact, programs that pay out enough to hit that level.
Using the most commonly used programs that people receive as a mother with two kids (age 1 and 3), they include 7 different assistance programs. The first is Temporary Assistance for Needy Families (TANF), a cash payment which pays up to $923 a month. The second is Supplemental Nutrition Assistance Program (SNAP), which provides food vouchers, which a person is automatically eligible to receive once on TANF. The third is Medicaid, providing medical care to poor and elderly. The last four programs are housing assistance, utilities assistance, Women, Infants, and Children Program (WIC) and The Emergency Food Assistance Program (TEFAP).
By combining these into a total welfare package, you see that there are 35 states that pay more than a full time minimum wage job, even after accounting for the EITC (Earned Income Tax Credit). Because of the assistance mostly being tax free, a person leaving welfare for the same paying job would actually see a decrease in income in over a dozen states. In 13 states, welfare pays more than $15 per hour. In 11 states, welfare pays more than a first year teacher. In 39 states, it pays more than a secretary. And in the three highest paying states, the programs pay more than a computer programmer. So please tell me, is there welfare dependency?
By applying the CRS’ finding, which I call the “leisure principle,” it would mean that people would rather stay on welfare than work. Is this not the definition of welfare dependency? Since a numerous amount of states pay more than a full time secretary, why should they work. Social stigma might be negative and people might look down on welfare recipients, but that would play only a small part. If a person leaving welfare will make less than a secretary, working 40 hours a week, or less than a teacher, which requires four years of college education and a large amount of debt in most cases, or as a computer programmer, a highly skilled job, there is no incentive to leave welfare. To make more than these occupations and not have to commit any of the time or money that those people had to invest, it makes no sense for a person to leave welfare. Therefore, welfare dependency must exists if it means that these programs leave no incentive to leave, and even add an economic incentive to join.