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September 3 2013

Money for Nothing: How it Pays Not to Work in Most States

Vicki E. Alger

Last Thursday labor unions planned nationwide protests against fast food restaurants because they want to increase the minimum wage to $15 per hour—almost double the current rate.

But a new study from the Cato Institute finds that if you’re looking to make more money in most states welfare pays more than working:

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. (Table 3, p. 8). …

In 11 states, welfare pays more than the average pre-tax first year wage for a teacher. In 39 states it pays more than the starting wage for a secretary. And, in the 3 most generous states a person on welfare can take home more money than an entry-level computer programmer. (p. 3 and Table 4, pp. 10-11)

Cato senior fellow Michael Tanner told  FoxNews.com that beyond Congressional reforms, Americans need better education to prepare them for the workforce. Additionally, FoxNEws.com reported that according to Tanner:

…entry-level workers don’t stay at that level, …just 2.6 percent of full-time worker are poor and only 42 percent of Americans are engaged in work activities, which includes job training and looking for employment.

In the end, Tanner and co-author Charles Hughes explain:

Many welfare recipients, even those receiving the highest level of benefits, are doing everything they can to find employment and leave the welfare system. Still, it is undeniable 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. (p. 42)

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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