Which is better – making minimum wage or getting on
welfare?
This question was addressed in a highly controversial study
entitled, “The Work Versus Welfare Trade-Off.” Published by Cato Institute, the
report is an updated version of the 1995 study that examines the total value of
welfare benefits available to a typical recipient in each of the 50
states and the District of Columbia. Michael Tanner and Charles Hughes, authors
of the report, define a “typical” welfare recipient as a single mother with two
children. Much like the 1995 study, the updated report suggests that, in too
many states, welfare benefits outpace, at the very least, the federal minimum
wage amount of $7.25 and, at most, the income of an entry level job.
Ultimately, Tanner and Hughes argue that the “high level” of benefits in the
current welfare system acts as a disincentive for work. According to the
report:
- Welfare currently pays more than minimum
wage in 35 states, even after taking Earned Income Tax Credit into
consideration.
- In 13 states, welfare pays more than $15/per
hour. The most generous package was in Hawaii.
- In 11 states, welfare pays more than the
average pre-tax first year wage of a teacher. In 39 states it pays more than a
secretary.
- Welfare paid more than $10/per hour in 33
states; 17 paid less than $8/per hour.
- Texas is one of very few states whose minimum
wage is higher than the “total welfare benefits.”
- Less than 42% of welfare recipients are
working. Though, those cited as working do not have jobs, but are participating
in “work activities” such as job training or job search. Less than 20% of
recipients have unsubsidized private-sector jobs.
The report argues that the only way to reduce welfare
dependency is to consider strengthening welfare work requirements, removing
exemptions, and narrowing the definition of work.
Based upon data
and logic proposed by Cato, receiving the “total welfare benefits”
package in the form of cash, food, housing, and medical care aid is certainly
better than relying on minimum wage as the latter does not pay enough for any
family to meet basic needs.
But, in all fairness, there are several flawed
methodological issues with this report. As Sharron Parrott and LaDonna
Paavetii of the Center on Budget and Policy Priorities point out, “Cato assumes — incorrectly — that (1) all
poor families in which the parents aren’t working receive all of these
benefits and, (2) if a parent works, the family does not receive any
forms of assistance for which it would qualify except refundable tax credits.” Many
low-income working families are eligible for, and receive, assistance through
programs such as SNAP, Medicaid, housing assistance, and WIC. In fact, 86% of
low-income children receive health coverage; more than half of SNAP recipients
work; and 87% worked in prior year – just to highlight a few stats from 2011.
Viable Employment: Outweighing Minimum Wage and
Welfare
Given that a high proportion of low-income families depend
on many benefits of the welfare system, it appears that there is not an
optimal choice between minimum wage and welfare. The only remedy is to
equip low-income or unemployed adults with the skills and credentials to obtain
viable employment. This is Why We Do What We Do. As previously
discussed, there are no guarantees that a qualified beneficiary will receive
the “total welfare benefits” package. Likewise, there is also a lifetime limit
on welfare benefits. As importantly, minimum wage jobs do not pay enough for
any family to get by or get ahead with or without supplemental
benefits. For example, just recently, a resident that received TANF benefits
was advised to accept a $7.25 job earned through her work activities with TWC.
As a result, her SNAP assistance decreased. She soon realized that the minimum
wage she was earning was not sufficient enough to support her family
post-Interfaith. Since then, the resident has worked with our Career Services
Manager to invest in the Interfaith’s “career-first” way.
Though difficult to obtain, the importance of viable
employment cannot be underestimated. As discussed last week, lack of skills and
education is a definite hindrance to obtaining viable employment. Yet, another
reason Why We Do What We Do. Through Interfaith’s Employment
Initiative, we seek to increase our resident’s ability to maintain long-term
self-sufficiency by increasing their ability to identify a career path and
obtain viable employment and build assets. This is done through vocational
assessments, financial literacy training, employment training, career
advancement opportunities, and through our internal employer referral network
that is continuously growing. Our outcomes indicates that this comprehensive
approach yields our residents with wages that pay enough to meet their basic
needs without relying on mainstream benefits. As we continue to provide
these stellar employment opportunities, we can become a model of career
building and financial security. Hopefully, we will be in a position to provide
such incentives to residents and non-residents alike as we approach our 30th
Anniversary.
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