The Human Cost of Welfare

1. Work is essential for human happiness and self-worth

Having no work to do means boredom, and often depression, alcohol, and drugs.

Work provides purpose. Employment offers more than just income; it provides a sense of accomplishment, social connections, and personal growth. Studies have shown that even formerly welfare-dependent single mothers report higher levels of life satisfaction after entering the workforce.

Lack of work has consequences. Unemployment often leads to:

• Decreased self-esteem
• Social isolation
• Increased risk of substance abuse
• Mental health issues like depression

The authors argue that welfare programs should prioritize getting people into jobs, not just providing financial support. This aligns with the fundamental human need for meaningful activity and contribution to society.

2. Current welfare programs often discourage employment

If you pay someone as much for not working as you do for working, it should come as no surprise that many take advantage of the offer.

The welfare trap. Many welfare programs create a "cliff effect" where recipients lose benefits abruptly if they earn too much. This can make working counterproductive financially, trapping people in poverty.

Key issues include:

• High effective marginal tax rates as benefits phase out
• Asset limits that discourage saving
• Complex eligibility rules that make transitions to work risky

The authors argue for reforming welfare to create a smoother transition to employment. This could involve gradually reducing benefits as income increases, eliminating asset tests, and simplifying program rules to remove disincentives to work.

3. Poverty measurements and welfare eligibility need reform

Today more than half of the benefits allocated through programs we think of as 'anti-poverty' efforts actually go to people above the poverty line as defined by the U.S. Census Bureau.

Flawed metrics. The current poverty line calculation, based on three times the cost of food, is outdated and doesn't account for non-cash benefits or regional cost-of-living differences.

Problems with current eligibility criteria:

• Many non-poor receive benefits
• Asset tests discourage saving
• Income limits create work disincentives

The authors suggest revising poverty measurements to better reflect modern living costs and family situations. They also recommend tightening eligibility to focus resources on the truly needy while creating smoother benefit phase-outs to encourage work and saving.

4. Marriage and family structure significantly impact poverty rates

If they really care for the kids that they bring into this world, they should do that in the context where those kids have two parents who are committed to one another … and are ready to become parents.

Single parenthood and poverty. The rise in single-parent households, especially among lower-income groups, strongly correlates with higher poverty rates. Children in single-parent families are much more likely to experience poverty than those in two-parent households.

Factors contributing to this trend:

• Welfare benefits that increase with additional children
• Marriage penalties in benefit calculations
• Cultural shifts in attitudes toward marriage

The authors argue for welfare reforms that don't penalize marriage and promote family stability. They also suggest expanding access to long-acting reversible contraceptives (LARCs) to reduce unintended pregnancies.

5. Cash assistance programs like TANF have evolved but face challenges

[T]he program provides strong incentives to applicants and beneficiaries to remain permanently out of the labor force, and it provides no incentives to employers to implement cost-effective accommodations that enable employees with work limitations to remain on the job.

TANF's mixed results. While the 1996 welfare reform successfully reduced caseloads, many former recipients remain in poverty. States have found ways to circumvent work requirements, and the program's block grant structure hasn't adapted to changing economic conditions.

Ongoing issues:

• Declining value of cash benefits
• Weak work incentives in some states
• Inadequate job training and support services

The authors recommend strengthening TANF's focus on work preparation and creating better pathways to sustainable employment. They also suggest adjusting funding to respond to economic cycles and tightening work requirement enforcement.

6. Food assistance programs are widespread but have flaws

Strikingly, although no one would exchange today's welfare programs for those of the 1980s, over the past couple of decades work requirements have eroded and new problems have arisen.

SNAP's growth and challenges. The Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) has expanded dramatically, now serving one in seven Americans. While it provides crucial food security, the program faces criticism for lax work requirements and potential fraud.

Key issues:

• Minimal enforcement of work requirements
• Eligibility expansions to non-poor households
• Concerns about nutritional quality of purchased foods

The authors suggest reinstating and enforcing work requirements for able-bodied adults without dependents. They also recommend tightening eligibility to focus on the truly needy and exploring ways to encourage healthier food choices.

7. Disability programs inadvertently discourage work

Once people go onto disability they almost never go back to work.

Disability as a permanent exit. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) often become de facto early retirement programs. The application process and benefit structure create strong disincentives to return to work.

Problems with current disability programs:

• Long application periods erode work skills
• "All or nothing" benefit structure
• Limited support for partial work capacity

The authors recommend reforming disability programs to encourage and support partial work capacity. This could involve creating a smoother transition back to work, improving vocational rehabilitation services, and providing better incentives for employers to accommodate disabilities.

8. The Earned Income Tax Credit (EITC) shows promise as a welfare model

The EITC and other income-enhancing measures improve the educational outcomes of young children in low-income families.

EITC's success. The Earned Income Tax Credit has been effective in encouraging work and reducing poverty, especially among single mothers. It provides a financial boost to low-income workers without creating a welfare cliff.

Benefits of the EITC:

• Increases workforce participation
• Improves child outcomes
• Enjoys bipartisan support

The authors recommend expanding the EITC, particularly for childless workers. They also suggest exploring ways to deliver the credit throughout the year rather than as a lump sum at tax time to better support ongoing expenses.

9. Native American reservations illustrate welfare dependency pitfalls

We didn't know we were poor then. We were happy. We worked hard, building our homes from wood off this land, putting up food for winter. Now we are all rich. The children don't listen to us.… We made it too easy for them.

Unintended consequences. Many Native American reservations, despite receiving significant welfare benefits and sometimes casino revenues, face high rates of poverty, unemployment, and social problems. This illustrates how unconditional financial support can undermine motivation and community cohesion.

Observed issues on reservations:

• High unemployment despite available resources
• Substance abuse problems
• Loss of traditional skills and values

The authors argue that this example demonstrates the importance of work and earned success for individual and community well-being. They suggest that welfare programs should focus on creating opportunities for meaningful work and community contribution rather than just providing financial support.

10. Reforming welfare requires prioritizing work incentives

Slowing the decline in the size of the labor force.

Work-centered reform. The authors propose a comprehensive overhaul of the welfare system to prioritize and reward work. This involves both improving work incentives within existing programs and creating new approaches to support low-wage workers.

Key recommendations:

• Expand and improve the Earned Income Tax Credit
• Create a wage subsidy program for low-income workers
• Eliminate or reduce payroll taxes for low-wage earners
• Reform disability programs to support partial work capacity
• Strengthen work requirements in food assistance programs

The authors argue that by focusing on making work more financially rewarding and accessible, welfare reform can both reduce poverty and increase economic productivity. This approach aims to break the cycle of dependency while still providing a safety net for those truly unable to work.

Last updated: July 28, 2024