It is a fundamental economic principle that if you pay people more to do A than you do to do B, you will get more people doing A. A new Cato Institute study demonstrates how this principle applies to choices between work and welfare.
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. If you live in Hawaii, welfare provides you with almost $50,000 in payments (see Table 14 below). You would have to earn over $60,000 in pretax income just to match those benefits (see Table 15 below). Is it any wonder that Hawaii has so many people who choose not to work? In California unless you have jobs that pay you at least $37,000, you would be better off on welfare.Is it any wonder that California has 12% of the country's population but a third of all its welfare recipients?
And that's just the monetary aspect. It does not account for the value to
you of the extra 40, 50 ,60 hours of leisure time you enjoy when you're not
having to work.
Welfare recipients are often maligned as being stupid people. Maybe not.
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