It Pays to Be on Welfare in California. Not So Much in Texas

I recently ran across this chart which shows how employment is growing in Texas versus California  since the 2007-08 recession.



There are a number of reasons why this is happening, but consider just this one. Not working pays much better in California than it does in Texas.

In California, you would have to earn $35,000 in salary to be better off than collecting all the welfare benefits available to you (TANF, SNAP, Medicaid, WIC, TFAP etc.). In Texas that threshold is only $18,000. Half the California rate. 

Like everyone else, those on welfare respond to incentives, and the incentives to stay on welfare rather than work are much higher in California than they are in Texas.

Work Versus Welfare

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.