“The Statistics Do Not Lie! Welfare is the Best Paying Entry Level Job in 35 States!”
“Welfare Is the Highest Paying Entry-Level Job in 38 States”
“Welfare is Highest-Paying Entry Level Job in All but Fifteen States”
A reader asked us to fact-check this claim circulating in the conservative blogosphere and social media. It asserts that people on welfare — the broad term used to describe a range of public assistance available for low-income Americans — earn more through the benefits than salaries of entry-level positions in 35 to 38 states.
Where does this claim come from, and how accurate is it?
The blog posts repeating this claim cite the libertarian Cato Institute’s 2013 study on the work-versus-welfare trade-off. We wrote about this study some time ago, when a Wisconsin lawmaker mischaracterized its findings. Let’s review it again.
Researchers set parameters for a welfare package, which included: Temporary Assistance for Needy Families (TANF) cash assistance, the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), Medicaid, housing assistance, utility assistance and the Women, Infants and Children (WIC) program. They looked at what a “typical welfare family,” a single mother with two children, would receive.
Researchers also accounted for federal and state tax deductions, exemptions and credits (such as the Earned Income Tax Credit and child tax credit), then compared the benefits package with the wages a recipient would need to earn in order to have an equivalent take-home income.
Among the main findings, using 2013 data:
- The biggest welfare package was in Hawaii, at $49,175. (Hawaii’s data may be distorted because of the high cost of living, researchers wrote.) The lowest was in Mississippi, at $16,984.
- Welfare paid more than the average pre-tax first year wage for a teacher in 11 states, more than the starting wage for a secretary in 39 states, and more take-home money than an entry-level computer programmer in the three most generous states.
- The pre-tax wage equivalent for welfare recipients exceeded the median salary in the state in eight states. (That is far from 35 states.)
- In 35 states, welfare paid more than a minimum wage job, even after accounting for the Earned Income Tax Credit, and paid more than $15 per hour in 13 state. (This appears to be the misconstrued point in the latest viral claims.)
A minimum wage job is not necessarily the same as — and could pay lower than — an entry-level job. The Bureau of Labor Statistics’ Occupational Outlook Handbook‘s latest data from 2012 shows that the median pay for entry-level positions across various sectors could be as high as $75,000. The median 2012 salary for workers with a high school diploma or equivalent was between $25,000 and $74,999.
The study does not provide the highest entry-level salary in each state, making it impossible to use its findings to argue that welfare paid more than entry-level jobs in 35 states.
“I’m not sure that when you compare [welfare packages] to an entry level job, it’d be the same as a minimum wage job. I think that we said it could pay more, not necessarily that it would for everybody [at entry level jobs],” said Michael Tanner, the study’s author.
“I think there’s a point in here, which is essentially that welfare can provide benefits that exceed what a person would end up taking home from their job, which is a problem in getting people into full-time work,” Tanner said. But he also added that he “certainly wouldn’t phrase” the findings as the current viral claims about his study are phrased.
The amount of assistance varies by state, and that not all eligible recipients receive all the benefits they can. Housing assistance, such as Section 8, was not included in this report for states where less than 10 percent of the welfare population received the benefit. When you start factoring in these differences, and how the phase-out of benefits once someone starts working at a minimum-wage job, the comparisons start to change.
Plus, as the Cato report notes, “most welfare recipients today are required to either work or participate in some form of job search activities.” So their eligibility for benefits often is contingent on searching for a job — though, the report also notes that “actual work participation under this requirement varies widely by state.”
“The goal of public assistance is to provide a baseline level of support for those with little or no income. In an environment in which entry level jobs don’t pay much, it can be a challenge to make work pay more than welfare,” said Gregory Acs, director of The Urban Institute’s Income and Benefits Policy Center. One way to address this challenge is to provide supports like the earned income tax credit to low-income families, but not available to non-working families. Another is to phase out benefits that a family can receive as its earned income rises, Acs said.
But comparing a welfare package to earned income in a job overstates the disincentive, Acs said: “If you want to talk about disincentives, you really shouldn’t be comparing ‘welfare only’ to ‘earnings and taxes,’ because ‘welfare’ benefits extend to low-income working families — and they do that so that work pays better than welfare.”
The Pinocchio Test
We examined the headlines (“Welfare is the Best Paying Entry Level Job in 35 States!”), the corresponding articles and the underlying study. This is an example of how the findings of a report with many caveats and structured within specific parameters got misconstrued in an article and spun out of context with a poorly written (and click-bait) headline. It’s easy to jump to the conclusion that collecting welfare is easier than working in 35 states, but this report — and the issue — is much more nuanced and complicated than that.
However, it captures the underlying conclusion the researchers arrived at through this study: “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. As long as this is true, many recipients are likely to choose welfare over work.” The researchers determined the benefits in a typical welfare package and found it paid more than a minimum wage job in 35 states, even after taxes. Minimum wage jobs are not the same as entry-level jobs.
Plus, not all people eligible for welfare collect benefits. When they do, many of the benefits are contingent on some level of work-related requirement. And even low-income families receive some level of public assistance. These are all points that are clear once you actually read the study.
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