Lots of studies shed light on the negative incentive to work created by our welfare system. Not only is it more relaxing to sit on the couch and cash welfare checks than it is to get out the door and work, but it actually makes economic sense too!
Several economic studies examine the cost of leaving welfare to work. Focusing on the Earned Income Tax Credit (EITC), which is a payment the IRS makes to taxpayers with low taxable income, the studies generally show that, up to fairly high income levels – $30-40,000 plus – one actually suffers a cut in income by moving from unemployed to worker. The incentive clearly favors staying on welfare.
Now comes a study by the staff of the Ranking Member of the Senate Budget Committee showing how much more lucrative it can be to be poor than to work. The figures are amazing even to me, but they come from a seemingly legitimate source, so I’ll pass them on. If one includes ALL of the available government payments under means-tested programs – primarily medical assistance, food assistance, cash payments, and housing assistance (but NOT social security or Medicare) – the average daily cash-equivalent payment per household below the poverty level would equal $168. (See link below.) This compares to an average daily income of $137 for the household with $50,000 in annual income, the median family income across the country. On an hourly basis, that translates to $30/hour for the welfare household versus $25 for the working household. After taxes, the $25 would drop to $21-23.
These are gross numbers, of course – averages – and can mislead on a per household basis. Still, eye-opening, a trillion dollars a year if combined with state programs (which the above numbers do NOT do). See for yourself.