DYCHE OPINION | The Work Versus Welfare Trade-Off
By John David Dyche
Only 63.2 percent of America's working-age population is either working or looking for work. That is the lowest labor force participation rate since August 1978.
CNN says, "There are now 90.5 million Americas who don't work and are not counted as part of the labor force. This excludes kids under the age of 16 and non-civilians such as those in the military or in prison, but includes just about everyone else."
This is bad news for several reasons. A robust labor force is required to produce economic growth and pay for the explosion in entitlement benefits due to retiring Baby Boomers.
Experts disagree about the reasons for this shrinkage in the size of the U. S. workforce. The Washington Post recently cited the aging of America, discouragement and lack of opportunity due to the prolonged bad economy, and the record 8.9 million people receiving disability benefits.
Others blame Obamacare or cite the need for immigration reform. After rejecting arguments that the decline is almost entirely "structural" in nature, John Cassidy recently concluded an analysis in the New Yorker by saying that, "You can't argue with the proposition that the labor market is considerably weaker than it appears to be, and the official unemployment rate is sending out some very misleading signals."
A recent report by Michael Tanner and Charles Hughes of the libertarian Cato Institute offers another potential explanation. Titled The Work Versus Welfare Trade-Off: 2013, the report posits that, "The current welfare system provides such a high level of benefits that it acts as a disincentive for work."
According to Tanner and Hughes, "Welfare currently pays more than a minimum-wage job in 35 states," and "in 13 states it pays more than $15 per hour." They say that, "If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work."
This means shrinking "the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements." Importantly, the Cato researchers do not believe that "people on welfare are lazy or do not wish to work," but are merely making a rational choice not to work based on the level of welfare benefits.
Consider this: "In 11 states, welfare pays more than the average pre-tax first year wage for a teacher. In 39 states it pays more than the starting wage for a secretary. And, in the three most generous states a person on welfare can take home more money than an entry-level computer programmer."
Kentucky is not among these states. The most generous states are, predictably, Democrat-dominated: Hawaii, District of Columbia, Massachusetts, Connecticut, New Jersey, Rhode Island, New York, Vermont, New Hampshire, Maryland, and California.
In Kentucky, the Cato scholars conclude, the value of a welfare benefit package for "a typical welfare family, consisting of a single mother with two children," is $18,763. That is 96.1 percent of the federal poverty level and ranks 45th nationally.
The package of benefits includes "the primary U. S. cash benefit program for the poor," Temporary Assistance for Needy Families; the Supplemental Nutrition Assistance Program, or SNAP, which uses an electronic benefit card for use in purchasing food; Medicaid; and other food, housing, and utilities assistance programs.
Critics dispute various aspects of the study, of course. But almost everyone agrees that there is a staggering number of federal and state anti-poverty programs, and that they are complicated, poorly administered, and uncoordinated.
But, as the left-leaning British publication The Economist recently noted, "There is little talk of simplifying America's welfare system." While other countries are innovating, "America remains stuck with a system so complex that even its fans struggle to measure how well it works."
Alison Lundergan Grimes, a Democrat candidate for the U. S. Senate from Kentucky, recommends raising the minimum wage. But abundant research and practical results show that this will only result in fewer jobs and higher unemployment for the lowest-skilled workers.
Instead, Congress should do as James Sherk, a senior policy analyst in labor economics for The Heritage Foundation recommends. "Reduce the tax and regulatory burden it imposes on businesses to encourage hiring and stop the fall in labor force participation."
Tanner and Hughes acknowledge that, "Many welfare recipients … are doing everything they can to find employment and leave the welfare system." Too bad for them and the rest of us that well-meaning, but misguided government policies may make many others content to stay on the dole.
John David Dyche is a Louisville attorney and political commentator for WDRB.com. His e-mail is firstname.lastname@example.org.