Welfare Pays More Than Regular Jobs in Many States

Welfare payouts for a family of four exceed the national median household income in 24 states, and top $100,000 annually in Washington, Massachusetts, and New Jersey, a new study finds.

Many pandemic-related unemployment subsidies have expired, but existing programs coupled with a recent expansion of the Affordable Care Act (ACA)—also known as “Obamacare”—continue to offer substantial incentives for the unemployed. A study (pdf) conducted by the Committee to Unleash Prosperity (CTUP), nonprofit co-founded by Steve Forbes, chairman of Forbes Media, and economists Arthur Laffer and Steve Moore, discovered that many well-paying jobs often earn less than what government assistance can offer.

In 14 states, the study found that electricians, teachers, construction workers, firefighters, and truckers earn less than combined federal and state benefits.

Washington state holds the record for the most generous benefit scheme, where a family of four with two non-working parents can earn $122,653 annualized. This puts the earnings of unemployed Washingtonians far ahead of the national household median income of $70,784, as reported by the U.S. Census for 2021.

Not working has its tax advantages as well.

“Unemployment benefits have at least one tax advantage in all states: they are not subject to payroll taxes,” the CTUP report, co-authored by economists Casey Mulligan and EJ Antoni, noted.

In six states—Alabama, California, Montana, New Jersey, Pennsylvania, and Virginia—benefits are also exempt from the state income tax.

“These factors further tip the work versus welfare financial balance in favor of not working,” the report stated.

President Joe Biden’s Inflation Reduction Act, signed in August, extended ACA eligibility to those in higher income brackets through 2025. The study showed that a family of four earning more than $500,000 was eligible for ACA-related subsidies in several states, with benefits in West Virginia not phasing out until the family earns $638,189 or more.

Generous health care supplements are now commonplace. “In 40 of the states, families earning over $300,000 a year still qualify for subsidies,” the study reported.

The Affordable Care Act is expected to cost more than $200 billion in fiscal year 2022, as estimated by the Congressional Budget Office. Total health care-related expenditures will reach more than $1.4 trillion for the year, representing 22 percent of the federal budget.

Brian Blase, an economist and president of Paragon Health Institute, wrote in Health Affairs that former president Barack Obama’s health plan has “proven to be fiscally unwise” and has significantly increased deficits. Health care spending roughly equated to the total deficit for 2022, which reached $1.38 trillion.

While benefits earned through the ACA are permanent for those eligible, unemployment benefits time-out after six months in most states. However, as economist Moore and authors of the report pointed out in a New York Post op-ed, the welfare system can be gamed to maximize outlays.

“People move in and out of the unemployment system—working enough months until they again qualify for benefits,” the wrote. They went on to say that the goal of assistive policies should be “to achieve a just and productive society and make America a place that rewards work.”

“The left has adopted a strategy of a ‘national guaranteed income’ for Americans whether they work or not.”

According to Mulligan, economics professor at the University of Chicago and co-author of the report, welfare programs are necessary, but have gone too far.

“Of course, a safety net is appropriate. Prior to the Obama administration, Republicans and Democrats (remember Clinton) had converged on a system that balanced cost and benefits,” Mulligan told The Epoch Times. He added that President Biden and several Democratic governors have taken welfare to a “whole new level.”

“I would recommend rolling back to what we had 15–20 years ago,” he said.

Mulligan critiqued federal policies in the CTUP report as well, highlighting the large number of people who dropped out of the workforce at the start of the pandemic and have yet to return. “Unemployment benefits, along with the relaxation or elimination of work requirements, kept millions of people from returning to the workforce in 2020 and 2021.”

The labor-force participation rate sat at 63.4 percent before the pandemic and, after a dramatic decline in March and April 2020, it still remains significantly lower than normal levels at 62.1 percent as of November.

“The extension of ACA subsidies and high levels of standard unemployment benefits produce precisely the same effect, just with a reduced magnitude,” the report stated.

The economists concluded their study with several policy recommendations, specifically advocating for a reduction in unemployment payouts and reforming eligibility requirements so that welfare is more targeted to those that need it.

“That would reduce unemployment and the duration for which people remain unemployed,” the economists argued. “The federal government should, at a bare minimum, roll back the extension of Obamacare subsidies in an effort to keep premiums from rising further.”

Some economists argue that when it comes to welfare, private organizations are more effective than the government.

“Obviously, we all believe in helping the most vulnerable or least affluent among us,” economist Jeff Deist told The Epoch Times. Deist, president of the Mises Institute, said the best way to help people is through private charities.

“Charity is a lot more efficient. It loses a lot of the overhead and inefficiencies that any government program has, including salaries, and it’s not political.”

Ideally, Deist would like to see no government involvement in welfare programs.

To minimize the inefficiencies of public schemes, Deist recommended that issues regarding income supplementation be handled at the state and local levels of government. He agreed with Mulligan that the structure of today’s welfare system is wrong, saying that it needs to stop punishing work.

“Everybody needs to be engaged in productive activity,” Deist said. “Anything that engenders this mindset of being up-and-out and earning, I think, is very important.”

Liam Cosgrove works as a freelance journalist covering business, markets, and finance. He received his bachelor’s degree in mathematics from the University of California–Santa Barbara.

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