The Disincentives of Welfare

One of the realities of welfare that is certain to garner the most scorn for bringing up is that these programs provide a very real disincentive for the recipient to find work. ‘Why that’s preposterous to say that someone receiving welfare benefits would ever cause them to not accept a better job or work more if given the opportunity!’ proponents of these programs often claim.

However, the reality is people receive welfare payments in an inverse and non-proportional relation to their income. That is, as people’s incomes rise there are thresholds at which earning an additional dollar of income will actually reduce a person’s overall combined total payout of income plus welfare benefits.

The Disincentives of Welfare

This chart, produced by the American Enterprise Institute, illustrates the adverse effect that welfare programs have on people searching out jobs and earning additional income. When taking into account all of the various welfare benefits, a person earning $29,000 a year is actually bringing home closer to $57,300 in total benefits plus income. This net payout of $57,300 would require that same person earning a mere $29,000 to find a job that pays closer to $69,000 to achieve the same financial outcome.

Furthermore, the chart also points out the existence of several “Welfare Cliffs” in which earning just one additional dollar in income drastically reduces the benefits received.

These are very real disincentives and are certainly contributing factors to the booming welfare state.

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