The Disincentives of Welfare

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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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Earn a Degree, Work for Minimum Wage

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Earn a Degree, Work for Minimum Wage

As a follow up to the previous post in which a McDonald’s store was requiring applicants for a cashier position to have a bachelor’s degree and two years work experience, the Wall Street Journal has reported a staggering number of college graduates who are working for minimum wage. In 2012 there were 284,000 workers with a bachelor’s degree in minimum wage positions. While this is down slightly from its 2010 peak of 327,000, the number is approximately 70% higher than a decade ago.

This sad statistic is further evidence of the long-inflating college bubble. As the cost of a traditional college education continues to skyrocket, the value of the degree is in decline. Aside from the 284,000 graduates in minimum wage jobs, the Center for College Affordability and Productivity reported earlier this year that 48% of the graduating class of 2010 held jobs that did not require a college education. Even worse, 38% of them were working in jobs where not even a high school diploma was necessary.

None of these facts have slowed down the cries for increased government spending on subsidized student loans or other programs designed to encourage every student in America to get a college education. As is a common theme in all things political, dire warnings of catastrophe are destruction are peddled to call for even more government money being funneled into the pockets of the universities. Ohio State University president, Gordon Gee has recently utilized this scare-tactic well when he stated “If we do not as a nation increase the number of graduates, then we risk the very foundation of the American Dream.”

Interesting. I wonder what American Dream he has in mind for all of these college graduates. It appears to be one of mountainous debt and low wage jobs while universities continue to skyhigh prices for near valueless pieces of paper.

Chuck Schumer Asks the Big Question

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Chuck Schumer Asks the Big Question

….but then incorrectly answers it.

Appearing on Hardball with Chris Matthews to discuss the recent uproar over the Obama remarks made at a conference in 1998 in which he stated that he “actually believes redistribution” raises the big question that Americans need to honestly address. Answering Matthew’s question “What is wrong, anyway, with redistribution?”, Sen. Chuck Schumer (D-NY) rails off several examples and asks if they are “redistribution”. He asks (starting at 1:25),

  • “Is the EITC redistribution?”
  • “How about giving a veteran who’s wounded disability insurance”
  • (and then the big one) “How about Social Security?  Is that redistributionist?”

The answer to these questions is, of course, yes.  Yes they are redistributionist.  Any program that takes something (tax dollars) from one person/group of people and gives it to another person/group of people is redistribution.  The only way a government can accomplish such a task is through the coercive measures of the threat of violence or force  against those who resist.  Politicians and political pundits can try to compare government redistribution with “what we do every time we help someone” as Chris Matthews attempts to do, but it is and always will be wrong because it lacks central tenet of what charity is: voluntary and compassionate self-giving.  What we need to do is call a spade a spade and accept that our society is full of these socialistic program and stop deluding ourselves into thinking that we live in a capitalistic country.

In its very nature, therefore, almost all government action is redistribution because it relies on taxation (that is, the non-voluntary provisions of money we all pay to the government) to achieve its ends.  What people must begin to understand is that even beloved government programs that are popular with the general public fit into this category.

The protect of private property is a central (and necessary) tenet of capitalism, as is the abolition of private property essential to communism.  Republicans are fighting a losing battle when they try to campaign against some redistributionist programs while simultaneously standing up for others because it shows a lack of consistency on the very principles they claim to espouse.

Regardless of how popular programs like Medicare and Social Security are in this country with those who are receiving the benefits, it does not change the fact that they are generational transfer program, redistributing wealth from the young and working to the old and retired.  These popular program are draining the U.S. economy as their debt obligations mount to tens of trillions of dollars.

A courageous and consistent stand in which a politician educates the American people about what these programs actually are is what is needed.  If only a politician like that were  real.