September 19, 1995

Welfare pays better than work, study says

Welfare benefits are far more generous than commonly portrayed and substantially exceed the amount a recipient could earn in an entry-level job, according to a new study from the Cato Institute. As a result, recipients are likely to choose welfare over work, increasing long-term dependency.

The study examined the combined value of benefits--including AFDC, food stamps, Medicaid, and others--for a typical welfare recipient in each of the 50 states. The study compared the value of those tax-free benefits with the amount of pretax income that a worker would have to earn to receive an equivalent income.

Among the study's findings:

The study's authors -- Michael Tanner, Cato's director of health and welfare studies; Stephen Moore, Cato's director of fiscal policy studies; and David Hartman, CEO of Hartland Bank in Austin, Texas -- conclude that if Congress or state governments are serious about reducing welfare dependency and rewarding work, the most promising reform is to cut benefit levels substantially.