Planet Money
5:04 pm
Fri October 4, 2013

Is Welfare 'A Rational Alternative To Work'?

Originally published on Thu October 10, 2013 8:33 pm

For many people, says Michael Tanner, it pays not to work. People on welfare — that's everything from food stamps to Medicaid to heating assistance — can make more in 35 states than they would if they had a minimum wage job, according to Tanner. Even for someone who wants to work, he says, "welfare can actually be a rational alternative to work for many people." Choosing welfare may be a sound economic decision, Tanner argues in a recent report published by the libertarian Cato Institute, where he is a senior fellow.

"If someone came to me and said, 'I'll pay you everything you're making today but you don't have to work anymore,' I'm going to think about that," Tanner says. In Rhode Island, according to Tanner's report, a mother with two children can receive aid — cash assistance, Medicaid, housing, etc. — worth almost $39,000 a year, more than a starting teacher or secretary.

I asked Brandy Alvarez, a single mother with two kids who lives in North Providence, R.I., what she thought of Tanner's analysis. "I'm wondering where the rest of my money is," she says, laughing. She says she didn't receive housing assistance or several of the other benefits included in that $39,000 figure. In Rhode Island, only 1 in 4 families on welfare receives housing assistance. People wait years for public or subsidized housing.

And if you do get a job, benefits don't all disappear. When Alvarez was offered a $12-an-hour job with a nonprofit, she knew she'd lose her monthly welfare check and her food stamps would be reduced. But she got to keep Medicaid. She says that, in the end, it was worth taking the job, even though she's just breaking even.

There is also, of course, the question of whether you can get a job at all. Tonilyn Rowe is a 25-year-old single mom who left her job at Dunkin' Donuts when her son, Marcus, was born. Unemployment in Woonsocket, her Rhode Island town, is over 11 percent. Many stores are shuttered. Wal-Mart recently left town.

"Every day, I go out and push my son around and fill out applications," she said. "But obviously it's not a good look to walk into a job with a stroller."

To Tanner's point, Rowe does worry that she'd lose some of her benefits if she took a job. But she also thinks certain benefits that she doesn't get — job training and child care — would help her and others like her support themselves in the long run. To some extent, Tanner agrees.

"I think what we want to do is have transition assistance," he says. "But we also want to make sure that the level of benefits is not sufficient to be a disincentive."

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Transcript

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

In the effort to help Americans through difficult times, does government assistance make people more dependent on their government? That's the key question behind much of the debate in Washington over spending for food stamps and other aid. Republicans say these benefits create a culture of dependency and ought to be cut. Democrats say low-income families need the help to get on their feet. Well, Pam Fessler of NPR's Planet Money team explores that divide.

PAM FESSLER, BYLINE: Michael Tanner of the libertarian Cato Institute says for many people, it pays not to work.

MICHAEL TANNER: Look, if someone came to me and said, I'll pay you everything you're making today, but you don't have to work anymore, I'm going to think about that.

FESSLER: Tanner says that those who get welfare - that's everything from food stamps to Medicaid to heating assistance - can get more in 35 states than they would from a minimum wage job, in some states, a lot more. He says even if someone wants to work...

TANNER: Welfare can actually be a rational alternative to work for many people.

FESSLER: Not that they're lazy, he says. They're just making a sound economic choice. Take Rhode Island. A mother with two children who gets seven benefits there, including cash assistance, food stamps, housing and Medicaid, he says she can get aid worth almost $39,000 a year, the average starting salary in the state for a teacher or secretary. So if it's welfare or work...

TANNER: It's going to tip the balance for some people.

BRANDY ALVAREZ: I disagree. And I'm wondering where the rest of my money is.

(LAUGHTER)

FESSLER: That's Brandy Alvarez, one of those welfare recipients Tanner is talking about. I went to Rhode Island to find out what she and others here thought about his findings published in a Cato report. Alvarez of North Providence went on public aid more than a year ago when she and her husband split. She had two children and no job. Alvarez says the assistance she got was nowhere near $39,000.

ALVAREZ: Even the benefits we did receive - which we didn't receive housing, we didn't receive utility assistance, we received cash and food stamps only - was barely enough.

FESSLER: And critics say that's a problem with Cato's report. It assumes people get lots of benefits when, in fact, few do. In Rhode Island, only one in four welfare families receives housing assistance, a third of Cato's $39,000 estimate. It's just not available. People here wait years for public or subsidized housing.

ALVAREZ: Benefits are not easily handed out. You have to jump through hoops. You have to submit all the documents that you've ever had in your life to them to qualify. And then, certainly, you don't always qualify.

FESSLER: And when you do get a job, says Alvarez, your benefits don't all disappear, something Cato fails to mention. When she was offered a $12-an-hour job with a nonprofit, Alvarez knew she'd lose her monthly welfare check and her food stamps would be cut. But she got to keep Medicaid. She says in the end, she's just breaking even. But taking the job was worth it.

ALVAREZ: I knew that that was going to be my stepping stone.

FESSLER: Hopefully to a better job and getting off all public aid. Another factor in her decision, Alvarez's cash benefits were set to expire in two years anyway. In most states, there's a time limit for receiving welfare. I called Michael Tanner back up and told him what Alvarez said. His response? Her decision just proved his point.

TANNER: She was, in fact, motivated to get a job, to some degree, by the paucity of benefits.

FESSLER: Which is why he thinks public aid needs to be cut. But people here say that ignores one other really important thing: There aren't enough jobs.

TONILYN ROWE: Hi.

UNIDENTIFIED MAN: Hello. I left the door unlocked.

ROWE: Oh, did you?

UNIDENTIFIED MAN: Mm-hmm.

FESSLER: Tonilyn Rowe has just arrived at a friend's house in Woonsocket, a small city north of Providence. She's picking up her 6-month-old son. Her friends were watching him while Rowe took a class on money management.

ROWE: He ate his dinner?

UNIDENTIFIED WOMAN: Yup.

UNIDENTIFIED MAN: He ate his dinner. He drink his bottle.

UNIDENTIFIED WOMAN: Mommy don't got you. You got mommy, huh? Yeah, you do.

(SOUNDBITE OF BURPING)

ROWE: Oh, good one.

UNIDENTIFIED MAN: That's a good burp.

FESSLER: Rowe is 25 and single. She stopped working at Dunkin' Donuts when she gave birth and has been on public assistance ever since. Rowe says finding a new job has been hard. Unemployment in Woonsocket is 11.2 percent. Half of downtown is shuttered. Even the Wal-Mart and Lowe's stores recently left town.

ROWE: Every day, I go out and push my son around and fill out applications. But obviously, it's not a good look to walk into a job with a stroller. I mean, they really don't look at that as ideal.

FESSLER: She also doesn't have a car, which limits her options. Buses in Woonsocket stop at 7 p.m. Rowe says public assistance isn't that great. She can barely make ends meet. But she does grant Tanner this, the trade-offs are something she worries about.

ROWE: There's always the thought in the back of my head that if I take a certain job, I'm going to lose my benefits, like food or cash. So it's always a thought in the back of my mind of getting a job to - if I'm going to make enough to support me and my son.

FESSLER: Rowe says she'd still rather work. But she and many others here think the answer isn't less public assistance but more, for things like job training and child care, benefits that would make work more doable. And surprisingly, to some extent, Tanner agrees.

TANNER: I think what you need to do is a little bit of both. I think what we want to do is have transition assistance, but what we also want to make sure that the level of benefits is not sufficient to be a disincentive.

FESSLER: So it seems the question isn't so much carrots versus sticks but finding the right combination. Pam Fessler, NPR News. Transcript provided by NPR, Copyright NPR.