Building Back . . . The Welfare State
WHERE are the workers? On welfare, which now pays more than work for millions of Americans. A new study by the Foundation for Government Accountability shows that amid the pandemic, available welfare benefits have become so generous that it makes financial sense for many of the unemployed to stay home rather than work.
President Biden and Democrats are trying to extend this backward system in the Build Back Better Act. If they do, a generation of families will suffer on the economy’s sidelines.
Employers are desperate to fill a near-record high 10.4 million open jobs, and as a result, average hourly wages are also at record highs and growing at the fastest rate in 40 years. Despite these opportunities, labor-force participation has dramatically fallen and remains near its 45-year low.
Some 4.5 million Americans are still missing from the labor force, yet expected job creation hasn’t materialized. The primary reason: Enrollment in welfare and welfare-like programs has skyrocketed, set new records and remained stubbornly high. Many of those programs were significantly expanded over the past two years, discouraging work and slowing economic recovery.
Consider an unemployed single parent with two children. Through a combination of welfare-style programs, he or she can collect more than $3,700 per month in government benefits for at least half the year (and until the fall could make even more over 12 months). At an annualized rate, that’s nearly
$45,000 a year for someone who’s staying home rather than returning to work. It’s nearly three times the earnings from a full-time minimum-wage job and more than the median American job pays.
This money is made by stacking the benefits from just four welfare and tax-credit programs. (Other state and federal programs can make welfare even more generous.) The largest source is unemployment insurance, which is usually paid for 26 weeks and alone can bring in nearly three-quarters of a minimum-wage income. Benefits were even more generous earlier in the pandemic when the feds offered weekly bonuses for remaining unemployed.
Next are health-care benefits. ObamaCare’s cost-sharing subsidies cover out-of-pocket costs, while premium tax credits cover health insurance purchased on federal exchanges. The latter is a welfare-like benefit that millions of able-bodied adults can receive without working. Democrats’ American Rescue Plan Act, enacted in March, expanded the credits through next year, and Build Back Better would further extend them through at least 2025.
ARPA also created an expanded child tax credit. The feds pay $3,600 for each child up to age 6 and $3,000 up to age 17 annually, now sent monthly. Untethered from work, unlike previous versions, the credit is set to expire in December unless
Build Back Better extends it through 2022. At that point, further extensions are all but guaranteed.
Food stamps keep the money coming. COVID-19 legislation temporarily increased the value of these benefits by 15 percent, which was superseded by a permanent 25 percent increase over pre-pandemic levels the Biden administration implemented in October. The feds have waived work requirements for able-bodied adults during the pandemic — and those waivers last until the public-health emergency expires, whenever that happens.
The final source of benefits is the Earned Income Tax Credit. While normally it’s tied to wages earned through work rather than unemployment, ARPA let people claim
‘ Welfare now pays more than work for ’ millions of Americans.
past years’ income to qualify, turning the credit into a de facto welfare payment. ARPA also expanded eligibility for childless adults, a policy Build Back Better would continue for at least another year.
These expanded programs have created the most generous welfare benefits ever. Millions of people are acting in their best financial interests by avoiding work, and in some states, the incentive to stay unemployed is staggering. In Arizona, benefits are worth 10 percent more than median wages. In West Virginia, they’re 44 percent higher.
Decades of research have proven that continued unemployment hurts physical and mental health and leads to higher mortality. Equally clear is that work improves people’s lives and society itself. Even with the pandemic’s difficulties, it was a mistake to drastically expand a welfare system that keeps people from work. Extending that system now would be an economic and moral crime.