Saturday, May 31, 2014

The one graph that proves that welfare (AFDC / TANF) is not a work disincentive

Image: Bill Clinton, masquerading as a liberal, signs TANF into law. (source)

TANF--also known as "welfare"--was designed with one thing in mind: laziness. Republicans and Democrats alike couldn't stand the idea of someone capable of working choosing not to work, so they established complicated rules about "work activities" (a polite euphemism for unproductive busywork) to ensure that no one on TANF was idle. They obviously assumed that the majority of people on AFDC, the program TANF replaced in 1996, did not actually need government assistance, as they created time limits: families cannot collect TANF benefits for more than 24 consecutive and 60 total months. And, no childless adult can receive any type of welfare benefit.

TANF rests on the assumption that people who don't work are idle because they want to be; the key challenge of welfare is to motivate unmotivated people into finding gainful employment. After all, anyone can get a job. (not)

But let's look at this another way. The American safety net is designed to keep people in paid employment and off welfare. The work activity requirement means you can't be idle and on welfare (and is designed to frustrate people into leaving welfare to get a job); the time limits mean you can't make a career out of your welfare benefits. This stands in stark contrast to other countries, whose safety nets are more like safety hammocks--so generous they encourage people to avoid work and live high off the government dole.

Stated differently, we must have a stingy safety net or people will become dependent on welfare and choose not to work.

But if this is true, then the United States should have more people working than countries with more generous safety nets. What if we compare the United States' employment-to-population ratio (the number of people ages 15 to 64 who have jobs divided by the total population of people ages 15 to 64) to that of the social democracies? If a stingy safety net really does encourage people to work, then the United States should have a far higher employment-to-population ratio. It does not:

(Author's graph of OECD data. Click on image for unobscured graph -- note that both axes are messed up)

Since 2008, the United States has had an employment-to-population ratio lower than all of the social democracies; prior to 2008, it had an employment-to-population ratio lower than the majority of the social democracies.

The takeaway is clear: the structure of a country's safety net has little--if any--affect on a country's employment-to-population ratio. In other words, there is no work disincentive inherent in a strong safety net. Our weak, frayed safety net does not result in more people working. (Why our political system prefers a weak safety net (last section in post))

Further reading
People are not primarily motivated by monetary incentives
TANF benefits are below 50% of the poverty line in all 50 states
CBPP's TANF chartbook
The source for these two charts: 

No comments:

Post a Comment