Why Work When the Government Pays You Not To
Once considered personally shameful, “going on the dole” has become a logical “career choice” for many people.
American businesses have been recruiting help for months. Jobs are plentiful, but there aren’t enough workers willing to fill them. There are millions fewer Americans in the labor force today compared to February, 2020.
Total jobs have reached pre-pandemic highs, unemployment rates are low, but at least 2.6 million workers who dropped out of the labor force during the COVID-19 lockdowns, especially low-wage workers in high cost areas, haven’t returned.
Why should they?
In addition to state benefits, the federal government authorized supplemental unemployment benefits of $600 per week during the pandemic and increased the term of eligibility. The number of job openings soared immediately.
In August 2020, the first full month during which supplemental benefits were not offered, the number of job vacancies declined, but rose again in January, 2021, when a $300 weekly supplemental benefit was introduced.
Although expired post-pandemic, clearly, increasing and extending unemployment benefits has had far-reaching effects.
Another of the primary reasons for the shortfall in willing workers is that, in many states, public assistance pays more than or nearly as much as family-supporting middle-class jobs.
Welfare programs and the Supplemental Nutrition Assistance Program (food stamps) are means-tested, but for many, especially single parents with children, earning even a modest income reduces or eliminates means-tested benefits. Many people who receive common means-tested benefits are eligible for other benefits as well. For example, some states used federal money to offer recipients up to $25,000 a year of rental assistance.
So, why work when welfare “pays” better?
However, unemployment benefits and other handouts, including ObamaCare subsidies, are not means-tested.
Statistics gathered by Casey Mulligan and E.J. Antoni appear in a study done for the nonprofit, free market advocacy Committee to Unleash Prosperity:
- In 24 states, unemployment benefits and ObamaCare subsidies for a family of four with no one working are the annualized equivalent of at least the national median household.
- A family making almost a quarter of a million dollars annually still qualifies for ObamaCare subsidies in every state.
In fact, in a few states, families can “earn” six figures in annualized unemployment benefits even without federal pandemic supplements.
Data shows that generous unemployment benefits contribute to the relatively low labor force participation rate, especially along with Obamacare subsidies. In some states, the two combined provide a family of four with two jobless parents an annualized equivalent of $80,000 a year in “wages” and benefits.
Most states time-limit unemployment benefits, but while Americans are receiving them, financial incentives to enter the job market are low, plus people find ways to restart benefits. People move into and out of the job market – working long enough to requalify for benefits.
Fraud payments are estimated to exceed $100 billion a year, too, so families that are not technically eligible for welfare, food stamps or continued unemployment benefits may still receive them.
In short, while safety net programs were designed to keep families out of poverty, the expansion of public assistance, combined with subsidized health insurance to non-working parents, often means that families can earn as much or more income from government assistance than median working households do, much more in certain states.
So, why work?
The Mulligan/Antoni report acknowledges that other factors, including residual fears of contracting COVID and early retirement, could help explain some work force absences, but the authors argue that the primary factor contributing to the shortage of willing workers is the generosity of benefits paid to non-working families.
The authors also noted that, until 2007, safety net and welfare programs functioned without disincentivizing real employment. In an interview, Mulligan said, “[A] simple recommendation would be to roll back the federal programs to 2007, before the Obama and Biden administrations got a hold of them.”
The report suggests that, to increase workforce participation, states should reduce unemployment insurance maximums and strictly limit the duration of benefits. More careful targeting and enforcement of means-tested benefits would contribute as well.
One can reasonably argue that families shouldn’t go hungry, lose homes or suffer deprivation when jobs are lost or people become disabled.
But most Americans agree that government assistance – at least for the able-bodied – should be limited to providing paths to financial self-sufficiency rather than endless, overly-generous handouts.
