Sunday, April 19, 2009

Extend welfare to the near-poor working class

Here is a student's paper with my reaction to it.

I would like to see a policy that in the welfare system has a program that helps the working class people. Whether they let them get help from the programs that are already out there or make one specific just for these people in the certain income area that they make. Working class people need help with day care or buying food each month. Even just allowing working class people to participate in day care help would make a huge difference.

I propose this policy because I think that we leave out the working class in welfare programs just like we leave out the middle class in money for school. It seems that our welfare system is there to bring people down instead of bringing them back up. People learn that they get more assistance not working then working so therefore they don't work because they are better off. We need to help these people when they need help and not encourage them to stop working so they can get help.

Is there any evidence you can offer to back up your claim that people “learn they can get more assistance not working than working” and that as a consequence of this lesson they “don’t work, because they are better off” not working? The Earned Income Tax credit increases benefits as people work, and then tapers off benefits as people rise out of poverty. Are you really arguing that people stay on welfare because they prefer to collect housing vouchers, Medicaid, SNAP (food stamps), SSI, or TANF? To qualify for SSI they need a disability, but I suppose some people with disabilities could work and choose not to because they would have a reduction in their SSI (or lose their SSI) if they demonstrated that they could in fact work. TANF has a limit on how long people can have benefits, and usually in order to receive benefits you must actively look for work. Medicaid is something that people lose when they earn more money, but people who earn enough money to lose Medicaid might earn enough to qualify for private insurance or they might get employer-provided health insurance, which might be better than Medicaid. Housing vouchers and public housing rents do remain a particular fraction of what a person earns, so once incomes reach a level where the fraction of one’s earnings is higher than the market-rate rent for where one is staying there is an incentive to either move out of public-assisted housing into market rate housing or else stop earning so much money. But many people in public housing are elderly or disabled, so I don’t think this is a big factor for a sizable proportion of those getting housing assistance. SNAP (food stamps) is the one program that is reduced as you earn more, but as you earn more, you can buy your own food without the stigma of using the food assistance card, so probably many people are happy to earn their way out of qualifying for SNAP.

In other words, I can’t understand why you are saying that the welfare programs we have now are “keeping people down.” Do you have any evidence from any studies of work effort over the past few years showing that people work fewer hours and earn less because they have the opportunity to collect the EITC, TANF, SNAP, Medicaid, SSI, Public Assistance Housing Vouchers, childcare subsidies, and so forth? I know this was a claim people made (with very little evidence indeed, although there was some evidence) back in the early 1990s, using data from the 1980s, when AFDC gave low-income unmarried parents a certain minimum income, but we've had significant welfare reform since then.

I guess that you are essentially asking that policies offer benefits to households with incomes up to higher thresholds. You’re suggesting that benefits ought to be reduced gradually up to the lower reaches of middle class incomes.

For example, let’s say a family with no income gets a certain amount of help with housing, food, medical insurance, daycare, utilities, and other sorts of income support. You’re asking that instead of having families qualify for 100% of the benefits when they meet a certain income test and then lose 100% of the benefits when their incomes exceeds that test threshold, that the benefits be reduced at some particular rate.

Here is a chart of what you might want:

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