By now I’m sure most of you have seen this chart:
It’s from a presentation by Gary Alexander, Secretary of Public Welfare in Pennsylvania (factoid: he’s also an ordained deacon in the Armenian Orthodox Church!). It shows the after-tax wages (bottom blue bars) and welfare benefits (upper multicolored bars) available for a hypothetical single mom with two children at various income levels. The glass-half-full observation is that the family is able to maintain a standard of living of at least $40,000, even if the mother earns no income at all at a job. The glass-half-empty observation is reflected in the text box:
The single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income & benefits of $57,045.
If you can spot it, there’s even an odd range between wages of $44,000 and $50,000 where, even after receiving CHIP, the mother takes home less than if she didn’t earn any income at all. A single mom who simply worked and didn’t want to receive any assistance from the state would be worse off working at a job of $54,000 than if she didn’t work at all.
Again, I suppose we could see this chart in two ways: one, the state of Pennsylvania and its (combined with federal) welfare programs are generous to poor families, of which there certainly are lots these past few years. Many of these moms and families are struggling, and need our compassion.
On the other hand, the chart reveals the perverse incentives these programs create. Will it increase or decrease the number of poor people if more single moms realize they only have to work enough to earn $29,000 when they could otherwise earn $69,000? Does society benefit or is it harmed when a single mom could be generating (at least) $69,000 worth of goods and services but instead decides to only be productive to the tune of $29,000? Does it bode well for the future fiscal stability of the government that it’s a toss-up whether a single mom produces $11,955 (=$69,000-$57,045) in taxes for the state or whether she receives $28,327 (=$57,327-$29,000) from the state?
None of this is to blame or criticize poor single moms; the blame should go squarely at the feet of politicians or bureaucrats who structure the tax and welfare system in such a way that encourages idleness and/or dependence on the state. I know we are supposed to have a preferential option for the poor, but I don’t think that means we are supposed to prefer options that create more of them.