U.S. Welfare Statistics

Few things seem more misunderstood and misconceived in the U.S. than the welfare system, by which I mean public aid programs that include Medicaid, food stamps, special payments for pregnant women and young mothers, and federal and state housing benefits (even the term is used loosely enough to merit debates about semantics, with some using welfare to refer solely to one or some of these programs, and others going so far as to include public education and other goods to be a form of welfare — right now I am concerning myself with my aforementioned definition).

So with all that in mind, I figured that I would share some detailed and objective statistics regarding the welfare system: how many Americans are on it and for how long, the demographics of said recipients, the cost of the program, and so on. Sources include the U.S. Department of Health and Human Services, U.S. Department of Commerce, and the CATO Institute (a prominent libertarian think-tank).

In essence I have copy and pasted the data from Statistic Braina well-regarded and extensive source for those who love raw data; the original page can be found here.  Note that this report was updated July 8th of this year, so this is as relevant as it gets. As you look through the details, take into account the various myths regarding the sheer cost of the country’s welfare system, how many people are on it, the predominant racial demographic of recipients, and so on.

Welfare Statistics
Total number of Americans on welfare 12.8 million
Total number of Americans on food stamps 46.7 million
Total number of Americans on unemployment insurance 5.6 million
Percent of the US population on welfare 4.1 %
Total government spending on welfare annually (not including food stamps or unemployment) $131.9 billion
Welfare Demographics
Percent of recipients who are white 38.8 %
Percent of recipients who are black 39.8 %
Percent of recipients who are Hispanic 15.7 %
Percent of recipients who are Asian 2.4 %
Percent of recipients who are Other 3.3 %
Welfare Statistics
Total amount of money you can make monthly and still receive Welfare $1000
U.S. States where Welfare pays more than an $8 per hour job 39
U.S. States where Welfare pays more than a $12 per hour job 6
U.S. States where Welfare pays more than the average salary of a U.S. Teacher 8
Average Time on AFCD (Aid to Families with Dependent Children)
Time on AFDC Percent of Recipients
Less than 7 months 19%
7 to 12 months 15.2%
1 to 2 years 19.3%
2 to 5 years 26.9%
Over 5 years 19.6%
Top 10 Hourly Wage Equivalent Welfare States in U.S.
State Hourly Wage Equivalent
Hawaii $17.50
Alaska $15.48
Massachusetts $14.66
Connecticut $14.23
Washington, D.C. $13.99
New York $13.13
New Jersey $12.55
Rhode Island $12.55
California $11.59
Virginia $11.11

The Best Way to Fight Global Poverty — Just Give the Poor Money, No Strings Attached

It seems deceptively easy, doesn’t it? For many years, the conventional wisdom has been that simply handing money to people is, well, too simple — there are just so many other complex factors at work, the poor will misuse or abuse the money that’s given, and so on.  Such concerns have colored our own debates about welfare and economic assistance, even though evidence suggests that the such programs have indeed reduced poverty.

But Slate reports on a recent study in one of the poorest parts of the world that demonstrates that unconditional cash transfers not only raises the living standards of those who receive it, but it also increases hours worked and labor productivity, thereby leading to a virtuous cycle of overall economic growth.

The research comes from a 2008 initiative in Uganda’s very poor northern sections. The government announced plans to give roughly a year’s worth of average income (about $382) to young people aged 18-34. Youths applied for the grants in small groups (to simplify administration) and were asked to provide a statement about how they would invest the money in a trade. But the money was explicitly unconditional—parceled out as lump sums with no compliance monitoring.

It’s easy to see that a nice injection of cash would make people better off. But in principle, the long-term impact could be ambiguous. Give money to a person whose only job prospects are low-paying and unpleasant, and perhaps he’ll simply respond by working less. That kind of income support would increase human welfare, but not really create any economic growth. That’s not what happened in Uganda. The government selected 535 groups—a total of about 12,000 people—for the experiment. Of the 535 groups, about one-half were randomly selected to actually get the money, and the rest were denied. Blattman, Fiala, and Martinez then surveyed 2,675 youths from both the treatment and the control group before dispersal of money, two years after dispersal of money, and four years after dispersal of money.

The results show that the one-off lump-sum transfer had substantial long-term benefits for those who got the cash. As promised, the people who received the cash “invest[ed] most of the grant in skills and business assets,” ending up “65 percent more likely to practice a skilled trade, mainly small-scale industry and services such as carpentry, metalworking, tailoring, or hairstyling.” Consequently, recipients of cash grants acquired much larger stocks of business capital and thus earn more money—a lot more money. Compared to the control group, the treatment group saw a 49 percent earnings boost after two years and a 41 percent boost after four.

Pretty positive outcomes, to say the least? The implications are even more encouraging.

Maybe there’s just no feasible way for subsistence farmers and casual laborers in rural Africa to get loans at reasonable interest rates. When young people get money for free, they’re able to put it to such good use that it’d be well worth their while to pay interest in order to get their hands on it. But there’s no Ugandan equivalent of federally subsidized student loans for youth to jump-start their tailoring careers.

One of the most interesting results from the experiment is that recipients of grants actually report 17 percent more hours worked, suggesting that the money serves as a true bridge to economic opportunity. Grant winners increase both the quantity and quality of labor supplied, suggesting there should be at least some spillover benefits to the broader community. No doubt there are major limits to how far up the development ladder you can climb with this strategy: It might not work in moderately prosperous countries with more access to capital. But these results are extremely encouraging. A large share of poor people live in countries (India, for example) that have enough financial resources to undertake transfer programs all on their own. And people in the rich world can pitch in as well. GiveDirectly is an exciting new charity model that lets you directly transfer money to households in Kenya.

Overall, the message is that taking a huge bite out of global poverty may be easier than most people realize. Poor people just need more money.

Like any method of poverty alleviation, there will be limits and caveats. But given its relative simplicity and cost-effectiveness, there is no excuse why we shouldn’t see more efforts like this being undertaken.

Link

India Recognizes ‘Legal Right’ to Food, Launches Largest Welfare Program in History

From the Independent:

In a move intended to help the hundreds of millions of Indians whose lives are scarred by malnutrition and hunger, the Congress party-led government has passed a £13bn scheme to provide heavily subsidised wheat, rice and cereals to the very poor. Perhaps more importantly, the bill, which was passed by the upper house of parliament late on Monday evening, guarantees citizens a legal right to food.

Though the Indian economy has grown in the last 20 years to the point where it is now the third-largest in Asia, up to two-thirds of the population live in poverty. Unicef says that around half of all children in India suffer from malnutrition, something the country’s prime minister, Manmohan Singh has termed a “national shame”.

“The question is not whether we can do it or not. We have to do it,” the head of the Congress party, Sonia Gandhi, said as the bill was being discussed

[…]

“It’s different from a scheme or a plan. This is a legal entitlement,” she said. “It’s a legal right.”

India has long lead the way in implementing similar welfare provisions (albeit imperfectly and amid similar controversy). Since the 1960s, the government has been providing free midday school meals in an effort to improve the health of students and incentivize poorer parents to send their children to school. Around 120 million children are reach by the program. In a similar vein, the country promises hot cooked meal to pregnant women and new mothers, which will now be extended to include children between six and fourteen.

Granted, with its rampant corruption and slowing economic growth, India will have a difficult time carrying out such a massive initiative. But conceptually speaking, I think they have the right idea. 

 

 

Random History Fact: Welfare

One of the first comprehensive welfare programs in history was introduced by Muslim Caliph Abu Bakr (Muhammad’s senior companion and father-in-law) of the Rashidun Caliphate (632 to 634), who established an annual guaranteed income to each man, woman, and child. Special taxes were also used to provide assistance to the poor, elderly, orphans, widows, and those with disabilities. The government further decreed that food must be stored up and supplied for all citizens in the event of an emergency. 

Emperor Augustus (27 BC to 14 AD), the founder of the Roman Empire, established the “congiaria” for citizens who could not afford to buy food, while Emperor Trajan (98 to 117) further enlarged the program. 

The Song Dynasty of China (960 to 1279) supported an extensive and sophisticated social welfare program that included the establishment of retirement homes, public clinics, and cemeteries for the poor.

Mincome: An Experiment to Eliminate Poverty

Poverty has long been the scourge of every human civilization. To this day, even the most prosperous and well-organized societies struggle with its perennial presence, and it seems that no policy, economic system, or social movement can ever eradicate impoverishment entirely (even if it comes close to being extinguished, the problem resurges, as it has since the recession).

The intractability of this issue leads many people to conclude that its origins lie in the moral and personal failings of the poor themselves. This disparaging view is what fuels the indifference and even hostility towards the underclass that only reinforces their plight. After all, why support programs that benefit people who lazy, irresponsible, or negligent? Why give money to those who don’t deserve it? Wouldn’t they just squander or abuse it like they have ever other opportunity?

Aside from the absurdity and prejudice of painting an entire class of people with such a broad brush, this perception is – to my knowledge – devoid of any empirical or scientific basis. Anyone could base their worldview on limited personal anecdotes or hearsay, but has there ever been a proper examination of what would happen if the poor were given more resources – without conditions or parameters?

Dominion, a grassroots Canadian news source, reported on a fascinating government program from several decades ago that did the politically unthinkable: giving poor people money, no strings attached. This effort was only recently uncovered by Evelyn Forget, a professor who fought to obtain the ample research data, which was gathering dust in a government archive.

Beginning in 1974, Pierre Trudeau’s Liberals and Manitoba’s first elected New Democratic Party government gave money to every person and family in Dauphin who fell below the poverty line. Under the program—called “Mincome”—about 1,000 families received monthly cheques.

Unlike welfare, which only certain individuals qualified for, the guaranteed minimum income project was open to everyone. It was the first—and to this day, only—time that Canada has ever experimented with such an open-door social assistance program.

In today’s conservative political climate, with constant government and media rhetoric about the inefficiency and wastefulness of the welfare state, the Mincome project sounds like nothing short of a fairy tale.

For four years Dauphin was a place where anyone living below the poverty line could receive monthly cheques to boost their income, no questions asked. Single mothers could afford to put their kids through school and low-income families weren’t scrambling to pay the rent each month.

For Amy Richardson, it meant she could afford to buy her children books for school. Richardson joined the program in 1977, just after her husband had gone on disability leave from his job. At the time, she was struggling to raise her three youngest children on $1.50 haircuts she gave in her living room beauty parlour.

The $1,200 per year she received in monthly increments was a welcome supplement, in a time when the poverty line was $2,100 a year.

“The extra money meant that I was also able to give my kids something I wouldn’t ordinarily be able to, like taking them to a show or some small luxury like that,” said Richardson, now 84, who spoke to The Dominion by phone from Dauphin.

As part of the experiment, an army of researchers were sent to Dauphin to interview the Mincome families. Residents in nearby rural towns who didn’t receive Mincome were also surveyed so their statistics could be compared against those from Dauphin. But after the government cut the program in 1978, they simply warehoused the data and never bothered to analyze it.

The federal and provincial governments ended up spending $17 million Canadian dollars on the program, far more than the intended amount. The cost overrun, combined with difficult economic times, contributed to the project’s speedy abandonment. I’d wager that cognitive bias play a role too – like most people, perhaps the officials involved felt it was a clear waste of money, and that even the positive results wouldn’t make up for the costs.

Indeed, touching firsthand accounts notwithstanding, perhaps the benefits were ultimately less than the costs, or maybe other people ended up wasting the misusing the money.

But Forget has culled some useful info from Manitoba labour data. Her research confirms numerous positive consequences of the program.

Initially, the Mincome program was conceived as a labour market experiment. The government wanted to know what would happen if everybody in town received a guaranteed income, and specifically, they wanted to know whether people would still work.

It turns out they did.

Only two segments of Dauphin’s labour force worked less as a result of Mincome—new mothers and teenagers. Mothers with newborns stopped working because they wanted to stay at home longer with their babies. And teenagers worked less because they weren’t under as much pressure to support their families.

The end result was that they spent more time at school and more teenagers graduated. Those who continued to work were given more opportunities to choose what type of work they did.

“People didn’t have to take the first job that came along,” says Hikel. “They could wait for something better that suited them.”

For some, it meant the opportunity to land a job to help them get by.

When Doreen and Hugh Henderson arrived in Dauphin in 1970 with their two young children they were broke. Doreen suggested moving from Vancouver to her hometown because she thought her husband would have an easier time finding work there. But when they arrived, things weren’t any better.

“My husband didn’t have a very good job and I couldn’t find work,” she told The Dominion by phone from Dauphin.

It wasn’t until 1978, after receiving Mincome payments for two years, that her husband finally landed janitorial work at the local school, a job he kept for 28 years.

“I don’t know how we would have lived without [Mincome],” said Doreen. “I don’t know if we would have stayed in Dauphin.”

This conflicts with the popular notion that handouts have a corrosive effect on productivity. In fact, it would seem intuitive that giving someone money without any conditions would lower his or her incentive to work. Instead, the recipients used their newfound resources as an investment, bettering their circumstances in the long-term and thus multiplying the direct benefits.

Meanwhile, freeing up students to focus on their education brings obvious benefits – more attention to learning means good grades, graduation, and (generally-speaking) a better job. If young people can afford to be given better nutrition and healthcare, they’ll be more productive students. The developmental damage and negative stressed caused by poverty accounts for the poor performance of many low-income children.

As it turns out, this aid did more than bestow economic benefits. The positive outcomes were across the board.

Although the Mincome experiment was intended to provide a body of information to study labour market trends, Forget discovered that Mincome had a significant effect on people’s well being. Two years ago, the professor started studying the health records of Dauphin residents to assess the impacts of the program.

In the period that Mincome was administered, hospital visits dropped 8.5 per cent. Fewer people went to the hospital with work-related injuries and there were fewer emergency room visits from car accidents and domestic abuse. There were also far fewer mental health visits.

It’s not hard to see why, says Forget.

“When you walk around a hospital, it’s pretty clear that a lot of the time what we’re treating are the consequences of poverty,” she says.

The trauma of poverty can sometimes produce self-destructive behavior (such as alcoholism or substance abuse), violence, and psychological problems. The subsequent lack of healthcare access can exacerbate these trends and make them more costly for society to bear.

Furthermore, the greater access to healthcare that’s offered by “guaranteed income,” as this kind of financial aid is known in Canada, means addressing health problems before they become more severe and expensive. These savings extend to society as a whole, too.

Give people financial independence and control over their lives and these accidents and illnesses tend to dissipate, says Forget. In today’s terms, an 8.5 per cent decrease in hospital visits across Canada would save the government $4 billion annually, by her calculations. And $4 billion is the amount that the federal government is currently trying to save by slashing social programming and arts funding.

Having analyzed the health data, Forget is now working on a cost-benefit analysis to see what a guaranteed income program might save the federal government if it were implemented today. She’s already worked with a Senate committee investigating a guaranteed income program for all low-income Canadians.

I hope to see Forget’s report soon, as the implications of this project are significant. Not only could it alleviate human suffering at a lesser overall cost, but it changes our perception of human nature. Most people, when given the resources, will do better for themselves, which in the aggregate means overall prosperity for the nation as a whole.

It’d be even better if the Canadian government decided to reinstitute the program and apply it to more areas, or eventually on a national scale. Even some of Canada’s right-wing politicians are receptive to the idea.

Conservative senator Hugh Segal has been the biggest supporter of this kind of GI, claiming it would eliminate the social assistance programs now administered by the provinces and territories. Rather than having a separate office to administer child tax benefits, welfare, unemployment insurance and income supplement for seniors, they could all be rolled into one GI scheme.

It would also mean that anybody could apply for support. Many people fall through the cracks under the current welfare system, says Forget. Not everybody can access welfare and those who can are penalized for going to school or for working a job since the money they receive from welfare is then clawed back.

Most mainstream politicians here in the States, much less those on the right, would be bold enough to publicly support expanding welfare. Even Canada’s broadly liberal society would have qualms about it, for some the reasons I mentioned earlier:

If a guaranteed income program can target more people and is more efficient than other social assistance programs, then why doesn’t Canada have such a program in place already? Perhaps the biggest barrier is the prevalence of negative stereotypes about poor people.

“There are very strong feelings out there that we shouldn’t give people money for nothing,” Mulvale says.

Guaranteed income proponents aren’t holding their breaths that they’ll see such a program here anytime soon, but they are hopeful that one day Canada will consider the merits of guaranteed income.

The cost would be “not nearly as prohibitive to do as people imagine it is,” says Forget. “A guaranteed minimum income program is a superior way of delivering social assistance. The only thing is that it’s of course politically difficult to implement.”

Imagine how much more untenable this program would be in the United States, given that Americans are especially resistant to social policies and government spending. Even if GI was eventually found to be more cost-effective, it’d still be hard to convince people of its merits. There’s as much cynicism towards the state’s ability to do anything efficiently, as there is towards giving the undeserving poor more money for nothing.

But that’s why there needs to be more studies and trials. Maybe Dauphin was a fluke, or the project only works in specific circumstances (smaller population, rural areas as opposed to urban ones, etc). Maybe the benefits end up being outweighed by the costs, or begin to wear-off with time. We simply don’t have enough examples to go by.

Then again, countries such as Brazil and Mexico have enacted very similar GI programs, and their outcomes have generally been favorable too. The US could stand to experiment with similar measures, at least in a limited way, to see how they’d work. With the growing socioeconomic problems that we’re facing, there’s no reason not to be creative with ways to better our society even during a period of austerity. What are your thoughts?

Subsidizing the Rich

As I noted in my previous post, public concern about government spending has become an intractable part of our political discourse, with only unemployment registering as an equal or higher concern. While it’s disputed whether debt should be top priority, most of us could agree that government waste is something to be curtailed for the sake of political integrity, practicality, and ethics.

Yet of all the surprising places that taxpayer money could (and does) go, who would expect that those in our society who need it least, would be recipients of tens of billions of dollars of it? As HuffPo reports:

Millionaires are receiving billions in taxpayer-funded support every year that helps them pay for everything from child care to bad debts to boats and vacation homes, according to a report released Monday by Sen. Tom Coburn.

People who individually earned more than a million dollars in 2009 even managed to collect a total of nearly $21 million in unemployment insurance.

“From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous,” wrote Coburn, an Oklahoma Republican, in an accompanying letter. “Multimillionaires are even receiving government checks for not working. This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate.”

Read the Post’s satirical but sobering report on just how and where the estimated $30 billion of pubic money is spent. It pretty much breaks down to this:

Coburn totaled up all the federal money for millionaires over several years that his office could find. Among the handouts for the well-heeled are:

  • $18.15 million in child care tax credits
  • $74 million in unemployment checks
  • $89 million for preservation of ranches and estates
  • $316 million in farm subsidies
  • $608 million in business entertainment deductions
  • $9 billion in retirement checks
  • $21 billion in gambling losses
  • $28 billion in mortgage breaks for mansions, vacation homes and yachts

Some of the payments, such as for Social Security and Medicare, stem from payroll taxes and are not means-tested when they are paid out. Advocates of such payments believe the government made a promise to individuals that it must keep, regardless of their wealth.

Some other payments, such as the millions received by the wealthy to preserve land or to use alternative energy sources, arise from programs that proponents consider beneficial overall, even if the rich get the money.

If this isn’t a case for reform, I don’t know what is. If the government made a promise to individuals to repay a certain amount, regardless of whether they actually need it, than that’s not a case for scrapping social security altogether, but for at least attempting to re-calibrate it’s distribution to make more sense. It’s dated and inefficient, but it still does some good and could still merit more creative solutions besides total amputation (which is largely populist rhetoric anyway, but is still thoroughly supported by a lot of people).

The same goes for these other programs – maybe some of this money will always inevitably spillover into the wealthier segments of this society: the free rider problem is endemic in any public good. But why not try to mitigate this issue through auditing and reform rather than wholesale cuts that will hurt the poor far more? (consider that a hypothetical question, since the answer as to why it’ll be obstructed should be obvious by now).

Many would argue that $30 billion isn’t a lot of money in the grand scheme of things, which is a sad indicator of just how flawed our fiscal system is. But money is still money, and we should trim any and every amount that is unnecessary. We hear much about the “waste and fraud” that goes into social welfare programs for the poor and middle-class – some of it exaggerated, some of it credible. But things like corporate welfare – which also costs us tens of billions of dollars additionally – don’t get nearly as much as much attention, even by the GOP hypocrites who claim to be small government warriors while safeguarding and creating tax loopholes for the wealthy. I commend Coburn for owning up to this issue, despite the indifference or outright support by most of his party.

“Government policies intended to mainstream wealth redistribution are undermining these principles. The tragic irony is the wealth in these cases is trickling up rather than down the economic ladder,” he continued. “The cost of this largess will thus be shared by those struggling today and the next generation who will inherit $15 trillion of debt that threatens the future of the American Dream.”

Coburn does not argue that taxes should be raised on the wealthy, however. Simply ending giveaways for people who don’t need them would help, and he recommends limiting or cutting payments to millionaires in the safety net programs; ending farm and conservation payments to the rich; means-testing tax breaks and other payouts; and reforming provisions of the tax code that help pay for vacation properties and mansions.

Indeed, at the very least we could start with streamlining a tax code that allows for $1 trillion in lost revenue due to  various deductions and loopholes. That should’ve been one of the few non-partisan non-issues that everyone could’ve agreed on. And yet even that, go figure, was too much for the best politicians money could by.