How Expansive Welfare Benefits Can Make Being on Dole More Lucrative Than Working

Kids love Santa. They don’t have to work for the stuff on their Christmas lists. He just gives it to them.

In many states, gratuitous welfare benefits have made that childhood fantasy an adult reality. Professor Casey Mulligan of the University of Chicago and I have found that some families can receive the annualized equivalent of a six-figure income with no one working—and you’re paying for it.

During the pandemic, idled workers received unemployment “bonuses” so high that many were pocketing more than twice what they had been making on the job. Even without these extra weekly payments, unemployment benefits can reach unexpected high levels in many states.

In New Jersey, for instance, a family of four with no one working can receive unemployment benefits equivalent to a job paying over $96,000. That’s more than the median household earns in wages and benefits combined.

High unemployment benefits are not unique to the Garden State. In 13 states, a family can receive annualized unemployment benefits worth more than the median household income. The value of unemployment benefits comes not just from their sheer size, but their tax advantages as well. Unlike earned income, unemployment benefits are exempt from payroll taxes, and six states also exempt them from the respective state income tax.

And while the pandemic-related unemployment benefits have ended, the Affordable Care Act (“Obamacare”) subsidies have just kept expanding. A program that was sold to the American people as a hand up for the poor has quickly been transformed into a handout for upper-income earners.

In some parts of the country, a family of four earning over half a million dollars still qualifies for Obamacare subsidies. Those with a quarter-million-dollar income qualify in nearly the entire country.

The annualized value of these health care subsidies and unemployment benefits for a family of four can exceed a six-figure income. In Washington state, the amount is more than $122,000, substantially more than many blue-collar incomes.

In fact, it is 32% more than the wages and benefits of the median household; 51% more than the median secondary school teacher’s wages and benefits; 95% more the median machinist’s salary and benefits; and 220% more than the median retail associate’s salary and benefits.

But Washington state is not alone. In 29 states, unemployment benefits and Obamacare subsidies are worth more than the wages and benefits earned by the median firefighter or truck driver. In 14 states, these two programs pay annualized benefits exceeding the wages and benefits of the median electrician.

While our study examined only two welfare programs that are not means-tested, there is an entire suite of means-tested programs for which many people are eligible, and which together provide a surprisingly high standard of living.

In Loudoun County, Virginia, just outside Washington, D.C., you can receive over $25,000 in annual rental assistance alone—and that is just one program. Add to that food stamps, which have just been expanded, and subsidies for everything from education to transportation, and you have not just a robust social safety net, but a perverse incentive not to work because even a small amount of income disqualifies you from receiving these means-tested benefits.

Many economists have been scratching their heads, wondering why so many workers are sitting on the sidelines today, despite four-decade-high inflation and the resulting record-high number of unfilled job openings. The expansion of welfare benefits—in terms of both eligibility and size of benefits—has provided a substantial disincentive to working. Businesses must not only compete against one another for workers, but against the dole as well.

That’s what happens when liberals play Santa Claus with your tax dollars.

A version of this column first appeared at FoxNews.com.

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