Cato ‘Welfare More Than Minimum Wage’ is Fatally Flawed Analysis

First posted at the Ramirez Group website.

Fox News was more than happy to highlight the messaging Cato recently released about welfare vs. work last night.

Welfare pays more than a minimum-wage job in 35 states, creating little incentive for Americans to take entry-level work and likely increasing their long-term dependency on government help, according to a new study by the libertarian think tank Cato Institute.”

With a headline like that, you are going to enrage a lot of people and make them think a bunch of lazy welfare mommas are gaming the system instead of working. That appears to be what Cato would like you to think. At best, the data is misleading… but, frankly, I classify it as wholeheartedly deceptive.

What Cato considers Welfare

If you read Cato’s fine print in the study under “methodology,” you’ll find they define a welfare recipient as someone who isn’t working and receives all of the following benefits:

  • TANF (Temporary Assistance for Needy Families)
  • Medicaid
  • SNAP (Supplemental Nutrition Assistance Program – formerly “food stamps”)
  • Housing Assistance
  • Utilities Assistance
  • WIC (Women, Infants and Children Program)
  • Fatal flaw of the study: almost no people receive all of these benefits simultaneously and aren’t employed

Cato starts with two fatally flawed assumptions: 1) All people who get these benefits get all of them at once and are not employed. 2) All people who are employed don’t receive any of these benefits. These assumptions are totally false in reality, making the conclusions of this study not only worthless, but entirely misleading. I’ll let you decide if this was Cato’s intention.

With a little help from Sharron Parrott and LaDonna Pavetti of the Center for Budget and Policy Priorities, we get some data that sheds light on the subject. We find that these assistance programs are rarely all used by one family and that many working families receive one or more of these assistance programs to keep them above the poverty line.

Reality of people who receive public assistance:

  • 86% of children who receive Medicaid (or CHIP) are members of working families
  • More than half of able-bodied adults in households with children receiving SNAP work while receiving assistance, and some 87 percent worked in the prior year or will work in the subsequent year
  • A majority of SNAP recipients only receive benefits for 6 months
  • Only 16% of families who received SNAP also received TANF
  • 8% of WIC recipients receive TANF
  • Only 16% of TANF recipients receive housing assistance

Cato’s picture was just too simple and far removed from reality to be taken seriously.

Welfare reform in the early 1990s has dramatically reduced the number of families with children that get a “welfare check.” That number – 1,972,500 – is down from 4,852,600 in 1994.

The sad reality is that one in six Americans lives below the poverty line. If not for public assistance programs like the ones listed above, one in three Americans would be living below the poverty line. Some 40 million families are kept above the poverty level by public assistance programs, many of those families being working families.

Cato also included some state by state data. So if you are interested in welfare and poverty specifically in Nevada, here’s additional information you may find interesting. Notice the number of people on unemployment exceeds the number of SNAP cases, and there are only 11,900 TANF cases.

Justin McAffee

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