Does a generous welfare benefit create a work disincentive?

Posted By on July 10, 2014

I listened to a debate on CNBC on Wednesday morning featuring Princeton economics professor Alan Krueger discussing the problems of long term unemployment which lead to Joe Kernen suggesting there are financial disincentives to taking entry level jobs … the kind of work the unemployed need to gain experience. Krueger discounted that people weigh the numbers and choose not to work, but seemed troubled when faced with the financial calculations in some states which heavily favor continuing to accept government handouts and remain unemployed.

CNBC Squawkbox – Alan Krueger and Joe Kernen (mp3) July 9, 2014

It reminded me of a CATO Institute study from 2013 that shocked me: “… in the three most generous states, a person on welfare can take home more money that an entry-level computer programmer.”

catostudy2013

Add taxes to what you would need to make in these states to equal the government support, and your hourly pay would need to match the chart below in order to break even.

catostudywageequiv2013

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.