The work vs. welfare trade-off in Illinois

A new study by the Cato Institute in Washington, D.C., takes a state-by-state look at the value of the welfare benefits package. While no one in America receives welfare benefits from all 72 federal welfare benefits programs that provide direct cash or in-kind assistance, long-term welfare beneficiaries are more likely to receive benefits from multiple programs. Highlights...

A new study by the Cato Institute in Washington, D.C., takes a state-by-state look at the value of the welfare benefits package. While no one in America receives welfare benefits from all 72 federal welfare benefits programs that provide direct cash or in-kind assistance, long-term welfare beneficiaries are more likely to receive benefits from multiple programs.

Highlights from the study include:

• Nationwide, the value of benefits for a typical recipient family ranged from a high of $49,175 in Hawaii to a low of $16,984 in Mississippi
• In 35 states, welfare pays more than a minimum-wage job (even after accounting for the Child Tax Credit (CTC) and Earned Income Tax Credit ( EITC))
• In 13 states, welfare pays more than $15 per hour
• In 12 states, an individual leaving welfare for a job paying the same amount as welfare would see a decline in actual income

According to the study, an Illinois family of one mother and two children receiving Temporary Assistance for Needy Families, or TANF; Medicaid, food stamps, Women, Infants and Children, or WIC; public housing; utility assistance; and free commodities (e.g., milk and cheese) would have a benefits package worth $19,442 per year.

To make work “pay,” that mother would need to earn $13,580. This earned income plus tax credits (Child Tax Credit and EITC) would provide a total annual income of $19,400. In other words, the mother would need to work more than 30-hours per week in a minimum wage job, which pays $8.25 an hour in Illinois, to have an income equivalent to what she might receive on welfare.

When you add work-related costs, such as transportation, child care and clothing, the recipient would need to work even more to be better off financially than staying on welfare. Currently, less than 60 percent of Illinois TANF recipients are currently working.

Welfare in Illinois does not, by any means, afford recipients a lavish lifestyle. But for many, particularly longer-term welfare recipients, it is financially easier to remain on welfare than to work. The study authors conclude that:

“If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work. Moreover, states should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.”