More “Incentive” for Welfare or Work in S.C.?

Politicians love to tout job creation through business “incentives” — but is there an incentive to take these jobs?

Given the dismal unemployment rates both on the national and state levels (8.1 percent in South Carolina), one would think that anyone currently without a job would do anything to obtain a job. Well, according to the recent Cato Institute study “The Work Versus Welfare Trade-Off: 2013,” South Carolinians would actually make more money living off of welfare programs than being employed in an entry-level job.

According to the study, if all available benefits are added together for a typical welfare family consisting of a single mother with two children, the total benefits package would add up to $26,536, or a pre-tax equivalent of $21,910. Programs included in this calculation include TANF, SNAP (food stamps), Housing, Medicaid, WIC, LIHEAP (low income energy assistance), and TEFAP (emergency food assistance).

Using the pre-tax equivalent, welfare benefits equate to an hourly wage of $10.53 – which, compared to jobs with an hourly wage quite higher than the minimum wage of $7.25, would be more profitable than working. Based on a 2,080-hour work year, the pre-tax welfare benefits package is worth nearly $7,000 more per year than the minimum wage salary of $15,080.

This is not to say that the minimum wage should be increased to outweigh welfare benefits. Minimum wage laws only help to distort the market and prohibit companies from hiring teenagers and young adults who desperately need jobs to support themselves and their families. The key point this study proves is that expansive, unchecked welfare packages, as well as other South Carolina state policies that impede income mobility, only help to remove incentives for South Carolinians to choose work over welfare.

Although many welfare programs were created at the federal level, state governments like South Carolina’s are still to blame, since they accept federal funds (and usually ask for as much money as they can get) to run these programs. From 2001 to 2011, the amount of federal funds South Carolina accepted more than doubled, and even when calculated for population and inflation, still increased nearly 50 percent. This fiscal year’s budget passed by the legislature and signed by the governor includes a record $9.1 billion in federal funds, when food stamp money is included.

Bottom line: South Carolina lawmakers and the governor love to tout how using tax “incentives” to lure companies to the state help create jobs – a policy that’s failed in every demonstrable way. And while they love to give big companies incentives with the stated intent that they create more jobs, state government, by maintaining high taxes, a burdensome regulatory environment, and liberal welfare policies, gives South Carolinians few incentives to actually take these jobs. The state can “incentivize” companies, but if South Carolinians have more incentive to use welfare programs than take those jobs, then all of the jobs announcements and ribbon cuttings and ground breakings will be for nothing.

Posted by South Carolina Policy Council on Wednesday, August 21, 2013

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