Perverse Welfare Incentives

Eagleye Blog ^ | December 10, 2012 | Bethany Stotts

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What if you had to choose between your child learning to read and making ends meet each month? Before child labor laws were passed, the solution for the poor seemed to be to pull kids out of schools and place them to work in factories or other employment. For some today, argues Nicholas D. Kristof in a recent column, the solution may be to make sure their kids don’t learn to read. That way the parents can continue to collect Supplemental Security Income (SSI) checks.

“This is what poverty sometimes looks like in America: parents here in Appalachian hill country pulling their children out of literacy classes,” asserts Kristof in the New York Times. “Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability.”

“About four decades ago, most of the children S.S.I. covered had severe physical handicaps or mental retardation that made it difficult for parents to hold jobs — about 1 percent of all poor children,” he writes. “But now 55 percent of the disabilities it covers are fuzzier intellectual disabilities short of mental retardation, where the diagnosis is less clear-cut. More than 1.2 million children across America — a full 8 percent of all low-income children — are now enrolled in S.S.I. as disabled, at an annual cost of more than $9 billion.”

“This is painful for a liberal to admit, but conservatives have a point when they suggest that America’s safety net can sometimes entangle people in a soul-crushing dependency,” he asserts. “Our poverty programs do rescue many people, but other times they backfire.”

Welfare reform was supposed to fix some of these perverse incentives by requiring work for government assistance and placing time limits on welfare checks. However, as previously noted, the Obama Administration recently undermined workfare requirements, giving states an opportunity to restructure the work requirements section of their welfare programs. This could be done with proposed “alternative outcome standards.”

Robert Rector of the Heritage Foundation noted earlier this year that “…these alternative outcome standards happen to have been around the welfare system for about 30 years. They are completely bogus, but now they’re bringing them forward as if this is some kind of new idea.” He continued,

“And the most prominent of these is that if you get a waiver, in some cases or maybe in all cases–it’s not clear–you’re going to have to increase the number of people who get a job and get off welfare by 20%. … Wow, that sounds impressive, doesn’t it? It sounds impressive because this is a pure sham that has been used to deceive the American public in the welfare system for years and this was in fact the most prevalent type of statistic used in the old AFDC program to try to convince the American public that you were reducing dependence when in fact you were increasing it.”

In his column, Kristof rightly goes on to note that poverty-reducing programs also provide perverse incentives against marriage: “… In a means-tested program like S.S.I., a woman raising a child may receive a bigger check if she refrains from marrying that hard-working guy she likes. Yet marriage is one of the best forces to blunt poverty,” he writes.

“In married couple households only one child in 10 grows up in poverty, while almost half do in single-mother households,” Kristof continues. And the less-educated are more likely to have children out of wedlock. “Less than 10 percent of the births to college-educated women occur outside marriage, while for women with high school degrees or less the figure is nearly 60 percent,” wrote Jason DeParle for theNew York Times this July.

America is in a culture war and the state of marriage may have a lot to do with how people are lifted out of poverty. For himself, Kristof recommends that the federal government shift some funding out of S.S.I. and into invest in early childhood education instead and to support initiatives such as Save the Children.