Welfare Programs Increase Poverty

This is how welfare economic incentives work to keep people poor.

If we create a law that says people who earn below 20,000 per year will get 5,000 in handouts, the following situation occurs:

1. As a worker earning 21,000 per year, I now have an economic disincentive to work beyond the 20,000 dollar threshold. In fact I would demand that my employer either reduce my pay or my hours until I make under the 20,000 threshold.

2. People earning less than 20,000 per year already will not have any incentive to work harder if the additional work only accumulates benefits below an additional 5000 dollars.

That is to say, if I have the option of working more and earning 4,999 additional dollars beyond my 20,000 – I will not do this because it is easier to take the free money than to work for it.

This is called the disutility of labor. People would rather not work than work if given the choice.

These economic truths apply to any welfare program at any price level for any benefits. Welfare programs will always INCREASE the social ill they are trying to solve.

Lets take another example – lets say the State creates a program that pays people 5,000 to quit smoking. If the benefit of the handouts outweighs the cost of cigarettes, people would START smoking in order to collect on the benefit that helps them quit. Even if the handout was only 100 dollars, it is worth peoples while to start smoking in a manner that they purchase less than 100 dollars in cigarettes in order to collect on the margin.

Ronald Reagan once said that we should measure a welfare programs success by how many people we are able to get off of it. This is IMPOSSIBLE when benefits are increased and benefits made more abundant. Basic economic laws make it clear that increasing welfare benefits leads to an increase in welfare rolls.

Today, the State has given up on trying to get people off of welfare and instead has done everything in its power to turn the welfare sucking horde into a political weapon against the productive class.