Poverty Myths Busted: You Can Live Really Well on Benefits
Poverty Myth: You can live well on government benefits.
False!
Living on benefits is not easy – even surviving is a challenge. Benefits definitely do not support upward mobility, and with lifetime caps on programs like Temporary Aid for Needy Families (TANF), how much a person can receive they don’t provide long term security.
According to the Center on Budget and Policy Priorities[1], TANF benefits in 2017 in every single state were not enough to meet 60% of the federal poverty line. The monthly TANF benefit is less than the rental cost of a modest 2-bedroom apartment in all states, according to the same report. Moreover, in terms of purchasing power benefits are less than they were in 1996.In the most generous state, Alaska, TANF provides just $923 a month for a single parent family of three. In the least generous, Alabama, it is just $170 a month. Who could live well with so little? TANF does not provide enough to cover basic necessities.
What little money families receiving assistance do get is spent on daily necessities. A study conducted by the Bureau of Labor Statistics[2] found that of their total budget, families receiving assistance spent 77% on food, transportation, and housing, compared with families not receiving assistance who spent 65.5% of their budget on these expenses. Over 30% of one-parent families receiving assistance did not own a car, compared with just 3% of families not receiving assistance.
It’s a [poverty] trap!
This inadequate system traps families in poverty.
Let’s look at that number from above again – 30% of families receiving TANF do not own a car. Partially this is because in order to qualify to receive benefits you have to prove that you have very few assets – no more than $1,000 in Washington state [3] – which includes checking and savings accounts and any stocks or mutual funds. This means that even owning a cheap used car can disqualify you from government assistance. Not to mention the challenge of saving up for a deposit on a new apartment. And that Roth IRA you opened back when you still had a job, or the savings bond you got when you were a kid? If it’s worth over $1,000 you’ll have to empty it.
It’s not just TANF, it’s the heart of how benefits work in the US. A participant in one of the Multidimensional Aspects of Poverty research groups said as much talking about healthcare: As an elderly disabled person, she worked as much as she could, but not full time. The little income she earned, however, meant she didn’t qualify for government supported healthcare in her state, and so she had to purchase it on the marketplace. The plan she could afford was basic, and the result was that after paying for healthcare costs out of pocket, she was back below the poverty line, taking home less than if she had no job and had qualified for free health insurance.
The current climate in federal policy changes isn’t encouraging. According to an article in the April 25, 2018 Washington Post, HUD Secretary Ben Carson “proposed far-reaching changes to federal housing subsidies, tripling rent for the poorest households and making it easier for housing authorities to impose work requirements.” In addition, a number of House members are pushing a plan to tighten work requirements for people receiving food stamps.
Benefits capture families in a trap – a trap that provides just enough support to keep them afloat, but not enough support to help them escape poverty.
How to escape?
It seems counterintuitive – but the way to help people out of poverty isn’t to cut back on benefits and make their lives even harder, it’s to make benefits more generous.
One study in the European Union looked at 19,000 people receiving benefits and found a direct link between how generous the benefits are and how much people look for work [4]. In the authors’ words, “'The notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support.”
The fact of the matter is that when people are meeting the work requirements that go with TANF and just barely getting by they don’t have the energy left over for an intense job search or to take the steps necessary to improve their situation. Moreover, often the jobs they find won’t on their own pay enough to improve their financial security.
Perhaps most noteworthy from the European study though was the observation that when people feel that the state is taking care of them they feel a greater sense of obligation to give back by working and paying taxes themselves.
The net result is that counter to what much of the public debate in the US would have us believe –reducing benefit amounts as people find work actually makes their lives even more difficult and is no way to help them escape poverty. It is known as the ‘cliff effect’—you earn a little something that puts you over the eligibility line and some forms of assistance are dropped, pushing the recipient over the edge of the cliff and into the void.
Sources
[1] https://www.cbpp.org/research/family-income-support/tanf-cash-benefits-have-fallen-by-more-than-20-percent-in-most-states
[2] http://www.bls.gov/opub/btn/volume-2/spending-patterns-of-families-receiving-means-tested-government-assistance.htm
[3] https://www.dshs.wa.gov/esa/community-services-offices/tanf-and-support-services
[4] http://www.dailymail.co.uk/sciencetech/article-3021698/Generous-welfare-benefits-make-people-likely-work-study-claims.html