May 6, 2008

Who benefits from welfare?

Low-income families pose a fiscal burden on the federal government because they are eligible for government assistance, such as food stamps, Medicaid, and housing assistance. These forms of government assistance – food, shelter and medical care – are necessary for the survival of the low-income families. Without food, shelter, and medical care, the family members would be malnourished, and at higher risk of death from lack of food, medical care and exposure to the elements. These forms of government assistance are thus necessary for the maintenance of low-income families. On the surface, it seems as though the low-income families are the primary beneficiaries of these programs.

However, if we consider that, without these forms of government assistance, the family members in these low-income families would be at risk for serious illness or death, it becomes apparent that the real beneficiaries are their employers and future employers. Companies such as Walmart that pay their employers a small enough wage that they are eligible for government assistance means that these forms of assistance are in fact a subsidy for corporations. It is not possible in the U.S. for a family of four to survive when the primary breadwinner earns $8.00 per hour, even when there are two breadwinners. Thus, they turn to government assistance to meet their basic needs. With this income, even though both parents are working full-time, this family is eligible for governmental assistance in terms of medical care and food stamps. The ability of these workers to survive thus is dependent on governmental assistance.

It is, of course, true, that this family could make it without governmental assistance were they to have chosen not to have children. Besides the fact that there is something ethically dubious about denying low-income families the right to have children, it also does not make long-term economic sense. If low-income people do not have children, then whose children will form the next labor force? Keep in mind that nearly half of all families qualify for some form of governmental assistance, in the form of Earned Income Tax Credit, food stamps, medical assistance, and housing assistance. A family of four, for example, who earned less $39,783 in 2007 would qualify for Earned Income Tax Credit. That would include families where both adults worked full time at $10.00 per hour and didn’t miss any days of work.

In sum, we are talking about a large number of families who require governmental assistance, and, even in the most crude terms, our society needs for those families to have children in order to ensure a future labor force. Government assistance thus allows employers to pay their workers a lower wage since this assistance ensures their survival. Despite this, the companies are rarely scapegoated for relying on governmental assistance for the survival of their employees. Instead, low-income families who rely on this assistance often face humiliation and reprisal for not pulling themselves up by their own bootstraps.

Simple mathematics will show that a family of four cannot make ends meet on a pre-tax income of $8.00 per hour. This comes up to about $2816.00 per month. Renting a small apartment for $800, skimping on food at $400, paying medical insurance at $500, a car payment at $300, $200 for gas, $100 for clothes, $250 for utilities, $100 for phones, $100 for car insurance, this family is left without money for dental insurance, vacations, personal hygiene products, taxes and social security, and a host of other necessities. Food stamps and Medicaid save this family about $900 a month, and make it possible for this family to make it from month to month, and thus for their employers to have a labor force, subsidized by the government.

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