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Chapter 4. State-Level Benefits
- Brookings Institution Press
- Chapter
- Additional Information
Needy working families can realize significant material gains by participating in work support programs.Work support benefits vary from place to place, they vary according to family size and structure, they vary according to participation in Temporary Assistance for Needy Families (TANF), and they vary according to work effort, earned income, and length of employment. The number of work support programs in which one participates is also a crucial factor. In this chapter we estimate the nominal income and benefits that can be gained from participating in the work support system in the fifty states and the District of Columbia. We assume a single mother with two children has emerged from the cash assistance welfare system and is in month thirteen of employment. Estimates of state benefit generosity are presented for full-time and half-time year-round minimum wage workers. In general, estimates are based on benefit rates in 2000. They represent the nominal value of work support benefits because they are not adjusted to reflect differences in living costs (which we consider in chapter 5). Our analysis focuses exclusively on minimum wage workers. There are several good reasons for this. First, basing the earned income estimates on minimum wage rates makes them policy relevant, because minimum wage rates are discretionary policies for states. By focusing on minimum wage earners our estimates capture important differences in state-level compensation for work and the effects such differences have on eligibility for and generosity of means-tested benefits at the state level. Second, minimum wage workers are at the bottom of the labor market. Consequently, they are the workers with the greatest need of work supports. Finally, the annual earnings of full-time minimum wage workers are a good basis on which to assess the prospects of 87 4 State-Level Benefits 04-8191-1 Ch04 11/2/05 4:19 PM Page 87 people making the transition from welfare to work (a topic we discuss in more detail in chapter 6). People moving from welfare to work often earn $7 or $8 per hour. However , they rarely find full-time, year-round employment. That means that rather than $14,000 to $16,000 per year, they typically earn between 70 and 95 percent of the federal poverty standard, or between $9,700 and $13,200 annually .1 Our full-time, year-round minimum wage worker earns $10,700. People qualify for work support benefits on the basis of income, not hourly wage rates. Consequently, the estimates we present are a fair representation of the typical low-end outcome achieved by people moving from welfare to work. The notion of the generosity of state benefits requires some clarification. As previously explained, the work support system is composed of programs that feature national eligibility and benefit standards and programs that allow state discretion in these matters. We use the concept of “state benefit generosity ” to indicate the relative generosity of this combination of nationally defined and state-discretionary benefits available in each state and the District of Columbia.As a consequence, the generosity of state-level benefits is a function of policy decisions at both the state and the national levels. Our estimate of total income and benefits is the sum of nine different sources of material support available to needy workers: earned income from a minimum wage job, less federal and state income taxes and federal payroll taxes; federal earned income tax credit (EITC) benefits; TANF earned income disregards; the face value of food stamps; the maximum face value of state child care grants; the estimated market value of Medicaid benefits; the government cost of means-tested components of school meal programs; the face value of rental assistance; and refundable state EITC benefits. Appendix A explains the estimation method used for each work support component. Our estimates of total income and benefits are based upon the assumption that needy workers participate fully in the work support system and receive all possible benefits.As such, the estimates presented in this chapter represent the maximum possible benefits the work support system may provide in each state and the District of Columbia but do not necessarily indicate how the system actually performs. The work support system has significant potential to reduce poverty among needy working families. In all fifty states and the District of Columbia , the combination of minimum wage work and work supports provides an income and benefit total that exceeds the federal poverty standard by a wide margin. However, only some work...