Six-Figure Blue-State Safety Nets Are Driving Americans Out of the Work Force, Study Finds

The value of welfare and government-provided health insurance for some U.S. households in certain blue states exceeds six figures, exacerbating the labor shortage that has plagued the U.S. economy in the wake of the Covid pandemic, according to a newly released study entitled “Paying Americans Not to Work.”

In 24 states, unemployment benefits and Obamacare subsidies for a family of four with two unemployed parents is equivalent to — and in some cases, exceeds — the national median household income, according to a recent study conducted by the economists Casey Mulligan, Erwin Antoni, and Stephen Moore on behalf of the Committee to Unleash Prosperity, a non-profit that promotes free-market economic policy. The national median household income was $78,813 in 2022.

In 14 states, a family of four in which both adults are unemployed can receive unemployment insurance and Affordable Care Act subsidies equivalent to a job that pays $80,000 in combined salary and health benefits. Washington, New Jersey, and Massachusetts provide safety-net programs that provide the equivalent of over $100,000 in annualized cash and benefits for a family of four, the economists found.

Workers in some states can receive more benefits from remaining unemployed than their blue-collar counterparts who are working, the study showed. In roughly half the states today, an unemployed couple receiving unemployment and health-insurance subsidies can earn more than a fire fighter, a construction worker, a retail clerk, or a machinist working 40 hours a week. In certain states, couples with a combined income of more than $400,000 are eligible for taxpayer-subsidized healthcare.

“We all believe in a reliable safety net for when Americans lose a job or can’t work,” said study co-author Stephen Moore, who served as former president Trump’s economic adviser. “But it isn’t fair to the hard-working Americans who put 40 hours a week on the job, that neighbors who aren’t working a single hour can receive a higher income from not working and collecting benefits. Work requirements and time limits on benefits must be reinstated to help our economy grow and as a matter of fairness to those who are working.”

To make the labor shortage situation worse, many states introduced Covid-inspired weekly supplemental unemployment benefits in 2020 and 2021, ranging from $300 to $600, driving many blue collar workers out of the labor force. The states that terminated their supplemental benefits saw the gap between labor supply and demand demand narrow faster than states that maintained the benefits, according to the study.

Unemployment benefits are not subject to payroll taxes, unlike earned income. In Alabama, California, Montana, New Jersey, Pennsylvania, and Virginia, they are also exempt from state-income tax, further incentivizing residents not to work.

The authors found that government payouts are largely to blame for record low labor force participation over the last few years. Labor shortages, originating during the pandemic, still persist in many major industries. Many of the work requirements in the 1996 Welfare Reform Bill have been removed, they write, disincentivizing workers to find a replacement job.

In many states, remaining on the government dole is simply a better deal. A spouse would have to generate more than $80,000 a year in come working 40 hours per week to net the same amount of money after taxes as certain families with two unemployed spouses receiving government benefits, the study said.

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