Welfare: How Does It Work?

People will often refer to "welfare" as if it is this monolithic thing. You will hear them talk about how someone is "on welfare" or how we need to "cut welfare." Back in the day, this referred to the AFDC program, but it's not terribly clear what it refers to now. In that vein, I found myself somewhat puzzled by this tweet from Garett Jones (which I meant to post about a few days ago):



The tweet is confusing because, for most anti-poverty spending, increases in market incomes at the bottom should result in the programs cutting themselves.

Take food stamps for instance. The federal government does not set aside a specific amount of money for food stamps each year. They project that spending in the budgets, but food stamps is an open-ended program that pays out based upon eligibility and need. If more people qualify for food stamps than before, spending will go up. And vice versa.

So what would it mean to cut a program like food stamps in anticipation of poverty reductions caused by a minimum wage increase? If you believe the minimum wage increase will cause incomes to rise such that less people will be eligibile for food stamps, you don't need to do anything to the program because it will already cut itself.

The only proactive things you could do are reduce eligibility or reduce benefit levels. But that doesn't make any sense in the context of Garett's tweet. If the minimum wage increase did push people out of food stamp eligibility, then reducing eligibility would harm some class of (now fewer) people who still are eligible. It would pull additional people off of food stamps than those whose income increases made them ineligible. Why would you want to do that?

The same story holds for reducing benefit levels. If the minimum wage caused some to come off of food stamps and caused others to have lower benefits (because that's how food stamp benefit levels already work), why would it make sense to reduce the general level of benefits for food stamp recipients who remain eligible? This would claw back money in addition to the money that would come from people having more income and therefore qualifying for less food stamp income.

I use food stamps here, but it's the same story for basically all of our means-tested benefit programs including Medicaid, low-income heating assistance, Pell Grants and so on down the line. If a minimum wage increased caused incomes to rise so as to reduce eligibility, the programs would cut themselves. The only thing you could do legislatively beyond that would not cut benefits from those who the minimum wage helps (their benefits will be cut already), but cut benefits from those who are not adequately boosted out of hard ship by the minimum wage. And it's not clear why advocates of a higher minimum wage would ever want to do that.