The purpose of our social service system is to help people climb out of poverty, right? But too often, it does the opposite. Let’s take a fictitious but representative example.
Bob is married and has two young children. He has a decent job that provides health insurance. His wife is a full-time mom. They live in a 3-bedroom home that costs $1,200 per month– a little higher than the average 3-bedroom apartment, but not much. Their utilities cost $300 per month. They get by, but they haven’t saved much.
Bob loses his job. Without a job he can’t pay his rent, much less afford the $600 per month payment for COBRA health insurance. Fortunately, his family becomes eligible for food stamps ($650 per month) and Medicaid. He can also apply for HUD vouchers to help with his rent, but the waiting list is over a year out. He can’t move to a cheaper place because he has no income. What landlord in their right mind will rent to someone without a job?
Bob is having trouble finding a position that pays as well as his last one. So he takes a $12 per hour part-time job– a decent paying job in these parts– that leaves him time to pound the pavement looking for a better one. He now earns $1,500 per month. That’s just enough to cover his rent and utilities, but not gas or car insurance for the family’s (one) car, or clothes for interviews, or anything else. And his food stamps get cut to $450 because he’s now earning money. And the more he makes, the more his food stamps get cut. At $2,000 per month, which is just enough to get by with food stamps. they phase out completely. If he replaces the $650 per month subsidy with income, he loses his Medicaid. Then, not only does he have to come up with a premium for insurance, but his family faces a $10,000 per year deductible. And he starts to owe income taxes, which aren’t taken into account for social programs.
To break even, Bob now has to earn $50,000 per year, or $24 per hour. Or he has to find a job that provides health insurance. Neither is common in this area. The median income in the city is $33,807, which is 27% lower than the average for the nation. And if Bob’s wife looks for a job, they’ll have to pay for childcare. Childcare Aware lists this state’s average cost of childcare for an infant and a toddler at $19,396 per year— the equivalent of $9 per hour at a full-time job. Is it worth it to have Bob’s wife work for a net increase in income of maybe $3 per hour, while putting the kids with strangers for the day?
But let’s back up a little. Is Bob better off making less than $1,000 per month and getting enough food stamps to feed his family and have health insurance (Medicaid), or making enough to pay the rent and not being able to feed his family or pay for medical care? Ultimately Bob faces a choice between feeding his family and paying his rent. Neither is an attractive proposition. Where is the incentive to earn, when earning actually causes you to lose ground?
This state is not unusual. In fact, New Jersey has a higher cost of living and a lower earning threshold for social services. So does Pennsylvania. In Arkansas, the Medicaid limit is $114 per month!
How does this help get people out of poverty? If you can’t drive to an interview, if you can’t afford presentable clothes, it doesn’t matter what your skill set is. You’re going to wind up in a job like eviscerating chickens for $12 per hour. Or security for $10 per hour. Or a minimum wage job doing manual labor. And the inevitable medical expenses become long-term debt, putting you further in the hole.
Yes, unemployment is low. But the majority of jobs where I live won’t support a family. And if you lose the one you have… well, welcome to the world of perpetual need.