NC Budget and Tax Center

Don’t be misled by flawed Cato study purporting “welfare” pays better than work

According to a new report released by the conservative Cato Institute, the “welfare system provides such a high level of benefits that it acts as a disincentive for work.” This so-called hidden prosperity of the poor theory just doesn’t stand up to reality.

The report’s findings should not be seriously considered by any policymaker, or anyone else, because there are several major flaws in the analysis. The authors incorrectly assume that a “typical” family qualifies for and receives assistance from all seven of the most common safety-net programs while non-working families get none. There are two crucial blunders with this methodology.

First, the authors greatly exaggerate the public benefits that most people living in poverty actually receive. To bolster their case, the authors assume that the “typical welfare family”—which they define as a single mother with two children—receives each of the following services: Temporary Assistance for Needy Families (TANF), SNAP (formerly food stamps), WIC (a nutrition program for pregnant and postpartum women and young children), Medicaid, housing assistance, utilities assistance, and emergency food assistance. But this is simply not the case in North Carolina or anywhere else in the United States. The vast majority of poor people do not receive all the services they are eligible for, in part because there are not enough funds to allow that.

For example, the share of poor families in North Carolina that receive TANF benefits is very small: for every one hundred families in poverty, there are just 9 families receiving TANF benefits. Nationally, that figure jumps to only 27. Moreover, the majority who receive assistance do so for short periods of time in part-due to federal time limits that have been in place for more than 15 years. Nearly 73 percent of adults receiving TANF benefits in North Carolina have accumulated 24 months or less on their 60-month lifetime limit, according to the Department of Human Services.

Second, the authors grossly underestimate the assistance that families who work but earn low-incomes receive. They incorrectly assume that safety net benefits are available only to nonworking families. But again, this is not true. All of the benefits included in the analysis are available to working families, and these benefits go a long way in helping working families make ends meet. On this point, the Center on Budget and Policy Priorities writes the following four data points in their commentary in response to the Cato study:

  1. More than half of able-bodied adults in households with children receiving SNAP work while receiving assistance, and some 87 percent worked in the prior year or will work in the subsequent year.

  2. Cato assumes that jobless families that receive TANF also receive SNAP, but that working families do not.  In fact, just 16 percent of SNAP households with children received TANF in 2011.

  3. Similarly, CATO assumes that jobless families that received TANF also receive WIC, but that working families do not.  In fact, in 2010, just 8 percent of WIC participants received TANF.

  4. While only a small share of TANF recipients receives housing assistance — less than 16 percent, according to Cato’s own data — those who do receive it remain eligible if they get a job unless the job pays substantially more than most former welfare recipients earn.  Cato counts housing assistance for families that are not working but assumes that they lose this entire benefit if they find a job.

The Center on Budget and Policy Priorities also explains that the authors ignore large changes to the nation’s safety net in their analysis:

Policymakers have changed the safety net substantially over the past three decades, as we explained recently.  Contrary to Cato’s assertions, these programs now do much more to promote work and support low-income working families — and much less to help poor families in which parents are out of work (leading to rising numbers of very poor children).

In light of the acceleration of low-wage work over the last decade, these supports play a vital role in the daily lives of many low-income working families and can mean the difference between getting by and going homeless or hungry. When so much is at stake for so many adults and children, it is important that policymakers are informed with high-quality analysis and well-researched policy recommendations.  The Cato study just doesn’t live up to these standards and should be ignored.


  1. Emma

    August 29, 2013 at 10:56 am

    Cato should have zero credibility due to the fact that it began as the Charles Koch Foundation and has Tucker Carlson as a senior fellow. Anyone that considers the Cato, Heritage or Heartland Foundations as an authority on anything are being seriously deluded.

  2. James Protzman

    August 29, 2013 at 12:11 pm

    If facts mattered, none of the recent policies imposed on North Carolina would have ever made it through the legislative gauntlet. Sadly, facts don’t matter. Their minds are made up on the grounds of bigotry and prejudice.

  3. LayintheSmakDown

    August 29, 2013 at 1:41 pm

    Funny how we are “misled” by a conservative leaning group…..but all the progressive leaning groups present are the true facts that are untouched by bias. I guess you guys are like the pied piper of old…it is a similar situation when you look at the story and his purpose….nuff said.

  4. ML

    August 29, 2013 at 1:49 pm

    Hey genius, if you can’t see through the bias from both sides then you are part of the problem. It shouldn’t have to be pointed out to you when you’re on Cato, Civitas, the progressive pulse, righty mcrighties, or liberalmania…

  5. LayintheSmakDown

    August 29, 2013 at 3:30 pm

    Oh I can and do see the bias in both (and I appreciate your recongition of my intellectual superiority, it is truly flattering). It just needs to overtly be said right here since I doubt the general reader of this board would have the intellectual curiosity to maybe question the veracity of studies and surveys presented here as unbiased. My experience here shows that few make the same journey I do in reading multiple sources.

  6. ML

    August 29, 2013 at 3:34 pm

    I’m glad you are educating yourself and I hope you continue to have an open mind while considering different points of view.

  7. Alan aka Captain America

    August 29, 2013 at 3:40 pm

    LSD (Doogie), you are so funny, I always look forward to your postings. “Reading multiple sources”, that’s a classic, not quite as good as “The scientific law of the Ignorance of Liberalism”, that’s your best to date.

  8. david esmay

    August 29, 2013 at 4:23 pm

    LSD, there is nothing superior about you’re intellect, in fact conservatism is a maladaptive trait found in humans with simpleton belief systems.

  9. gregflynn

    August 29, 2013 at 5:17 pm

    When Fox say it is Fair and Balanced, that’s only one source, and it’s neither.

  10. Emma

    August 29, 2013 at 6:53 pm

    Layin, so you are saying that having read both sides you are going with the untrue facts and bias?

  11. david esmay

    August 29, 2013 at 8:23 pm

    LSD, with your level of intelligence, I’m sure reading is a journey.

  12. wncgirl

    August 30, 2013 at 8:14 am

    Turn the masses against each other and reap the benefits of chaos…. Republican patriotism
    take from the public by force to enrich your donors…. Republican economics.

  13. LayintheSmakDown

    August 31, 2013 at 4:32 pm

    There are no “lies” pointed out. Exaggeration is different….and all you have to do is look at any study touted as pristine by the NC Justice center or one of their co-horts like the policy watch to see the exact same tactic. It really boils down to what assumptions you feel are the most realistic. That being said, I will side with the “exaggerations” of a conservative group if it comes down to it since their exaggerations will likely be based on economic views that are significantly more sound (i.e. not socialist/communist, or quite as radically Kensyian).

    Now specifically with this referenced study, none of the exaggerations are too surprising. Basically what Tazra would have done with her ideal study then is to do exactly the opposite in estimating fewer benefits received per person and then likely estimate the benefits to working families to bolster her argument. It is a game that all these think tanks play…even your beloved policy crotch

  14. gregflynn

    September 2, 2013 at 9:37 am

    “policy crotch” – nice. That’s it, your intellectual challenge to the material posted here? You’ve been spiraling the drain in recent weeks LayintheSmak-Doug. Now you’ve hit a new low. That’s the kind of vulgar right-wing logic ignorance that motivates progressives to work harder to better the lives of all people.

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