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-.Y <br /> -a <br /> BTC REPORTS <br /> T November 1995 • b' • <br /> DOES WELFARE REALLY PAY MORE THAN WORK IN NORTH <br /> CAROLINA? <br /> EXECUTIVE SUMMARY <br /> • Despite reports to the contrary,work does pay more than welfare in North <br /> r: Carolina. Recent studies have been released claiming that government benefits <br /> "pay" more than working at low-wage jobs. Such studies contain many flaws <br />" and tend to overstate benefits received by a typical poor family. <br /> • In North Carolina, the average family completely dependent on governmental <br />`. assistance receives about $4.60 an hour in "benefits", even when including <br /> Medicaid as a cash benefit. A family with one full-time worker earning$5.25 an <br /> 1 : hour receives about$6.60 an hour in income and benefits, primarily due to the <br /> Federal Earned Income Tax Credit (EITC). <br /> • Both the Federal and State governments have constructed tax policies and <br /> programs to assist low-income workers, but workers earning low wages still <br /> often remain in poverty and face a choice of either low quality or high cost child <br /> and health care. Reducing benefits does not help those working for a living. <br /> Introduction <br /> Both houses of the US Congress, Governor Hunt and both houses of the North Carolina <br /> General Assembly have proposals to dramatically change public assistance programs, or <br /> 1 "welfare", in our State. . Policymakers are concerned that the current welfare system <br /> s" <br />.�. P rovides questionable incentives for low-income people, especially incentives not to <br />€, work and incentives to bear children out of wedlock, even if the parent does not have the <br /> '. means to support these children with his or her own resources. This issue of BTC Reports <br /> will compare the benefit levels of households which do not work at all and the income <br /> and benefit levels of households with workers. <br /> { Hasn't This Issue Been Studied Before? <br /> Other studies of this type have been conducted at the national level, with some gaps in <br /> knowledge about North Carolina. The following analysis will be specific to North <br /> Carolina families, including recent changes in North Carolina tax policy. One of the <br /> most publicized studies of this type is the Cato Institute's September 1995 report The <br /> Work vs. Welfare Trade-Off: An Analvsis of the Total Level of Welfare Benefits by <br /> State, hereinafter referred to as the Cato report.' The Cato report attempted to compare <br /> the benefit levels for seven major Federal programs for a family of three with no earnings <br /> from work with a pretax income equivalent for a family of three with one worker. Cato <br /> concluded that, in North Carolina, a family of three receiving benefits from these <br /> NORTH • BUDGET <br /> P • c <br /> , . <br />