Agenda - 12-04-1995 - Early - Special Work Session

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r programs received as much as a family of three with the head of household earning $8.08 per hour, almost twice the minimum wage. Therefore the authors conclude that work t- does not pay more than welfare. The Cato report,however, suffers from several flaws: • Benefits are incorrectly calculated. The Cato report assumes that each household receives the maximum benefit from these programs. But the level of benefits for one program often depends on the level received in another program. For example, the amount of food stamps is adjusted for Aid to Families with Dependent Children (AFDC) payments. AFDC is the primary Federal cash assistance program. The North Carolina family would receive $540 lei in food stamps than Cato projects. • Medicaid benefits are treated as cash. The Cato report treats Medicaid benefits like cash assistance. The US General Accounting Office (GAO) recently stated that such treatment of Medicaid is controversial.2 The controversy arises because Medicaid is paid to providers of medical services, so recipients cannot use the benefits for anything but medical care. The Cato report also uses the amount spent per beneficiary, rather than the more comparable amount of a private insurance policy. A September 1994 report by Michael Walden, an economist at North Carolina State, uses a proxy for Medicaid over$600 lei than the Cato study.3 • . Not All Recipients Benefit from these Programs. While all families receiving AFDC are eligible for Medicaid and most AFDC recipients receive food stamps, less than one out of every four AFDC recipients receive a housing subsidy. The Cato report fails to make clear that the family they describe is not typical. • Working Poor Families Benefit from Some Programs. The Cato report acknowledges that the Federal Earned Income Tax Credit (EITC) helps low-income workers. But the analysis does not account for programs such as food stamps provide assistance to the working poor as well. So How Does a Working Poor Family Really Compare to an AFDC Recipient? Our analysis will compare two families consisting of a single adult supporting two children. One family (Family A) will have no earned income, while the other family (Family B) will have one worker earning $5.25 an hour and working full-time. A description of the methodology is included in the Appendix. Family A receives $272 each month, or $3264 each year in AFDC. Family A is eligible for $250 each month for food stamps, or $3000 each year. We assume Family A receives Medicaid with a value of $3312 each year (the Walden estimate), when compared to market value. Family B receives $10,920 in gross income from earnings. Family B is also eligible for $113 each month in food stamps, or $1356 each year. If we assume that the children are under the age of nine, then they would be covered by Medicaid as well.