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Welfare Recipients Who Don't Work

Evelyn Bender reports on a speech by Jack Suyderhoud, Richard Pollack and Tom Loudat, professors at the School of Business Administration, UH, before the Hawaii Economic Association on April 30. The title of the speech was "Why Some Welfare Recipients Do Not Work".

With the aid of tables, graphs and computer data, the men found that there is a "poverty wall" that keeps welfare recipients working short for short hours and changing jobs often. This poverty wall can be described as the number of hours a recipient works a week that will actually cause him to lose more than he earns because taxes are deducted from earnings and benefits are decreased.

From an economic stand point, it makes no sense for the recipient to work past that point.

This poverty wall is different depending on such things as the welfare recipient's family size and the dollars he earns per hour. The professors determined that there are many cases where the combined penalty or more taxes, and lower benefits exceeds 40% of earnings. Interestingly it was this 40% number that was used by supply side economists arguing for over federal taxes at the approximate area where the incentive to earn more begins to dissipate.

They felt that the newly-adopted state tax law could bring some relief and the changes in federal welfare and tax policies might bring more. They did not however feel that their findings would lead them to propose any quick fix cure. They warned that "quick fixes" can be deceptive. A "fix" here can create a new problem elsewhere. The real world has a lot more variables than can be fed into a computer.

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