Big cities have the most generous welfare systems. In Cambridge, Massachusetts, for example, it may be possible to get free housing in an apartment whose market value is $60,000 per year or more. People with low income can also live in city-owned apartments in otherwise very expensive Manhattan neighborhoods (nytimes). The luckiest official poor can even live in brand new buildings for the rich (nytimes).
Big cities offer a lot of opportunities for jobs that leave no official trace. Two-career couples hire nannies and pay them in cash, for example. People offering services that are illegal are also paid in cash.
The Redistribution Recession looks at the extent to which Americans retired to their sofas when offered more generous welfare starting in 2009. What if the switch is instead to working in the cash economy, thus collecting both wage income and welfare?
Readers: (1) have you seen an uptick in people wanting to get paid in cash in order to preserve or obtain welfare benefits? (2) do government agencies that hand out free housing, free food, free health insurance, free heating oil, free mobile phones, etc. have any realistic way of figuring out which recipients are actually comfortably employed in the cash economy?
- “The Work versus Welfare Trade-Off” (shows that welfare in Massachusetts was worth $42,515 per year after tax in 2013, which works out to a total of about $80,000 per year in total after-tax spending power for a nanny making $17/hour in cash)
- “Just how many government workers can a poor American support?”
If a life of govt sponsored leisure is your cup of tea, why bother living in the US with meager month-to-month welfare benefits supplemented by working for under-the-table cash? Simply hop on a plane over here to the UK, assert refugee status, then claim a “permanent disability” to get a lifetime of £50k/yr benefits + a flat in London! 24% of Asian/African immigrants were doing it in 2009 (undoubtedly more today), so why not you too? Hurry up before we run out of other people’s money!
http://bit.ly/1hjVQAl
http://dailym.ai/1O0GdIo
Phil should definitely not look at the WaPo article about the family making $500,000 and living in public housing.
I think more often people want to get paid in cash to avoid income tax.
I don’t think there’s been any uptick because for the most part welfare recipients have always worked off the books to supplement their benefits. The problem (from their POV) is that most welfare benefits are non-cash and can’t be used to purchase stuff that they really want such as flat screen TVs, nice clothes and sneakers, alcohol, etc. so it’s necessary to work on the side to obtain cash income.
Philip,
I’m curious about your thoughts on a basic income or a “negative income tax” as described by Milton Friedman. Would you find that more palatable? Get rid of all of the bureaucracy surrounding welfare, get rid of system gaming… Just give everyone 20k let year and say “go nuts.”
James: I’ve written a lot about the negative income tax, e.g., in the comments to
https://philip.greenspun.com/blog/2014/12/12/revisiting-the-21st-century-draft-horse-posting/
I do think that Americans are too devoted to fraud for it to work as Friedman conceived it, e.g., with an expansion of the Earned Income Tax Credit (you earn less, you get more). The U.S. is not Singapore, after all. So probably your idea is a better one: give everyone, regardless of income, a monthly check for $2000. Then we could get rid of every other welfare program, including “welfare for health care industry” (Obamacare). A two-adult household with $48,000/year in tax-free income can afford nearly everything (except household workers) that an upper-middle-class family of the 1950s would have enjoyed.