Friday, January 20, 2012

Families receiving welfare - NZ versus US

Attempting to follow the progress of the US welfare reforms can be difficult simply because Americans mean different things when they use the terms 'government benefits' and 'welfare'. It is correct to believe that there is far less cash welfare to families than before the 1990s reforms. But headlines like this, "Nearly half of US Households receive government benefits" appear to contradict that.

Not included in 'welfare' are benefits like unemployment (funded through payroll taxes), supplemental social security (funded through social security taxes) food stamps, housing subsidies and Medicaid (health provision for the poorest).

The last sentence of the following NCPA summary is the one that interests me most:

Nearly Half of U.S. Households Receive Government Benefits

The pool of Americans relying on government benefits rose to record highs last year as an increasing share of families tapped aid in a weak economy, says the Wall Street Journal.
Expanding government programs combined with the worst downturn since the Great Depression have led to an explosion in the share of Americans relying on outside help.
  • Some 48.6 percent of the population lived in a household receiving some type of government benefit in the second quarter of 2010, up a notch from 48.5 percent in the first quarter, according to Census data.
  • To combat prolonged economic weakness, Congress extended unemployment benefits to a record 99 weeks (up from the normal 26-weeks offered in most states).
  • The food stamp program was tweaked so it was more generous.
  • Americans flocked to Social Security disability, a last bastion of support for some of the long-term unemployed.
The largest chunk of benefits flowing to families came from means-tested programs.
  • In the second quarter, 34.4 percent lived in a household benefiting from food stamps, subsidized housing or Medicaid, among others.
  • That number is up from 32.8 percent a year ago (when a total of 46.8 percent of the population lived in a home receiving benefits).
  • The biggest increases came from an uptick in those turning to food stamps and Medicaid.
  • Nearly 15 percent of Americans lived in a household receiving food stamps in mid-2010; almost 26 percent had access to Medicaid.
Only a small share of the population accessed cash welfare benefits as the 1990s overhaul made it more onerous in many cases to receive and maintain those payments.  Some 1.9 percent of the population lived in a household that received welfare in the second quarter of 2010.

Latest figures from the US Government Accountability Office show the following:

Only 5 percent of the families receiving cash assistance are two parent so the figures relate mainly to single parent. 1.9 million families just happens to coincide with around 1.9 percent of the US population (x 1.9 million families by 3/ 308 million total population). If we compared NZ DPB figures from June 2010 using the same formula the result would be 7.6 percent of the total population (x 112,000 families by 3/ 4.4 million total population) . Much higher despite our unemployment rate being considerably lower - 6.6 percent (NZ) versus 8.5 percent (USA).

(My calculations do not take into account a number of details and are non-specific but they serve the purpose of making a broad comparison between the two countries.)

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