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California’s Welfare Benefits: Boom or Bust?

California outspends every other state on public welfare spending. Source: UWire
California outspends every other state on public welfare spending. Source: UWire

There has been much discussion about immigrants in the United States from everywhere around the world. Yet, why is it that California seems to attract the most immigrants of any state? Indeed, while the state is only 12% of the nation’s population, it is home to 33% of welfare residents. According to a report published by the National Bureau of Economic Research (NBER) on January 26, 2015, there is a correlation between generous welfare benefits and an increase in immigration.

In total, California outspends every other state in public welfare spending – in 2014, it spent $22.4 billion. In contrast, the next closest state, New York, spent $11.9 billion. That being said, does this make California a magnet for immigrants? Not necessarily. It is more of an anchor – a reason why residents stay for long periods of time in the state. However, to deny that there is no magnet would be incorrect. According to George J. Borjas, the Robert W. Scrivner Professor of Economics and Social Policy at the Harvard Kennedy School and the author of the aforementioned report, the reason as to why people decide to relocate is due to “income-maximizing behavior.” Immigrants have already accepted that there are certain fixed costs that are inevitable because of migration, so it is natural that they will flock towards the places with the highest benefits. Empirical evidence suggests that it is because of these differences that there are an increasingly disproportionate number of immigrants among states. While there is the possibility of alternative explanations for this phenomenon, the conclusion that Borjas draws using the wealth-maximization hypothesis is one such testable method.

However, upon closer examination, on a per-capita basis, California’s seemingly generous benefits pale in data comparison to other states. For example, it spends approximately $179 for every resident, behind $233 in Hawaii and $256 in New York. Furthermore, approximately 8.9% of California residents live in poverty, the highest of any state. Despite this, the number of people immigrating to California increases exponentially each year.

What then, differentiates California from other states? One factor is its policy towards children. According to former State Senate President Pro Tempore Darrell Steinberg, the state will not “push out” children regardless of whether or not the parents are able to meet requisites for welfare. While other states cease aid to children when parents become ineligible, California maintains a safety net that ensures that children will be cared for in any circumstance.

Wealth inequality has imminently moved to the forefront of the political discourse, and is expected to be an increasingly prominent issue as the gap between the rich and the poor widens. California and other states seem to advocate for the idea that spending more money on welfare benefits and programs would ameliorate poverty. One such program is CalWORKS, which gives money to needy families. To be eligible, one must “be a resident of the state of California, either pregnant or responsible for a child under 19 years of age, a U.S. national, citizen, legal alien, or permanent resident, have low or very low income, and be either under-employed,working for very low wages, unemployed or about to become unemployed.” Like other programs, however, the benefit is reduced as a recipient’s earning rise. This is the poverty trap – people are disincentivized from getting a job because these programs are only eligible to those who are poor and unemployed. As a result, the poor will almost always stay poor. This is hardly surprising – to stay in the program, participants “cannot exceed a property limit of $2,000 (cash on hand, savings, stocks, etc.) or $3,250 if someone in the Assistance Unit is over the sixty years old.”

However, even if spending money on welfare programs is not a sure-fire method of alleviating poverty, it is indispensable to immigrants and those who live on next to nothing. In that sense, it is intuitive that California is not only an anchor for immigrants and welfare beneficiaries, but also comparatively better than other states, all things considered. Indeed, it is due to California’s unwavering commitment to welfare programs for both children and adults, that allows it to assert leadership in the United States regarding welfare policy.