Low-Skill Households Exact a High Cost

Rebecca Hagelin
Posted: Apr 06, 2007 12:01 AM
Low-Skill Households Exact a High Cost

Brace yourself for some old-fashioned class warfare in the months ahead. With a full roster of liberals running for president in 2008, some sharp contrasts will be drawn between the "haves" and the "have-nots" -- red-hot rhetoric designed more to anger than to educate.

Some politicians thrive on such talk. They insist that in America, the rich exploit the poor, who must scrounge for the lowly crumbs that fall from the table of life's banquet. A new paper from The Heritage Foundations Robert Rector eschews the emotion of the stump speeches and takes a hard look at the facts. Rector actually does the math, and the numbers reveal that middle class and wealthy Americans actually pay many of the bills for other folks.

In careful detail, Rector breaks down the amount of money that government (federal, state and local) spends per household: $32,706. Some of this is what Rector calls "direct benefits," such as Social Security and Medicare. Some of it is "means-tested benefits," including programs more typically viewed as "welfare" -- food stamps, public housing, etc. Then we have public schools, police and fire protection, roads -- the list goes on. I won't reproduce it all here, but suffice it to say that Rector has itemized the bill quite thoroughly.

The bottom line: If you add up every category of government expenditure, you find that what Rector calls "low-skill households" -- those headed by persons without a high-school diploma -- get $32,138 in annual benefits. And what do they pay? The total federal, state and local taxes paid by low-skill households in 2004 (the most recent year for which the figures are available) came to $9,689.

To really put that in perspective, consider that the average income of low-skill households is $20,564 – which, if you do the numbers, means those households are getting roughly $1.50 in benefits and services for every $1 they earn in income.

And we're supposed to believe politicians who want to demonize the middle class and wealthy?

But wait, some people may say, not every low-skill household is going to extract $32,138 annually. A household receiving Social Security benefits, for example, probably won't also be using the public schools, at least not at the same time. True enough. As Rector readily states, the $32,138 figure is a composite average. Some will cost less. But it's also true that some will cost more. Moreover, it is an accurate portrayal of low-skill households as a group. And as a group, they plainly cost much more in public benefits and services than they pay in taxes.

And if Congress and the president enact reforms that lead to increased low-skill immigration, we can expect the cost to climb still further. Only 9 percent of native-born adults lack a high-school degree, but among legal immigrants the number is 25 percent. With illegal immigrants, it's roughly 50 percent, according to Rector. Recent immigration "reform" proposals would add millions of low-skill immigrants to our society, at enormous cost to the U.S. taxpayer.

"In order to make the average low-skill household fiscally neutral -- to make taxes paid equal immediate benefits received and the appropriate share of interest on government debt -- it would be necessary to eliminate Social Security, Medicare, all 60 means-tested aid programs and cut the cost of public edu¬cation in half," Rector says. "It seems certain that, on average, low-skill households will generate deep fiscal deficits for the fore¬seeable future."

The point of all this is not to argue that low-skill households enjoy a life of ease, or that they deserve no public help at all. But Rector's analysis does graft some much-needed perspective on the hoary charges that the rich shaft the poor at every opportunity -- that we, as a society, don't do enough to alleviate the suffering of those mired in poverty.

In fact, we do quite a bit -- something our presidential aspirants should keep in mind. "Before government undertakes to transfer even more economic resources to these households," Rector says, "it should have a very clear account of the magnitude of the transfers that already occur." Would-be Robin Hoods, take note.