Welfare Helps to Depress Giving by the Poor

When the outlaw Willie Sutton was asked why he robbed banks, he was said to have replied: “Because that’s where the money is.” In the world of philanthropy research, we have a bit of the same mentality. We focus on the wealthy because we know that a relatively few well-off people are the source of most charitable giving.

But if we are concerned about civic participation among the poor, we should pay attention to patterns in charitable behavior by those in that group — and especially to the way in which welfare payments affect their giving habits. My research shows that income from welfare depresses charitable giving by the poor, while income from wages increases it.

An analysis of the 1999 U.S. Consumer Expenditure Survey shows that, holding all appropriate demographics constant (such as race, education, wealth, and family size), a 10-percent increase in wages predicts an 8-percent increase in giving. However, a 10-percent increase in welfare income stimulates a 1.4 precent decline in giving.

A plausible explanation might be that welfare recipients, perhaps because of their physical isolation, tend to donate informally, to family members and friends, instead of to charities. The data belie this idea, however. Welfare receipt has no statistically significant effect on giving to family and friends. In addition, higher income from wages is associated with greater informal giving as well as higher formal giving.

Another potential explanation is that welfare recipients give more in a nonfinancial way, such as babysitting and helping their neighbors. That question remains for future research.

These findings have implications for public policy. This year, Congress must extend the welfare-overhaul bill that it passed in 1996. By most reasonable estimates, changes in the welfare system, especially in the good economy of the late 1990s, drastically reduced welfare caseloads by creating incentives and ways for recipients to find jobs. Some even say that the number of children on welfare is half of what it was in 1995.

Few researchers have focused on the effects of welfare and changes in the welfare system on private giving, beyond observing that states with higher welfare benefits tend to have lower general giving rates.

Scholars have theorized that a “culture of welfare” might well affect charity, independently of poverty itself, however. William Julius Wilson, a professor of social policy at Harvard University, for example, argues that antisocial phenomena stem from the social isolation inherent in underclass life. Many authors believe that traditional welfare traps recipients in this life. Thus, welfare dependency may make certain prosocial behaviors, such as charitable giving, difficult or impossible. My findings are consistent with this theory.

Aside from the direct effects of welfare payments on charity by the poor, the data also show that the rules governing welfare can affect giving. A good example can be found in the restrictions on the savings and assets of welfare recipients. For the population as a whole, income from wages has a greater impact on giving than do savings and assets. But when the wealthiest one-fourth of the population are removed from consideration, savings and assets are more influential than wages.

For example, a $100 increase in wealth leads to less than 50 cents in extra giving among the population as a whole, but to more than $6 in additional giving among the bottom three-quarters of the population. Because that group contains practically all those who are most likely to collect welfare, the findings might make an argument for policies designed to encourage savings and home ownership among the nonworking poor. Such policies are increasingly possible under changes in the welfare system, which allows the states to set welfare recipients’ maximum level of assets.

Charities should not necessarily find that a decline in giving stemming from welfare payments is cause for alarm. Considering the relatively low giving levels by the nonworking poor, the data suggest that an average year’s increase in total welfare spending at all levels of government would depress charitable giving by only about one-tenth of 1 percent. Those changes would be eclipsed by increases in giving proceeding from growing income and wealth across the population.

That welfare is associated with lower giving is not a compelling argument against welfare per se. It simply illustrates a dimension of the costs and benefits of welfare policies not generally considered in the past.

It seems reasonable to believe that policies that lower welfare caseloads may produce an unintended secondary benefit in terms of charitable giving. In seeking to decrease dependency on the state, we may be enhancing voluntary charitable behavior, and thus improving social capital among the poor.

If it is true, as Robert Putnam, a professor of public policy at Harvard University, asserts, that “every year over the last decade or two, millions more have withdrawn from the affairs of their communities,” past welfare programs might be implicated. And the welfare legislation now up for Congressional renewal might be helping to create a solution.

Arthur C. Brooks is an associate professor of public administration at the Maxwell School of Syracuse University.