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Commentary By Reade Ben

Economics Newsletter: Expanding Welfare Drives Job Growth

Economics Employment

America’s unemployment rate is 3.7%. According to The Wall Street Journal, an expanding welfare state is driving job growth. Jobs in the government, social assistance, and healthcare sector accounted for 56% of 2.8 million new net jobs in 2023. As the graph below reflects, this type of job creation is strong in progressive states, particularly New York, Michigan, and Illinois. But why?

Three major issues are driving welfare spending and subsequent job creation: migration, homelessness, and Medicaid. New York City, for example, has spent more than $2 billion dollars on its asylum seekers.

Spending does not equal solving. Cities such as New York, Los Angeles, and Chicago have made little progress in addressing their various crises. While “free” housing, healthcare, and sustenance should be temporary fixes, they are used as costly, permanent solutions. Job training and treatment for drug addiction appear scarce. Contextually, perpetuating patchwork solutions makes sense. Actual problem solving would decrease demand for the welfare state and the jobs it sustains.

Subsequently, America’s “hot” labor market should be discussed with caution. In some states, growth in the “welfare sector” masked job losses in productivity boosting sectors (such as manufacturing and technology). Quality over quantity is critical when assessing employment.

Sources: Allysia Finley, The Wall Street Journal; Kelly Mena, Spectrum News NY1

Reade Ben is a policy analyst at the Manhattan Institute.

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