Household Income Sources: Who Gets Welfare?

Conservative politicians and pundits often imply that massive parts of the country are dependent on government assistance (e.g., Mitt Romney’s famous 47% claim).  Many imply that much of this assistance goes to hoardes of people live lives of luxuries while doing little to no work.  These depictions are often racialized to imply that non-whites are the chief recipients of assistance.  It is often implied that this money is taken by young drug-users, or women who cannot or do not want to control their fertility.

Racialized depiction of social assistance recipients, from The Gender Press

How accurate are these depictions?  We can probe the question by examining data from the Survey of Consumer Finances.

Household Income Sources

When we think about where people get money, we generally think about wages, payments in exchange for labor. Wages are the most prevalent form of income, but it is not the only way that people earn money. People also earn money through financial investments, business income, government payments, payments from personal relations, royalties, rents, and a range of other sources. People do not just differ in terms of how much income they earn, but also in the composition of their income portfolio.

Income Type % Receiving Any % Receiving >$10k
Any Income >99% 96%
Wages 72% 66%
Social Security & Pensions 36% 30%
Interest & Dividends 22% 4%
Business / Farm 16% 10%
Welfare1 14% 1%
Capital Gains 6% 2%
Alimony & Child Support 5% 1%

The table shows six prominent forms of household income. Most households are sustained by wages, but over one-quarter of households earn no wages. Many of these households earn some, but not much, in wages – only two-thirds earn more than $10,000 in wages.

The second most prevalent form of income is Social Security and retirement pension payments. Most of this is Social Security, which is received by 30% of the country’s households. Keep in mind, this does not mean that 30% of households are entirely sustained by Social Security, but rather that someone in 30% of households receives a check from the program. About 23% of households get more than $10 thousand from this program.

Social Security represents the biggest source of government payments to households by far. By contrast, only 14% of households receive some form of welfare payment, including food stamps, TNAF or some other welfare. Usually, this is a meager source of inceom. Only 1% of households get more than $10 thousand in welfare. When people are bemoaning the fact that many households are receiving large payments from the government, they are referring to programs for the elderly, not programs for the poor.

Aside from wages and government payments, most other forms of income are not very common. Just over one-fifth receive money from interest or dividends, but most of this involves very small interest income from deposit accounts. Only 4% of households receive more than $10 thousand from this form of income. Very few households received much in capital gains either. About 10% of households receive more than $10,000 from a business or farm.

The Takeaway.  The vast majority of government assistance recipients are elderly people.  Comparatively few households receive “welfare” that is directed towards indigent members of the working age population.  Moreover, the latter form of welfare is much less than that the social assistance directed towards elderly people.

Market versus Government-Sustained Income

About 89% of households receive any income kind of income from wages, business/farm income, interest, dividends, and private pensions. Just of ten percent of society’s households earns no money through markets. In contrast, 39% receive money from government payments.

Which demographics more or less often sustained by government payments, as opposed to markets? Older households almost universally receive government payments, though most households receive market earnings throughout their life cycle.

Age Group % Receiving Market Earnings % Receiving Government Payments
< 35 94% 21%
35 – 44 95% 18%
45 – 54 93% 18%
55 – 64 88% 33%
65 – 74 81% 91%
Age 75+ 76% 99%

Education also differentiates earnings compositions. College graduates overwhelmingly receive market earnings, but one-quarter still receive government payments. A majority of high school dropouts receive government payments.

Education % Receiving Market Earnings % Receiving Government Payments
< High School 72% 61%
High School 86% 50%
Some College 91% 38%
College 95% 25%

Race and enthnicity also distinguish the composition of household earnings. Hispanics and “Others” are least likely to receive government payments.

Race/Ethnicity % Receiving Market Earnings % Receiving Government Payments
White 91% 39%
Black 81% 50%
Hispanic 88% 32%
Other 86% 27%

The Takeaway.  A considerable proportion of virtually all racial, ethnic, and educational groups receive government assistance.  Among different age groups, younger people receive considerably less assistance than the elderly.

Unfair Characterizations

The imagery that the working population is being taxed heavily to support lazy young minorities is inaccurate and unfair.  Government assistance mainly goes to supporting the elderly, while payments to poorer members of the working age population are less common and much smaller.  Moreover, a wide variety of demographic groups receive social assistance.

  1. Includes SNAP, TANF, and other welfare payments