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The Welfare-Industrial Complex Is Booming

What’s driving American job growth? In progressive states, it’s government, social assistance and healthcare.

By Allysia Finley, WSJ

Dec. 31, 2023 11:23 am ET

Newly arrived migrants line up outside of the St. Brigid School hoping to find temporary housing in New York City, Dec. 6. PHOTO: ANDREA RENAULT/ZUMA PRESS

Drill into the nation’s 3.7% unemployment rate, and you’ll find a growing welfare-industrial complex beneath the seemingly strong labor market. Government, social assistance and healthcare account for 56% of the 2.8 million net new jobs over the past year, and for nearly all gains in blue states such as New York and Illinois.

The tens of thousands of migrants pouring into big cities need to be tended to. So do the hundreds of thousands of drug-addled and mentally ill homeless living on the streets. Progressive government doesn’t do anything on the cheap. America’s welfare state has thus become a proverbial Big Dig, and it keeps getting bigger.

New York City is spending $394 a day—or $143,810 a year—to house and feed each migrant, many in formerly posh hotels. Mayor Eric Adams grouses about the flood of migrants, but what does he expect when the city makes itself a welfare magnet?

Meantime, the homeless population continues to swell, even as government shovels more money into housing subsidies—nearly $43 billion in the Democrats’ March 2021 Covid bill alone. The number of homeless shot up 85,389 between 2019 and 2023, with California and New York combined accounting for about half the increase, according to a recent federal government report.

A 2017 report from Orange County United Way, a nonprofit in Irvine, Calif., estimated that each chronically homeless person living on the streets and in emergency shelters costs the public $85,631 a year, largely owing to high healthcare expenses from repeat trips to the emergency room. The $837,000 Los Angeles is spending to build a single housing unit for the homeless almost appears frugal by comparison.

Democratic Los Angeles City Councilman Kevin de León accused leftists of bribing vagrants to reject the city’s offer of temporary shelter. The self-proclaimed homeless advocates denied paying bribes, claiming they were merely seeking to protect homeless people’s right to “self-determination.”

Such advocates—some supported by taxpayer dollars—have sued local governments to stop encampments from being cleared. During the Biden presidency, employment at “social advocacy organizations” has exploded. Every migrant, vagrant and endangered species apparently needs an advocate.

Public-choice theory assumes people are guided by their self-interest. Progressive government and the groups that feed on it have a vested interest in not solving pressing social problems. Treating mental illness and drug addiction, and getting the homeless into productive jobs, would mean fewer jobs for the welfare-industrial complex.

It’s amusing, then, to hear Democratic leaders like Mr. Adams and Chicago Mayor Brandon Johnson scapegoat migrants for their cities’ vagrancy and budget deficits. How do they explain Texas? The Lone Star State’s foreign-born population has increased by far more than New York’s over the past few years, yet it has 75% fewer homeless people than the Empire State.

In October the Texas comptroller projected an $18.3 billion budget surplus. The state doesn’t have a budget deficit or a homeless problem because it doesn’t spend lavishly on welfare or tolerate public disorder. Migrants who arrive and stay in Texas can get jobs off the books that can support them, unlike in New York and Illinois, where there is less demand for labor.

Migrants aside, the biggest money pit for Democrat-governed states is Medicaid. New York spends about 2.5 times as much per capita on Medicaid as Texas. The Empire State’s spending on the program in the past year alone increased by $13 billion—roughly what Mr. Adams projects migrants will cost his city over three years.

More spending on Medicaid, migrants and the homeless means more jobs for the welfare-industrial complex. Government, social assistance and healthcare made up most, and in some cases more than all, of the net new jobs over the past year in California (61%), New Jersey (81%), Oregon (89%), Michigan (113%), Illinois (113%) and New York (121%).

The last three states lost jobs in several industries, including manufacturing and tech, but they were more than offset by gains in government, social assistance and healthcare. These sectors made up a much smaller share of new jobs in Texas (34%), South Carolina (37%), Indiana (39%), Florida (41%) and Georgia (48%).

President Biden won’t admit it, but he has Republican states to thank for the increase in productive jobs in private industry. The administration’s bet is that government spending on welfare and entitlements can continue to power the U.S. labor market even as job growth in manufacturing, tech, retail and other industries flags. But social make-work projects don’t improve American living standards.

Aside from two years of runaway inflation, one way to explain Americans’ malaise is that they sense most new jobs aren’t making them or most people they know better off. The main beneficiaries are workers in the welfare-industrial complex.

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