While the current US welfare system is a bureaucratic mess and replacing it with an hourly wage subsidy would probably help, fraud would be a problem. The federal Government is very bad at finding and prosecuting fraud (I have seen estimates that as high as 30% of medicare spending is fraud). For one thing the Federal Government does not have enough people on the ground to find fraud. Policing fraud requiters people going undercover and doing stings. So I wonder if an hourly wage subsidy could be done at the state or local level. If done on a local level it might attract low skill workers into the area offering the wage subsidy and that would be bad but it would also attract low wage employers into the area and that would be good. It might net out positive and might be a more efficient way to attract business into that the tax holidays land deals that are used today.
It would require some changes in federal law to allow the states and localities to produce an hourly wage subsidy.
Still the current system is so expensive and ineffective I think that it would be worth a try.
*Means tested welfare that includes AFDC, food stamps, subsidized housing etc.
Means-tested welfare spending or aid to the poor consists of government programs that provide assistance deliberately and exclusively to poor and lower-income people. By contrast, nonwelfare programs provide benefits and services for the general population. For example, food stamps, public housing, Medicaid, and Temporary Assistance to Needy Families are meanstested aid programs that provide benefits only to poor and lower-income persons. On the other hand, Social Security, Medicare, police protection, and public education are not means-tested; they provide services and benefits to persons at all income levels. In the typical year, around 71 percent of means-tested spending comes from federal funds and 29 percent from state funds. Nearly all state means-tested welfare expenditures are matching contributions to federal welfare programs. Ignoring these matching state payments into the federal welfare system results in a serious underestimation of spending on behalf of the poor.
In FY 2008, 52 percent of total means-tested spending went to medical care for poor and lower income persons, and 37 percent was spent on cash, food, and housing aid. The remaining 11 percent was spent on social services, training, child development, targeted federal education aid, and community development for lower-income persons and communities. Roughly half of means-tested spending goes to disabled or elderly persons. The other half goes to lower-income families with children, most of which are headed by single parents.
Here is another calculation below of marginal tax rates on the poor:
With more than 70 overlapping means-tested programs serving different low-income populations, it is difficult to determine the average level of benefits received by low-income persons. One way of estimating average welfare benefits per recipient would be to divide total means-tested spending by the total number of poor persons in the United States. According to the Census Bureau, there were 39.8 million poor persons in the U.S. in 2008, the most recent year for which data are available. An additional 1.5 million persons lived in nursing homes. (These individuals, though mostly poor, are not included in the annual Census poverty and population survey.) Total means-tested spending in 2008 was $708 billion. If this sum is divided by 41.3 million poor persons (including residents in nursing homes), the result is $17,100 in means tested spending for each poor American. However, this simple calculation can be misleading because many persons with incomes above the official poverty levels also receive means-tested aid. Although programs vary, most means tested aid is targeted to persons with incomes below 200 percent of poverty. Thus, a more a accurate sense of average total welfare spending per recipient can be obtained, if total welfare aid is divided among all persons within this larger group. Dividing total means-tested aid by all persons with incomes below 200 percent of poverty results in average welfare spending of $7,700 per person, or around $30,000 for a family of four.
Links, links, links mostly on marginal tax rates for low income people: