Welfare in Puerto Rico
Public welfare in Puerto Rico is a system of nutrition assistance, public health, education, and subsidized public housing, among others, provided to the impoverished population of the island. It is mainly funded by United States Federal assistance and by local government funds.
Puerto Rico received more than $6.5 billion annually in federal aid from the United States. A substantial portion of this amount is earmarked for public welfare, including funding educational programs (such as Head Start), subsidized housing programs (such as (Section 8 and public housing projects), and a food stamp system called the Nutrition Assistance for Puerto Rico program.
The following programs are provided by the U.S. Federal government in Puerto Rico:
- Head Start Program
- Nutrition Assistance for Puerto Rico (Programa de Asistencia Nutricional)
Inapplicable federal programs
As important as the federal aid programs that apply to needy Puerto Ricans are the federal programs that do not apply or only apply partially to otherwise-qualified residents of Puerto Rico.
The United States Congress, for budgetary reasons, has capped Puerto Rico's participation in the federal Medicaid program. The current annual spending cap of about $230 million is about 15% of the $1.6 billion that Puerto Rico would receive if equal treatment applied.
While the Medicaid cap could be justified by the fact that Medicaid is financed out of the U.S. Treasury and the federal income tax is generally inapplicable to taxpayers residing in Puerto Rico, the less-than-equal treatment in Medicare is especially unfair since Puerto Rico workers are subject to the full federal payroll tax that finances Medicare and Social Security. Health services providers are shortchanged to the tune of approximately $400 million annually due to reimbursement limits Congress has placed in Puerto Rico under Medicare.
Since the Nixon administration, perhaps the most effective anti-poverty federal program is not a program at all but the reimbursible earned income tax credit (EITC) available to the working poor. The credit currently amounts to a maximum of $4,536 annually to low-income workers. The EITC effectively rewards workers for seeking and keeping their less-than-$36,000 per year jobs and filing a federal tax return, a strong incentive for the work ethic. The EITC does not apply to residents of Puerto Rico, probably depriving close to half of the islands' workforce of a powerful inducement to seek and retain a job.
The 2006 Brookings Institution/Center for the New Economy report on Puerto Rico's economy suggested that federal-minimum-wage earning workers in Puerto Rico only receive net monthly income of $50 for their efforts compared to the unemployed who seek full welfare benefits. The federal EITC would multiply the net effect of working three- to six-fold if applied to Puerto Rico.
Another major federal assistance program generally inapplicable to otherwise-qualified residents of Puerto Rico is the Supplemental Security Income program, which provides payments approaching $600 per month to recipients, most of which are aged, disabled or blind. While many aliens legally residing in the United States, as well as non-US citizens residing in the Northern Marianas Islands qualify, American citizens residing in Puerto Rico do not.
The last major federal program not applicable in Puerto Rico is the Food Stamp program. Replaced in 1982 by the tailor-made federal Nutrition Assistance for Puerto Rico, eligible Puerto Ricans lose $500 million annually in federal benefits.
In sum, unequal treatment in Medicaid, Medicare, EITC, SSI and Food Stamps is conservatively estimated at costing needy Puerto Ricans approximately $3.4 billion annually, or almost $900 per capita.
Puerto Rico $7.25 Employers covered by the Federal Fair Labor Standards Act (FLSA) are subject only to the federal minimum wage and all applicable regulations. Employers not covered by the FLSA will be subject to a minimum wage that is at least 70 percent of the federal minimum wage or the applicable mandatory decree rate, whichever is higher. The Secretary of Labor and Human Resources may authorize a rate based on a lower percentage for any employer who can show that implementation of the 70 percent rate would substantially curtail employment in that business. Puerto Rico also has minimum wage rates that vary according to the industry. These rates range from a minimum of $5.08 to $7.25 per hour.
- Puerto Rico Government homepage
- GovBenefits.gov Benefits Report on Nutrition Assistance for Puerto Rico.
- Social Security Administration webpage with information on SSI
- The Social Security Act
- Commonwealth of Puerto Rico 2012 Comprehensive Annual Financial Report for the fiscal year ended on June 30, 2012; pg. 41; Statement of Revenues, Expenditures, and Changes in Fund Balances
- Congressional Budget Office report for Senate Finance Committee, on "the Effects of Increasing the Federal Minimum Wage Versus Expanding the Earned Income Tax Credit" (January 9, 2007)
- The Earned Income Tax Credit at Age 30: What We Know, Steve Holt, the Brookings Institution