I don't think you understand how welfare works in the US. There are many people trying to game the system. I know firsthand just from my roommate and his family who are on welfare. Also people will choose not to get married in circumstances where the can collect more money if they both classify themselves as single parents. Also yes that is how the economy works, if you pay laborers more then either profit gets cut into (which good luck convincing business execs/shareholders to accept that) or the price of the product go up. Those who can produce the product for cheaper will undercut the market thus putting those who charge higher prices for similar products to go out of business.
Edit: Some welfare packages easily go over 40K which is a huge amount a lot more than people can make at other jobs and easy to live on. That's about equivalent to $21/hr untaxed.