The reality of welfare

Love this from Derek Thompson, “Busting the Myth of ‘Welfare Makes People Lazy’” (Somebody tell Paul Ryan)

“Welfare makes people lazy.” The notion is buried so deep within mainstream political thought that it can often be stated without evidence… Even today, it is an intellectual pillar of conservative economic theory, which recommends slashing programs like Medicaid and cash assistance, partly out of a fear that self-reliance atrophies in the face of government assistance.

Many economists have for decades argued that this orthodoxy is simply wrong—that wisely designed anti-poverty programs, like the Earned Income Tax Credit, actually increase labor participation. [emphases mine] And now, across the world, a fleet of studies are converging on the consensus that even radical welfare programs—including basic-income programs and what are called conditional cash transfers—don’t make people any less productive.

Most notably, a 2015 meta-study of cash programs in poor countries found “no systematic evidence that cash transfer programs discourage work” in seven different countries: Mexico, Nicaragua, Honduras, the Philippines, Indonesia, or Morocco. Other studies of cash-grant experiments in Uganda and Nigeria have found that such programs can increase working hours and earnings, particularly when the beneficiaries are required to attend classes that teach specific trades or general business skills.

Welfare isn’t just a moral imperative to raise the living standards of the poor. It’s also a critical investment in the health and future careers of low-income kids.

The great news, is that since Republicans are all about following empirical evidence than what they just know (e.g., climate change) we can expect this to make a real difference in how they approach policy ;-).  Okay, not so much, but Democrats need to be a lot more zealous in countering this line from Republicans and arguing the importance of that last point.


About Steve Greene
Professor of Political Science at NC State

One Response to The reality of welfare

  1. Jim Rose says:

    My understanding of the literature from the family income tax credits is they have no net effect on labour supply. The high marginal tax rates, high abatement rates, discourage labour supply by 2nd earners. On the other hand, some supply more labour, a few hours more per week to qualify for the payment. That is the experience in New Zealand.

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