The Value of Restrictive Welfare


I agree with much of what Paul Winfree writes in the Washington Times related to Ontario’s abandoned experiment with a universal basic income, but he misses something essential:

There are some benefits to a basic income, especially when used to replace the current welfare system. For instance, a UBI leaves recipients free to decide how to spend their benefits. Many existing welfare programs use incentives, “nudges,” and other requirements to micromanage how the poor use their benefits. The assumption is that poor people lack certain virtues or fall victim to vices to which the rest of us are immune, and the expert managers of the welfare system know better.

I’m with the economist Lionel Robbins, who called this assumption, as applied to political calculations, “morally revolting.”

What Winfree misses is the value of restrictions on welfare to the recipients.   Sure, from an economic standpoint, leaving recipients free to use the cash however they want is more efficient for the economy, including the household economy of the recipient.  However, that efficiency reduces the disincentive to rely on the government, increasing the short-term value of welfare payments versus earned income.

If I tell you I’ll give you $100 for spending the day shoveling sewage in August, you might do it if you really need the money.  But if I also give you the option of doing nothing and collecting $50, you’ll evaluate the choice based on whether an extra $50 is worth the toil.

From the community’s point of view, the weighting is the opposite.  If we have $50 just lying around doing nothing for the economy, giving it to you may have some minor benefits by putting it in circulation.  But if you’re working, the community gets not only productive labor, but also the value of you becoming independent and better adapted to the economy.

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Placing restrictions on the money we give you increases its value to the community while decreasing its value to you in a way that is relatively beneficial for the community.  This would be true even if the restrictions were entirely arbitrary, but if we manage to stumble into a worthy moral principle, it’s even more so.

Unfortunately, in our public debate, economists often lose sight of less-tangible values, while advocates ignore economics.

  • Mike678

    “The assumption is that poor people lack certain virtues or fall victim to vices to which the rest of us are immune, and the expert managers of the welfare system know better.”

    Very carefully worded…no one, after all, is “immune” to lacking certain virtues (Trump and humility) or vices. But the so-called experts must admit that those in poverty tend to make poor choices–choices with negative financial consequences. Not finishing High School, children out of marriage and so forth. Yes, we all feel for them and want to help, but reducing the consequences of bad/poor behavior begets more of the same. Teach a man to fish…don’t just give him a fish.

    Finally, I can see the benefit to the person getting the money, but what’s the benefit for the persons taxed to provide said charity? Would they also not prefer to spend money they earned in a way they desired? Perhaps to charities that provide aid to people down on their luck, for example…