America’s first social welfare program began with FDR, in response to the poverty begot by the Great Depression. While nobly intended, his Work Progress Administration was met with derision by many of his political opponents, and the debate over government handouts has continued ever since. Well before the coronavirus pandemic hit, President Trump previously signed an order in 2018 calling on states to impose stricter criteria on welfare recipients. However, the recent health crisis has spurred his administration to sign a $3 trillion aid package, of which $300 billion will go toward one-time cash payments to individuals and $260 billion will go toward extra unemployment payments. In times of crisis, social welfare is undoubtedly necessary, but in times of normalcy, is it necessary or harmful to the people it’s intended to help?
Here are three reasons that, in times of normalcy, social welfare impedes productivity, and three reasons that it is necessary.
In times of normalcy, social welfare discourages productivity
The system is set up to be abused
Social welfare packages provide people with little incentive to work. For example, “Welfare Queen” Linda Taylor cheated the system in the ‘70’s and acquired over $150,000 a year from the government – a much higher “salary” than many make in their lifetime. There are less grand examples of others who may not want to permanently live off state handouts, but, like single mother Iris Swift admits, there are “a lot of advantages to staying on welfare.” According to a Cato study, US welfare packages exceed the minimum wage in benefits and salary in every state. If that’s the case, why wouldn’t people take advantage of the system when they get paid more not to work?
While welfare may be helpful in getting individuals out of tight financial spots, it may do little to support future self-sustainment. The government does a poor job of weaning the needy off of welfare and teaching them how to enhance their employability or earning potential. Not to mention that high marginal tax rates come into play when a household’s income increases. The minute a family attempts to cross back over the poverty line, these tax rates are combined with benefit phase-outs, resulting in a loss of 50-60% of the family’s initial income gain. This provides incentive to avoid jobs that pay highly enough for self-sustainment, promotions, and increased hours of work, subsequently trapping people in the cycle of poverty
Welfare benefits create a harmful culture of psychological dependence. A study found that welfare recipients are deprived of positive feelings of self-worth after receiving handouts – feelings that are necessary to function in society at full capacity; lack of self-esteem contributes to a lack of motivation and a diminished desire to move up in life. Research from a Yale University study corroborates these findings. Even former President Obama – a staunch advocate for social benefits – cited his own anecdotal evidence of welfare programs encouraging this culture of dependency and reducing motivation in their recipients.
In times of normalcy, social welfare is vital to society
Improves the economy
Social insurance, such as unemployment benefits, create a risk-sharing economy in which the threat of potential economic difficulties befalling any one person is protected by the majority. Take the Great Recession as an example, where unemployment rose by record levels, yet the poverty rate only increased by 0.5%. These social benefits also contribute to a more economically efficient society; for example, research found that increasing food stamps programs and public insurance in several states led to more entrepreneurship, because they made it less risky for would-be business owners to venture out on their own. Unemployment benefits also provide people leeway to find jobs that match their skill sets, rather than snapping up the first available position. In other words, overall economic productivity increases as a result of government assistance.
Not what it looks like
Contrary to the argument that welfare disincentivizes people from working, welfare beneficiaries are often those who cannot work. A third of the people who received government assistance in 2015 were off it within the year. In 2018, the number of people registered for food stamps dropped 7 percent year over year, following a 4.5 percent drop in 2017, showing a continued downward trend. Plus, most adults who qualify for TANF (Temporary Assistance for Needy Families) for an extended period of time have physical and mental disabilities. Additionally, a large percentage of children in the US receive of one of the six major forms of government assistance, and they participate in these programs longer than do adults. Welfare benefits aren’t for the lazy – they’re for the needy.
Gives low-income children a chance
Aside from adults, social welfare can also brighten the future for poverty-stricken kids, ultimately halting the cycle of poverty in families at risk. A recent study from Georgetown University and University of Chicago found that Mexico’s Prospera – a cash-transfer system conditional on parents sending their children to school and staying up-to-date with doctors’ appointments – led to greater increases in children’s educational attainment long-term. These children grew up to work an average of nine more hours a week than their counterparts who weren’t enrolled in the program, in addition to earning higher hourly wages. Another study found that kids who were covered by Medicaid later earned more money and required less welfare assistance as adults. Poverty can be traumatic for children, and welfare helps the next generation become less reliant on government support.
The Bottom Line: In normal times, when the economy is not paralyzed by Covid-19, social welfare can easily be taken advantage of and may not leave its recipients with much motivation to provide for themselves. However, government assistance provides a hopeful future for individuals in need and the economy as a whole. Thinking back to pre-coronavirus times, do you think social welfare has benefited your community?