Welfare's Unintended Consequences

A system that hurts those it's intended to help.


Is America's welfare system destroying the incentive to work? That's what Phil Harvey and Lisa Conyers contend in their recent book, The Human Cost of Welfare: How the System Hurts the People It's Supposed to Help

"The prospect of having all your benefits cut off…or a significant part of your benefits cut off makes people look on earning income as risky," says Harvey.

The co-authors sat down with Reason TV's Nick Gillespie to talk about what they learned from hundreds of welfare recipients they interviewed around the country.

Click below to watch:

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  1. 16 minutes? How about a warning?

  2. Arguably the worst aspect or impact of any of the current welfare systems is the step function in determination of benefits. Food stamps are a notable exception.
    The problem is this -- if X earns $3999/time period, X receives full benefits. If X earns $4000/time period, X receives nothing. The cost of that extra dollar is the dollar value of the benefits lost.
    Fully rational considerations conspire to keep X beneath the cut-off ceiling.
    Phase-out approaches would work much better. Except, of course, that nothing government does works very well.
    But we have to stop building systems with built-in disincentives to leaving the system.

    (Of course, to the thousands of employees involved in the systems, this is a feature, not a bug.)

    1. Whether an aspect of a government program is good or bad is a matter of perspective. Sure, ordinary citizens and taxpayers think that government welfare programs should generally facilitate a humane transition from poverty to self-sufficiency, and in cases where this is not possible, the programs should permit profoundly disabled persons some dignity despite their need for state assistance.

      However, politicians, the professional welfare bureaucracy, various crony capitalists, and other poverty pimps have perspectives that are quite different from ordinary citizens. A stable and permanent class of welfare dependents can be a reliable voting bloc. It makes the jobs of the bureaucracy easier and more secure. Cronies, particularly in real estate, enjoy more reliable cash flows from the government rather than from private renters. A lovely side benefit obtains when people who should be looking for a job get excluded from the divisor when calculating the unemployment rate. Another lovely feature is that, due to the perverse incentives outlined in the video, most welfare recipients have some sort of violation to their eligibility which bureaucrats can hang over their head if they get out of line.

      All of the complaints expressed in the video are, in fact, positive features of welfare programs to the state from the perspective of politicians, bureaucrats, or cronies.

      1. The fundamental mistake ponents of state power have been making is to assume that all the unintended consequences are in fact unintended.

    2. The California Unemployment Benefits system uses a phase-out approach.

  3. Let me shed my ideological purity as a libertarian and propose something here that I think would help. Create "charitable giving" accounts. Each tax payer has an account, in which the IRS holds whatever percentage of tax revenue Congress decides should go to transfer payments and welfare programs. We completely eliminate all government transfer payment and welfare programs. BUT we set up a marketplace ( we let a private company like Kickstarter do it so it actually works) and each year taxpayers can log in, and choose which of various for profit or NGO nonprofit charities get their money. We can audit these charities and require them to disclose various metrics in order to qualify for the marketplace.

    It isn't freedom and responsibility, but it introduces competition to charity and should spur efficiency. It also reduces the power gain to government inherent in controlling so many people's only source of income.

    1. It's too complicated. Just eliminate the entire bureaucracy and give everyone a basic minimum income. The democrats and their spineless counterparts in the GOP have created an entire generation of useless slugs who we now have to take care of to avoid them becoming rioting mobs. This was entirely intentional of course.

      1. Rome did this. It seems to be a feature of every large system.

        A science fiction book on the subject. A very good read IMO

        Child of Fortune

      2. My fear with that Swiss system is that you potentially lure more young people into useless slugdom.

        1. Give them incentives. Everyone gets their basic income. But all this does is give you a roof over your head and enough food so you don't starve. You want more, you get off your ass and go get it. Some will choose to want more, and some will sit on their porch and pop the next bud. But sitting on their porch and popping another bud, as long as they're not bothering anyone else is ok with me.

          1. My issue with this is that eventually that minimum standard isn't enough. Soon everything becomes an entitlement (healthcare, anyone?). It might start out as a roof over your head and just enough food to starve, but then enough of the moochers get together and vote in a minimum standard of wifi, or a minimum standard size TV, or a larger minimum standard size roof, etc. The check on the system is only as effective as the people running it.

            1. Then it will collapse just like the current entitlement system is going to collapse. I think that the current state of technology will set standards of living, like it does now, and what resources are available is what there is available, there's no stretching it beyond that no matter what someone may want it to be.

              1. yeah, looking back over history it seems like we're in a pretty bad place, but we've never had the technology we have now before. at this point the democratizing effects of technology are still very small but look at how much different information people have access to. and silk road was another step in that direction; starting to blur the lines between virtual and physical realities. i very much doubt I will, but I would love to live to see government's obsolescence

      3. I used to think the guaranteed minimum income was a laughably bad idea but the more I read about it the more I like it. It would serve as an effective and fair system that would smash the current one as we know it.

        1. Same here. It's actually unavoidable since most manual labor jobs will be automated in the next decade. Sure that creates new opportunities, but that will require someone having enough ambition to learn new skills.

          1. It sounds like you're suggesting today's technology changing jobs is unique. Haw many jobs from 100 years ago are people still doing today?

            1. Our dramatically increasing ability to produce the necessities of life without the need for most people to labor is a uniquely new condition. Most of the jobs from 100 years ago that produce food, clothing, shelter and other needs ARE being done today, but many are being done far more efficiently by fewer workers. And that's a good thing. Technological advancement SHOULD free people from the drudgery of "jobs", but for that to happen, we need to come up with a new way of distributing the output of the technology. The concept of "working for a living" is becoming obsolete and unethical.

              1. It's certainly true that people today (at least in the US and most of the west) have to put much less time into work to have necessities of life thanks to many innovations.

                But that has been true for quite a while. The necessities have been cheap for a while but people kept working. Someone today could afford a 700 sq ft house similar to the 40's a health diet and a model A type of cheap car. The labor necessary to achieve the necessities is probably something like 10-20 hours a week at a low skill job.

                But these necessities didn't stop people from wanting more, bigger houses, better cars, cell phones, computers etc. when the need for laborer a was lost in one area like farming laborers moved on to another like producing these new wants. I don't believe there is any maximum to people's desires for stuff.

                If you're saying this time is unique because people's needs will be met through technology and there will be fewer jobs because of that I don't agree. I think people will just want better stuff, so jobs will migrate to those things that need to be made to fill that need just as it has always done thus far.

                1. I think this perspective comes out of Luddites, and also the Bernie Sanders types:

                  "Without college degrees, people have nothing to look forward to but a life of misery and destitution!"

                  Eh, not really.

                  That's just the manufactured BS needed for those types to justify their final solutions. "Because, by our compassion, we just don't have another choice!" Whatevs.

                2. I don't believe there is any maximum to people's desires for stuff.

                  I don't disagree. My point is that the day is coming when those desires can be met with very few people being stuck in "jobs". Jobs suck. We should celebrate the end of working a job being normal instead of fretting about where the new jobs will come from. Let's aspire to technology putting an end to most "employment", and begin coming up with new ways to distribute the largess of future technology. Bring on the robot slaves.

              2. also the comparison of 1916 to 2016 and 1816 to 1916 doesnt really say anything about the next century. 1716-1816 did not see anything like the change of living condition weve seen in just the past twenty. technology is self-accelerating.

        2. As long as it's cheaper right? Wouldn't large numbers of federal and state bureaucrats who administer welfare programs all have to lose their jobs? Would that alone account for the majority of the savings?

          1. They need to lose their jobs, they're parasites. They serve no functional purpose outside of fattening themselves up at the expense of everyone else. That alone is not going to pay for this. It will take greatly increased productivity through technology (everything becomes easier and cheaper) and probably eliminating SS in favor of this system. Not sure how it will work, but we're going to have (already do) tens of millions of unemployable people. And again, unless we stop paying people who can't afford it, to have more children, it will all collapse.

            1. The birth rate declines with higher income. Above about $4K per person it goes below replacement. America is a little unusual as the decline below replacement happened at a much higher level.

      4. " This was entirely intentional of course."

        I immediately took issue with the characterization of the consequences as unintended.

      5. People drastically overestimate the willingness of people to start rioting mobs.

        Especially the kind of people who enjoy kicking back on the welfare of minimum income.

        Riots can be a lot of work, and they pay often sucks.

      6. I'm with you on the basic income. It removes the perverse incentives.

        Not only will it lead to better outcomes, but it has theoretical moral justification through the Lockean proviso and generalizations of it.

    2. I think that's a really good idea.

  4. I know several people I grew up with, they've been on all the government assistance that it is possible to get for years or decades, and there's no way out for them now. They have no skills and no ambitions. All of them will tell you they won't even look at going to work because doing so will lower their standard of living and even if it would improve for them, they have no motivation beyond playing on their government provided smartphones and popping another bud.

    The only way out of this is through technology and us getting smarter. I have a lot of confidence in the former and none in the latter. We have to reach a state of technology and automation where we no longer need a manual labor force. Then we're going to have to give all these slugs a living wage so they won't be a problem, and stop paying people to have more kids.

    1. We have to reach a state of technology and automation where we no longer need a manual labor force.

      We are already there. Manufacturing has gone from 40% or 50% of the labor force in the 40s to 10% and still declining today.

      A good book on how it might work in the future. Science fiction:

      Child of Fortune

  5. Medicaid - well there is an underground cannabis economy that treats people wit cancer. There are a number of other disease for which it would help if the costs (due to prohibition) weren't so high. When it is life and death the costs are somewhat secondary.

    There is a reason the medical establishment is the largest funder of "Drug Free America".

    1. It's nice to be the biggest dealer on the corner, and it's best to be the only dealer.

      1. Home delivery is the usual for people who don't have to resort to the street.

  6. We are at the bottom of a Kondratieff cycle. Just like 1929.

    The INs are furiously fighting the OUTs. I estimate another 10 years until the issue is resolved - for this cycle.

    We can see some of what might be done by looking at the laws against the automobile when that transition was taking place.

    1. We are at the bottom of a Kondratieff cycle. Just like 1929

      How do you come to this conclusion? I thought the K-wave was 50 to 60 years. With your calculations this cycle is 87 years. If I remember correctly, we should be starting to come out of the recession/depression.

      I'd love to get your thoughts on this.

      1. The cycle lengths are not fixed - despite what was originally postulated. It all depends on the profitability of the last wave. Automation has done a lot to lengthen this wave. Because it is not just one industry or sector affected.

    2. The big difference between today and ninety years ago is that back then, the robber barons, while insanely wealthy, for the most part actually truly felt some a little bit of responsibility to the country and the people who were less well off.

      The attitude of the robber barons of today towards most of their Americans is nothing but a giant "fuck you". It doesn't bode well. This is the stuff of how violent revolutions take seed.

      1. The last wave gave us FDR who destroyed capitalism in order to save it. We will be seeing another like him. Bernie is a harbinger.

        1. Obama is similar to FDR in changing regulations and programs like DemocratCare. FDR had a much deeper impact, of course.

  7. One of the problems is that welfare benefits are so high, getting off welfare and working is a step down the income scale.

    In 2013, welfare queens were getting the equivalent of $42,515 a year in Massachusetts.


    How much you wanna bet your average welfare beneficiary can't make anywhere near that in the job market?

    We should require work for welfare.

    Also, it wouldn't be a terrible idea to require someone to work x number of hours at a job in order to graduate from a public high school. It might mean fewer people graduate from high school, but then again, it would make having graduated from high school really mean something. It means you went to work for four hours a day, however many days a week. You showed up on time, didn't steal anything, got along with your coworkers, did what your boss said, and weren't rude to customers.

    And there would be a step down for going onto welfare after high school. Welfare benefits are high, but you don't get to spend the cash as you like, and that isn't like when you have your own job. EBT cards feel sort of like consumer discretionary income when they're at the grocery store, but it's not the same as spending your own money. If people come out of school earning a paycheck, then at least they'd have to give up something to go on welfare.

    1. How much you wanna bet your average welfare beneficiary can't make anywhere near that in the job market?

      Of course they can't. It's the reasoning in my post upthread. It's intentional. Also, stop fucking paying people to have more kids.

  8. Now that we've gotten our bi-annual token article critiquing the welfare stare, Reason can get back to matters that really concern libertarians - like flooding the West with third-world immigration, legitimizing every conceivable absurdity, and championing unisex bathrooms.

    1. I'm trying to figure out exactly how all of that fits neatly into the next Trump bashing article.

      1. Trump will be an end to the libertarian dream. You can fit anything into that.

  9. It acts as a huge disincentive to marraige. Like it needs another.

  10. "Any job is better than no job." Work & happiness. Great video. Thanks, Reason!

    1. "Work & happiness" rarely go together.

      1. You are not doing it right.

  11. Let's not forget how the regulatory state stacks the deck against new entraprenaurship. Way too many regulations, fees, and licensing requirements make staring a business cost prohibitive for poorer Americans. We can see with Uber what an impact opening an industry up can have. Although the state may yet fuck that up. Nobody dreams about growing up to be on welfare. The state does it's best to crush what dreams people do have. They do not have peoples best interest in mind, only their own.

    1. Eric Garner killed for once having sold loosies.

  12. This article is accompanied by a picture of Edward Snowden on the front page.

    Try as I might, I just can't imagine what the connection might be, so I am going to guess that it must be a mistake.

    1. The likely connection with this image screw up and the increasing typos and the Progressive invasion - a lack of funds.

      Progressives will work for a stick of gum as long as they get power.

      I mean really - Sheldon probably pays to write here. Who would pay him to write anything anywhere?

  13. Does anyone have any evidence that the creation of a dysfunctional dependent multi generational underclass is unintentional?

    Seems like the inevitable and predictable outcome of the design, in the interest of power for the progressive theocracy that created it and administers it.

    1. Democrats get 90% of the Black vote. "Look at all we did for you. The chocolate ration is up."

      1. We destroyed your families with Prohibition but we will give your girlfriend enough money to raise your kids. You should be grateful and vote for us.

  14. I don't think those are unintended.

    OTOH, welfare is also aimed at preventing a violent revolution by the underclass. People aren't going to just sit quietly and starve.

    1. And there's no reason why they should starve. We can easily produce enough food for everyone. "If you don't work, you don't eat" was a reasonable demand for most of human history, but it is no longer a defensible ethic. Today, we can imagine humans being largely freed from having to labor. That's wonderful?not a problem, unless we make it one.

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