Monday, March 3, 2014

Some musings about welfare reform

Recently I have been mulling the problems of welfare, just social safety nets, and Christian perspectives on economics. Coincidentally, a friend sent me a link to Nick Spencer, ed., The Future of Welfare: A Theos Collection (London: Theos, 2014). Theos, for those unfamiliar, is a Christian think tank in the UK. The anthology is a reasonably quick read, bringing together a dozen essays on the British welfare state, the need for reform, and principles that should shape reform. Most of the essays are written from an explicitly Christian perspective; one, very informative essay, is written by a Muslim who offers an Islamic view on the problems of the welfare state.

Concurrently, I also stumbled across an article in the Wall Street Journal that reported wealth inequality in the United States is now slightly greater than the inequality that existed in Britain in 1929 between aristocrats (like Lord Grantham) and the working poor (like his servants at Downton Abbey). Every time that I watch an episode of Downton Abbey, I am struck by the long hours servants work and their need to work and the idle lifestyle that the Earl of Grantham, his family, and other aristocratic families can adopt if they choose.

On the one hand, I want to live in a society that ensures everyone has access to life's basic necessities (decent food, drink, shelter, healthcare, and education). It was William Temple, when Archbishop of Canterbury, who coined the phrase the "welfare state" to describe our obligation we have to care for one another.

On the other hand, every adult also has a measure of responsibility for self. Denying this element of individual responsibility demeans one's personhood, reducing the person to a dependent, i.e., living as a child rather than an adult. Work is important because work affords people an opportunity to contribute to the common good, individuals the opportunity to function with at least some degree of autonomy, and afford individuals a sense of self-worth and dignity.

Welfare states, like the US and UK, in which families subsist on government aid for multiple generations, have struck the wrong balance between individual and mutual responsibility. Conversely, welfare states like the US, which spends more on healthcare than any other nation in the world spends for worse outcomes, has also struck the wrong balance – for the opposite reason – between individual and mutual responsibility.

Among the ideas in the Theos document that I found intriguing and provocative are:

  • Conceptualizing the welfare state in terms of reciprocity and risk-pooling, i.e., taxes that support entitlement programs are analogous to insurance payments that one makes, hopes never to need, and that make providing for potential catastrophe (e.g., a house fire or car cash) affordable. What people who contribute by paying their taxes but who never directly benefit from the scheme receive is (1) peace of mind from knowing that if calamity struck, they are covered and (2) the right to feel good from helping others. Calamity can strike all of us, whether in the form of unexpected disease, disability, economic collapse, or another hardship that individual cannot reasonably anticipate let alone prepare to meet alone. The welfare state expresses our concern for one another in ways that should expect all to contribute and that is reliable.
  • One of the weaknesses of the current welfare state is that too many people do not contribute; another weakness is that top earners do not bear their fair share of the burden.
  • Three key, overarching ethical values that should shape the welfare state are: fair, generous, and sustainable. Fair connotes a system that inclusive and treats all equitably. Part of treating all equitably is that the system should have incentives to encourage those who draw benefits to become self-supporting rather than indefinitely dependent upon the largesse of others. Generous connotes benefits that do not require people to live at a subsistence level. Sustainable connotes that the government must be able to afford the benefits its pays, generating sufficient revenue through taxes as well as having controls in place to prevent fraud and other abuses.
  • Contributors to the Theos collection divided over whether benefits should be means tested. Means testing can help to keep the welfare state affordable and seems appropriate for insurance schemes (lack of means is equivalent to a house fire or car accident in other insurance schemes).
  • What was not clear to me was how the welfare state can creatively and constructively address the issue of strongly encouraging, even requiring, both parents to support children. The UK, like the US, has experienced in the last half century a sharp rise in the percentage of children raised in single parent households; the nonresidential parent often contributes disproportionately little to the expense of raising the child(ren). Procreating a child entails responsibilities and expenses that both parents should share, regardless of the status of their personal relationship.

Both the United States and the United Kingdom can benefit from welfare reform. The welfare state, as found in both nations, is not only increasingly expensive (this, sadly, often appears to be the primary driver in calls for welfare reform) but also fails to provide adequate benefits for all (think of the growing numbers of beggars in our cities) while encouraging dependency rather than promoting healthy self-reliance in the context of mutual interdependence. As the Theos documents repeatedly insists, we can do better.


Ford said...

I think the main problem with the welfare programs that we now enjoy (?), is that many people think of it as an entitlement and they bear no responsibility to earn their own living. Why should they? They are living comfortably on other people's money -- the government's -- i. e. you and me!

Ford T.

George Clifford said...

I'm not sure how many people rely on welfare as an entitlement that allows them to avoid personal responsibility. Certainly, that happens, perhaps more so in the UK than it does here. Eliminating assistance for the genuinely unfortunate is unchristian. How to distinguish from the genuinely deserving and those who would take advantage of others is sadly a question that receives little constructive attention.

Anonymous said...

Here is recent review of economists on question of the right balance. Proverbial "on the one/other hand..." which I guess is the burden of reason.

George Clifford said...

A reader sent me this comment via email:

George very enlightening. Along this train of thought..a column on the inequities of antiquated 50's era civil service laws, which are now used to spike government management salaries and benefits vastly out of proportion to the private work force (including 'perma-temping' (see: support Daily Kos. for blog on 'temporary workers'. Looking forward to your thoughts.

Anonymous said...

Most of it sounds good, though my one hesitation is the definition of "generous." Who decides and is it a blanket designation? I recently saw an article that said they wanted to put welfare benefits to a point where people could live as if they were making $33,000/year. In this state, the median income is about $36,000, so basically half of the state is no better off than welfare people and you better believe they DO decide it's better to live off it and not work. Even panhandlers make an average of $35/hour. It might sound like nothing in New York, but you can live a normal life here on it, even buy a house outside the cities. So what is reasonable, generous, etc.? Perhaps we should limit what it can be used for. Should they get cable t.v.(65-75% do)? Should food stamps be used for Pizza Hut?

Chris Harwood

George Clifford said...

Chris, I'm skeptical about reports that people on welfare can live as if earning $35,000 per year. That does not mesh with what I see in families who subsist on welfare or with my knowledge of welfare programs. There are people who can receive more in benefits than they can earn working a minimum wage job, a position that equates to less than $17,000 per year, less than half of what the article that you saw suggested people can earn on welfare. An important reason that jobs should pay a living wage is to provide people with a genuine incentive for seeking work instead of attempting to remain indefinitely on welfare.