Debates over income support are never ending. And part of the reason is that people have different ideas about what they want the income support system to achieve.
When it comes to income support payments for people below retirement age who are capable of paid work, there are at least four different visions. Each represents a goal for reform of the income support system. And each is constrained by its own set of trade offs.
1. Work enforcement: Most people accept that government has an obligation to prevent citizens from dying of starvation or exposure. However, supporters of the work enforcement model insist that income support must never become an alternative to paid work.
In this model the income support system should be designed to enforce participation in work. The government must move recipients into work, not because it will save money, but because voters see work as a moral obligation.
The best known proponent of the work enforcement model is American political scientist Lawrence Mead. Mead argues that financial incentives are not enough to get people off welfare and into work. In a recent paper for the Institute of Economic Affairs he considers policies for jobless men arguing that:
… work programmes for men should be mandatory and paternalist – requiring participation and using case managers to enforce it. They should focus on placing men in available jobs, even if low-paid, rather than training them for better positions. Since training programmes for this group have evaluated poorly, the best way to raise wages is through wage subsidies. To achieve work, especially for ex-offenders, it may be necessary to create jobs, as employers willing to hire these men may be insufficient.
The model doesn’t enforce work in order to make recipients better off or to save taxpayers money. As Peter Saunders of the Centre for Independent Studies explains: "Liberals believe that, rather than relying on handouts from others, self-reliance is virtuous and should therefore be encouraged wherever possible".
2. Small government: Some libertarians worry more about the growth of government than about the behaviour of the non-working poor. While they too accept that government ought protect citizens from destitution, they argue that the welfare state is far larger than it needs to be. Much of the spending goes to middle class families who don’t need help, and far too much goes into supporting the bureaucracy.
Economist Milton Friedman suggested getting rid of most of the welfare state and replacing it with a Negative Income tax, a means tested cash payment with no strings attached. The poor would have the incomes they needed to live and taxpayers would save money.
Another libertarian, Charles Murray worries that Mead’s work enforcement model will become more and more intrusive and controlling. With an army of case managers and a growing network of work programs, a recession could tip the system over the edge into something he calls "custodial democracy".
In an opinion piece for the Los Angeles Times. Murray suggested scrapping the major institutions of the welfare state: "If we simply divided up the money we are spending anyway and gave it back to people in the form of cash, we could provide everyone with the resources for a decent standard of living, including money to pay for healthcare and save for retirement".
Murray’s plan would abolish scores of costly government programs including those designed to subsidise agriculture and prop up failing corporations. As Dalton Conley explains:
Murray’s new New Deal would replace all safety-net programs with a flat $10,000 annual per-person grant. Murray does away with welfare (that is,Temporary Assistance to Needy Families), food stamps, Medicaid and Medicare, and even Social Security. He also dumps agricultural subsidies and other forms of corporate assistance. Instead, every American age 21 and older would receive $10,000 a year, of which $3,000 would have to be spent on health insurance. When a person’s income from other sources exceeded $50,000, his or her grant would be cut back to $5,000. But that is the only reduction. In other words, Bill Gates gets his check, too. Murray is offering a truly universal benefit—even more comprehensive than Social Security, which can exclude those who have not spent much time in the formal labor market. His only requirement is that the recipient maintain a bank account.
Murray agrees that social norms matter. But unlike Mead he doesn’t believe that they should be enforced by the bureaucracy.
3. Positive freedom: As the world grows richer, some argue that we can now afford to give people a choice about whether to work for a living. On this vision an unconditional basic income would offer everyone the ability to choose the kind of life they want to live. While similar to Charles Murray’s plan, the objective is to expand freedom rather than to shrink government.
Philippe Van Parijs is a leading advocate of this approach. He argues that government should pay everyone a universal basic income, at a level sufficient for subsistence. Ronald Dore sketches out the vision:
No dole, no means tests, no concept of unemployment. The market economy goes on. Those who want to work and are genetically lucky enough to be able to learn skills that the market rewards do so and have more than the basic income to spend. Those who do not work include the genetically unlucky, who would find it hard to get a job, as well as those who are capable of almost anything but prefer to write poetry or play chess.
Unlike Mead, Van Parijs isn’t worried about people choosing not to work. "No one can reasonably want an overworked, hyperactive society", he writes. A basic income would allow people to spend more time with their children or caring for elderly relatives. And since it wouldn’t be means tested, he argues it would solve the problem of poverty traps for low-wage workers.
4. Active society: While the work enforcement model insists that paid work is the only acceptable for of participation and positive freedom model advocates a government subsidised free for all, the active society approach proposes something in between.
Rather than focusing on paid work, active society approach takes a broader view of participation. Recipients of support are expected to make a contribution to the community but this contribution can take a variety of forms. These might include studying, caring for elderly or disabled relatives, caring for children or performing unpaid work in the community.
Improving work incentives is not an objective of this model. Nor is it expected to deliver savings to taxpayers.
Beyond the graphs and tables
Too many debates over income support assume that everyone agrees on what the income support system is meant to do. Assuming that everyone wants the most generous allowance possible with the constraint of work incentives and what government can afford, the debate dives into the arcane language of replacement rates and effective marginal rates of taxation. Models are built and tested and costings developed. But most of this is a waste of time if there’s no agreement about what we want the income support system to do.