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The unintended consequences of welfare aid

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INTRODUCTION

Poverty has emerged as one of the biggest challenges to the governments across the world in contemporary times. Ameliorating poverty and preventing it through insuring against socially recognized risks of income interruption are the most fundamental aspects of state social provision. The English social scientist Richard Titmuss defined social services as “a series of collective interventions that contribute to the general welfare by assigning claims from one set of people who are said to produce or earn the national income to another set of people who may merit compassion and charity”. Welfare policy, whether it is the product of governmental, voluntary, or corporate institutions, is concerned with allocating goods, services, and opportunities to enhance social functioning.1 While in a lot of countries, welfare is provided by governments, it is also supplemented by efforts of the social groups, charities, religious groups, Non-Governmental Organizations (NGOs) etc. Social welfare policy, a subset of social policy, regulates the provision of benefits to people to meet basic life needs, such as employment, income, food, housing, health care, and relationships.

Social Welfare Schemes are often created in response to some social problems. However, Welfare schemes are also seen as the causes of many problems. One of the biggest criticism of Welfare Scheme can be seen in the fact that it creates perverse incentive for the entitled people to find jobs. Such a concept is called as Welfare Trap, where the people entitled to social security benefits often see a higher opportunity cost in not taking up a job when they are on social security benefits.2

Thus, Welfare Trap has several unintended consequences: One, it creates a perverse incentive for people to find work and gain employment. Second, it affects the family structure, often leading to inadvertent results. Third, it has also been argued that Welfare Aid leads to the dysgenic effect.

 

CHAPTER – 1 

WELFARE TRAP AND ITS ECONOMIC IMPLICATIONS

Welfare trap is seen as one of the many contradictions of welfare policies. The term “welfare trap” denotes a welfare recipient’s reluctance and/or inability to break his/her dependence on public assistance. In a situation like this, welfare support perpetuates the dependency of the recipient on public assistance rather than raising them to a level that they do not need assistance anymore.3 According to the advocates of this phenomenon, there are two different views on why recipients can get stuck in a welfare trap.4 The first one takes a behavioural approach and explains that welfare trap is caused by recipients’ lack of necessary traits to climb the socio-economic ladder. Lack of these traits might be associated with individual psychology or social environment. According to this view, being in the welfare trap is seen as a consequence of the mistakes the recipients have made over and over again in their decisions. The other view, is a direct reflection of “economic orthodoxy5 and suggests that welfare trap is a result of an economic optimization in terms of opportunity cost, individuals make, when given the choices of receiving the benefits or taking up a job. Given this opportunity cost, individuals would deliberately choose to receive benefits instead of finding employment because the cost of giving up on the benefits and taking up a job is too high compared to the minimal pay they get when they cannot work and receive public assistance in the form of social security benefits. Thus, welfare support is seen as a disincentive to work.Also, the fear of being excluded from the welfare benefits force the people to avoid taking up jobs.7 Thus, this view sees the individual as a rational being making rational choices. According to this line of logic, welfare trap exists because the welfare system is full of disincentives for households to increase their work effort in order to keep on receiving benefits. Thus, various critics of the American Welfare system have claimed that it exacerbates the problem of poverty by making living in poverty preferable to acting in ways that would  promote upward mobility.8 Further, various countries that provide social security like the U.S., U.K., Canada etc. use a mechanism called the means-test. A means test can be referred to as a determination test, wherein an individual or family is assessed on the basis of their means to see whether they are eligible for governmental assistance or not. Means test quantity the savings and income of the applicant, and therefore, the social security benefits of the individuals are reduced, contingent on the income of the applicant. For instance, a mother with one child, on welfare payments, finds a job that pays her $50 per week. Thus, half of what she earns, say $25, would be deducted from the welfare payments leaving her just a gain of $25. In addition to taxes being deducted on her current income, she also has to pay child care and commuting costs, as her productivity to the society increases. Thus, she gives on domestic productivity in order to be productive to the society, which renders her worse off, before she acquired the employment. Thus, this creates a perverse incentive for her to take up a job and move up the economic ladder. This forces her to stay in poverty.To qualify as a recipient under the social security test, the means test assess the assets and incomes of individuals. Such tests discourage savings among individuals and force them to be destitute and poor to qualify for such tests. Thus, this test deprives them of any savings, making it harder for them to escape poverty.

Further, it has also been argued that parental welfare participation may encourage the dependency of future generations.10 While welfare stigma can be seen as a deterrent to welfare participation, but a parent’s participation may lower their offspring’s distaste for welfare. Thus, the welfare children may feel less stigmatized as the deterrent effect of the stigma may become attenuated.11 Second, parent welfare participation may lower the labour market opportunities of offspring. Since the welfare parents are less attached to work or career, children from welfare homes may be less aware of proper on-the-job behaviour, may even lack job search skills, and may have fewer job contacts. Thus, fewer market opportunities ensues a greater risk of later welfare dependency. It has also been argued that people getting once on welfare rolls, often end up living in poverty.12 These two factors contribute to the welfare dependency of the future generations, miring the poor further into the welfare trap.

According to Charles Murray, a dependency theorist, the changes in social politics and programs changed the rules which structured the poor’s behaviour. According to Murray, such rules further led to the poor being mired further into the trap. Thus, these rules encouraged the poor families to take welfare even when an able-bodied male was present in the house and not working. Also, such rules encouraged the poor to work less than full time and maximize their combination of wages and welfare. These rules made a welfare-subsidized poverty existence more bearable and led to an increase in proportion of births to unwed teenage mothers and growth in the number of poor female-headed families. The researcher, in the next part, would try to look at the impacts of welfare trap on the family structures.

CHAPTER – 2

WELFARE TRAP AND ITS IMPACT ON FAMILY STRUCTURES

Welfare is both a consequence and a cause of several conditions best described as social pathologies. These may include: Poverty, Dependency, Out-of-wedlock births, unemployment, violent crimes etc.13 But, one of the biggest criticisms of the American welfare system is that it promoted single mother headed families and unwed motherhood.14 The American social security system started in the year 1935 by the Social Security Act. Named as the ADC (Aid to Dependent Children), it provided a subsidy to families with fathers who were deceased, absent or unable to work. While the law was not limited to families headed by widows, it was viewed as a means of extending help to these families, who had had the misfortune to lose a breadwinner and who, as it was widely believed, should not be forced to rely on the paid work of a mother, who belonged at home.15 Thus, ADC was to provide children with “assistance at least great enough to provide, when added to income of the family, a reasonable subsistence compatible with decency and health”.16 The 1935 Social Security Act was not the first government income support provided to the poor children in the United States. In most cases, ADC provided additional federal aid to state mothers’ pension programs, which were already assisting “deserving” poor lone mothers. Since the Federal ADC was contingent on state contributions, the states had the discretion to determine the eligibility and grant levels.17

Some states under the ADC would require the children to live in “suitable homes” to continue receiving assistance from the state. “Suitable homes” was a sort of moral scrutiny of the home receiving state assistance. For instance, in Louisiana, there were several grounds for unsustainability.18 These grounds would terminate aid to the dependent parent or the mother if the same would live with a member of the opposite sex as husband or wife without a ceremonial marriage existing. Assistance, in such a case could not be resumed unless the individuals living as husband and wife entered into a valid marriage or ceased their relationship. In other cases, where the mother in the home had given birth to an illegitimate child at any time in the past after having been the payee of public assistance at any time in the past, or a mother in the home was found to be illegitimately pregnant, her assistance would be terminated.19 In such a case, her aid would not resume unless she could prove that the illicit relationship had ceased and she was maintain a suitable home for her children. In some cases, welfare aid could be withdrawn from the parent on account of promiscuous conduct or cases where the child was being abused, neglected or exploited.20

Another factor taken into consideration for Aid to Families with Dependent Children (AFDC) was the man-in-the-house rule. In calculating the level of ADFC grant required to meet the cost of necessities, the state deducted the income and resources of the basic family unit from the state defined subsistence income figure.21 The basic family unit, as defined by the state, consisted of the mother and her dependent children. However, in some of the cases, the income of the members living with the basic family unit was also considered in calculating the grant of the family. Thus, when the welfare aid was calculated, it was conclusively presumed that the attributed income was actually available. Thus, it was assumed that another man had taken the place of an absent father with or without having married the AFDC mother.22

As a consequence of the same, when the state attributed the income of an individual living with an AFDC family member, it imposed a moral judgment as to the duty of the attributee. It was reasoned that if the attributee had not been contributing, the reduction in the budget resulting from attribution would force the mother either to exact payments or expel the attributee from the household.23 The attribution presumption also provided the ADFC mother a very strong incentive to conceal the presence of the attributee. Such concealment would have led to prosecution under the welfare laws, morally affecting the children and defeating the main purpose of AFDC. Consequently, the attribution doctrine precluded the development of meaningful family relationships, leading to break up of the existing relationships, and provided an incentive for dishonesty.24 In order to lighten the burden of welfare costs, many states in the United States adopted the so called “man-in-the-house” eligibility rules. Accordingly, these rules disqualified otherwise eligible ADFC families because of the mother’s often sporadic sexual relations with a given man. But the apex court in the US struck down the rule in the case of King v. Smith, where it held that the parent could not be an individual with no legal duty to support the children of the AFDC family. Thus, this requirement was used to exclude “undesirable families” from aid, particularly children of never-married or African-American mothers.25 The ADC subsidy, originally intended to allow mothers to stay at home to care for their children, now had unforeseen consequences.26

CHAPTER – 3

WELFARE AID AND DYSGENIC EFFECT

In 1984, Charles Murray in his book “Losing Ground: American social policy” suggested that welfare causes dependency.27 He further argued that the number of recipients increased as the welfare increased, since there is little reason to work in comparison to the high welfare benefits that they receive for a very long period of time.28 Charles Murray and Richard J. Herrnstein have suggested possible merit to the dysgenic effect.29 While Eugenics is defined as the “science which deals with all influences that improve the inborn qualities of a race or with those that develop them to the utmost advantage30, Dysgenics is defined as the study of factors that produce the accumulation and perpetuation of defective or disadvantageous genes and traits in the offspring of a particular species.

According to William Shockley, Nobel Prize winning physicist, social support systems designed to help the disadvantaged had a regressive effect.31 He argued that AFDC and other programs tended to encourage childbirth, especially among the less productive members of the society, thus causing this dysgenic effect.32 Shockley in 1965 made a statement at the Nobel conference on “Genetics and Future of Man” about the problem of “genetic deterioration” in humans caused by the “dysgenic effect” or “evolution in reverse”. Dr. Shockley suggested that the mankind faced a dysgenic threat. He believed that the least intelligent people (people who scored low on an IQ test) were reproducing more than the intelligent people (people scoring higher on the IQ tests), and, this backward evolution, threatened the very basis of the human civilization. Further, he was of the opinion that the Blacks (with lower IQs) were reproducing faster than the Whites (with higher IQs), and the blacks were devolving with lower IQs, they faced the prospects of serious, permanent degeneration. Charles Murray and Richard Herrnstein have argued that there is a relationship between IQ and educational attainment, and fertility falls with the rise in IQ in the three different ethnic groups.33 The two prongs of their argument were: One, there were different proportions of women of each ethnic groups at different IQ levels.34 Thus, as they illustrated, the proportion of Black Women as a percentage of whole was higher at the lower IQ levels in comparison to White women, given the fertility rates of both of them were the same. Accordingly, higher fertility rates of these women would have greater impact on the Black population than the whites.35 Second, they contended that better educated women of all ethnic groups postponed child bearing. And since, the whites had the highest proportion of college-educated women, who delayed child birth, the gap between the whites and other minorities was likely to increase. Murray and Herrnstein, thus, provided merit to the dysgenic effect, and how the Blacks faced the threat of degeneration.36

Further, it has also been argued that welfare assistance programs like AFDC encourage the participants to bear more children.37 It has been argued that in the absence of welfare, the ability of women to raise more children than her own income can support comes from the “option of marrying a man with higher earnings”.38 However, welfare may provide an acceptable alternative to marriage for low-wage women, who do not want to sacrifice enjoyment of children. It has also been contended that welfare can raise the probability of divorce for low wage women by decreasing the return to specialization in marriage and raising the level of consumption.39 Also, married women who would otherwise choose to remain childless may “insure” against the income risk of divorce by having a child, thus guaranteeing contingent eligibility for programs like AFDC. Thus, such programs encourage the participants to bear more children, while raising the probability for divorce. Thus, this would further provide merit to the dysgenic effect.

However, contrary to the views of Charles Murray, it has been pointed that there is no conclusive evidence to support the dysgenic effect.40 It has been argued that Murray and Herrnstein have placed too much reliance on the IQ test, without examining into detail the socio-economic status of the parents.41 Although, the advocates of dysgenic effect could not provide any convincing evidence of the same, the effect coupled with the repercussions of the welfare led to a reform in the AFDC in the year 1996. With the passing of the Personal Responsibility and Work Opportunity Act, AFDC’s successor Temporary Assistance for Needy Families (TANF) came into existence. TANF, arguably, was a revamped version of the AFDC in terms that it limited the period for aid to a maximum of 60 months, where the person on aid had to find a job within 24 months of applying.

CONCLUSION

Welfare aid certainly has a lot of repercussions and probably this galvanized the American legislature into passing the Personal Responsibility and Work Opportunity Act, and replacing AFDC with Temporary Assistance to Needy Families (TANF). Thus, as per the findings of this paper, welfare leads to a lot of unintended consequences, which might work against the sole purpose of such aid to the general public. The researcher has, in the first chapter, concluded that, the welfare trap ensnares the participants, which often leads to loss of productivity of the individual and for the society since the participants feel better off not working. Further, participants give up on their savings to get the maximum benefits, thus, reducing their odds of coming out of this trap. Further, the researcher has concluded that the welfare scheme led to break-ups of existing relationships, and provided disincentives for getting married again. Various rules such as “suitable home” and “man-in-the-house” rule enacted by states in the US led to such consequences. In the third and final chapter, the researcher has tried to look at the dysgenic effect, as has been argued by Nobel Prize winning physicist William Shockley. The researcher, in this part of the project, has concluded that, although various authors have provided merit to the claims made by William Shockley regarding the threat of degeneration of blacks, there has been no conclusive evidence that suggests the same. The claims made in the book: “Bell curve: Intelligence and Class structure in American Life”, rely solely on the level of IQs in various communities, but fail to take into consideration a host of other factors.

Thus, to conclude, there have been several unintended consequences of welfare aid in different countries, which has led to the welfare trap. Individuals often find it difficult to cut their way through this morass, which often has serious implications on the family structure, making people more dependent on the welfare aid, trapping them further in this mire.

Endnotes:

Richard Hoefer, ADVOCACY PRACTICE FOR SOCIAL JUSTICE, 20 (2006).

WELFARE ‘TRAPPING’ PEOPLE IN POVERTY SAYS DUNCAN SMITH (May 27, 2010) available at: http://news.bbc.co.uk/2/hi/uk_news/politics/8707652.stm (Last visited on May 10, 2015).

Patrice Hill, Welfare to work law encourages low wages, raises dependency on federal benefits, THE WASHINGTON TIMES (November 3, 2013) available at: http://www.washingtontimes.com/news/2013/nov/3/welfare-to-work-law-encourages-low-wages-increases/?page=all (Last visited on May 10, 2015).

Nancy Fraser and Linda Gordon, A Genealogy of Dependency: Tracing a Keyword of the U.S. Welfare State, 19(2) CHICAGO JOURNALS 309,336 (1994).

Necati Celik, A different look at the welfare trap: Institutional Causes and remedies

Charlie Weston, Welfare trap is Stopping people from taking jobs (August 27, 2013) available at: http://www.independent.ie/irish-news/welfare-trap-is-stopping-people-from-taking-jobs-29529657.html

Sanford F. Schram, J. Patrick Turbett and Paul H. Wilken, Child poverty and Welfare Benefits: A Reassessment with State Data of the Claim that American Welfare Breeds Dependence 47(4) AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY 409,422 (1988).

John J. Antel, The Intergenerational Transfer of welfare Dependency: Some Statistical Evidence, THE REVIEW OF ECONOMICS AND STATISTICS 74(3) 467,473 (1992).

Angus Whitley, WELFARE TRAP FOR AUSTRALIA DISABLED PUSHES HALF TO POVERTY: JOBS (April 3, 2014) available at: http://www.bloomberg.com/news/articles/2014-04-02/welfare-trap-for-australia-disabled-pushes-half-to-poverty-jobs (Last visited on May 10, 2015).

William A. Niskanen, Welfare and the Culture of Poverty 16(1) CATO JOURNAL (1996).

Susan W. Blank, Barbara B. Blum, A Brief history of Work Expectations for welfare mothers 7(1) THE FUTURE OF CHILDREN WELFARE TO WORK (1997).

Catherine S. Hilam, Welfare reform: The family support Act in historical context 66(3) SOCIAL SERVICE REVIEW 349,377 (1993).

Linda Gordon, PITIED BUT NOT ENTITLED: SINGLE MOTHERS AND THE HISTORY OF WELFARE (1994).

C. Brown, PUBLIC RELIEF 1929-39, 309 (1940).

The “Suitable-home” Requirement, 35(2) SOCIAL SERVICE REVIEW 203,206 (1961).

AFDC Income attribution: The Man-in-the-house and Welfare Grant Reductions, 83(6) HARVARD LAW REVIEW, 1370,1386 (1970).

Charles Murray and the Under Class: The Developing Debate, 30 (1999).

Charles A. Murray, and Richard Herrnstein, THE BELL CURVE INTELLIGENCE AND CLASS STRUCTURE IN AMERICAN LIFE (1994).

Francis Galton, Eugenics: Its Definition, Scope and Aims, 10(1) THE AMERICAN JOURNAL OF SOCIOLOGY (1904).

Shockley on Eugenics and Race: The application of science to the solution of human problems (Roger Pearson, 1992).

Elizabeth T. Powers, The Impact of AFDC on Birth Decisions and Program Participation (Working Paper No. 9408, Federal Reserve Bank of Cleveland, 1994).

Nicholas Lemann, THE BELL CURVE FLATTENED available at: http://www.slate.com/articles/briefing/articles/1997/01/the_bell_curve_flattened.2.html (Jan 18, 1997).

 

 

 

 

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