The Modern Welfare State Erodes Individual Initiative

Ever since its conception, the implementation and adaptation of the welfare state have both intrigued and perturbed economists.  While many have praised welfare’s ability to maintain and support a minimum societal level of well-being for all citizens in their time of need, others have expressed doubts at its level of effectiveness—especially its ability to motivate the impoverished out of poverty.  In the United States alone, many financial analysts became concerned at a sudden spike in citizens dependent on welfare—up almost 10 percent over the past decade (HHS Report).  These unfortunate statistics represent the manifestation of many economists’ fears surrounding the effects of the welfare state—a deadening of personal initiative.  In theory, the welfare state should only provide financial relief on a temporary basis, lasting only as long as it takes the recipient to re-enter the labor pool.  In practice, however, the ideological flaws in this idealistic notion reveal themselves.  Rather than boosting morale and providing the social services necessary to improve the lives of the poor, the modern welfare state in effect traps the unemployed under the umbrella of government-provided assistance, effectively limiting the individual self-motivation to improve one’s economic status.

The glaring fault in the welfare state stems from an unintended side effect, known today as the unemployment trap.  At its most basic level, the unemployment trap hypothesis theorizes that by giving welfare benefits to the unemployed, the opportunity cost of returning to work becomes too large, leaving the impoverished “trapped” within the welfare system.  This notion has been in existence for almost sixty years, beginning with the findings of political scientist Charles Murray.  In his work, Murray asserts that the welfare state creates a pervasive incentive—a government provided benefit that creates adverse effects—that leads to the unemployment trap (Murray, 9).  In his words, he believed that instead of assisting the poor, government welfare “produced more poor instead” (Murray, 9).  Since then, multiple studies have been released that support the existence of this financial trap.  At the turn of the century, studies noted that while the welfare transfer payments steadily increased, the poverty line did not (Anderson).  As a result, many recipients of welfare realized that they could earn a better, more consistent income through welfare support—which included a multitude of benefits—than they could through the market economy.  Milton Friendman described this phenomenon through a scenario where if a citizen chose to make more money than welfare provided, they would then lose their plethora of benefits, including subsidized housing, food stamps, and income support (DeLong).  In this situation, Friendman argued, it would be completely rational for a welfare recipient to lose any self-motivation to re-join the workforce, as the benefits received through the government are greater than what can be found on the free market.  In practice, economists have seen the negative effects of the unemployment trap at work.  A study conducted in 1980 concluded that only 12% of welfare recipients in New York City would be willing and able to leave the welfare system (Mead).  Overall, by providing benefits via welfare payments that do not exceed the opportunity cost of searching for a job, an unemployment trap is created, leading to a direct decrease in overall individual initiative.

In an effort to document the effects of the unemployment trap on individual initiative, a comprehensive case study conducted by Amy Butler on the effects of the welfare state in Poland during the 1990’s was conducted and appears to confirm the suspicions of previous economists.  Before any labor statistics were taken, a personality inventory of the Polish people revealed some startling results.  According to the survey, many of those who had recently lost their jobs still held the belief that a new job would automatically seek them out, while in reality the converse is true (Mozolowski).  As a result, many of whose on government assistance simply lost the desire to search for a new job, as they incorrectly assumed that a new form of income would appear without extensive effort.  Additionally, the study found that many Poles were content to remain on welfare until a “great opportunity” presented itself (Butler, 11).  The study determined that these ideologies were a result of the current setup of the welfare state in Poland, and most likely contributed to the dismal statistics found during the study.  By 1990, the study found that while 45% of Poles had a desire to improve their financial situation, a meager 5% had actually begun to search for a new job (Butler, 11).  On the other side, many employers were disappointed with the 5% that eventually decided to apply for new employment.  A survey of employers found that many believed that welfare negatively impacted the Poles’ ability to think critically on their own, leading to their measured decrease in personal initiative (Butler, 12).  This startling fact may be the result of government educational facilities set up in Poland.  An adjacent study of the government educational system at the time discovered that their efforts were both “inadequate” or even “nonexistent”, causing many to return back to welfare assistance (Bartyzel).  In its entirety, Butler’s study of 1990’s Polish welfare shed light onto to initiative-diminishing effects of the welfare state, showing how a combination of ideological fallacies and unemployment trapping lead to the deadening of self-motivation.

The development of the welfare state over the past century has provided ordinary citizens comfort and support in knowing that financial assistance can be provided in times of economic downturn.  While this system has its benefits, many continue to express skepticism over its overall effectiveness, especially concerning its effects on personal initiative.  From the results of multiple studies, many notable economics have agreed upon the existence of an unemployment trap created by government welfare, raising the opportunity costs associated with reentering the workforce and convincing many citizens to remain on government assistance.  Through the systematic entrapment of impoverished citizens under publicly funded financial aid via the unemployment trap, the modern welfare state removes the incentives necessary to motivate the unemployed to continue to pursue work, leading to the overall deadening of personal initiative.

(Visited 312 times, 1 visits today)

About Jake Thorne

Jake Thorne is Editor-in-Chief of the Review, studying Honors Political Science and Economics at the University of Michigan. He has been an active contributor to the Review since 2014. He can be reached at jnthorne@umich.edu