Welfare programs throughout the Western world have never been able to avoid the moral hazard that arises from the fact that when you keep giving people something for nothing, they stop trying to earn it for themselves.
The classic examples are such as welfare programs that immediately create dependency on government handouts – a dependency that all too often becomes inter-generational. Another is the American AFDC program – Aid to Families With Dependent Children – which aimed to help young mothers by giving them a monthly payment per-child.
The result? One of the rules was that if there was a father/husband living in the home, the money was cut off. So … guess what? Poor people are not so stupid. They soon realized that they could get more money by having more babies out of wedlock, and by ensuring their boyfriends were not caught living with them. The unintended, but disastrous consequence was that the AFDC program created more fatherless babies and more dependency on government.
But many Western governments could not – still cannot – resist flirting with the idea of a so-called Universal Basic Income, or a Negative Income Tax (NIT), or what is sometimes coyly called a “basic income supplement.” That’s a fancy expression for a graduated subsidy, by which recipients receive a cash payment to bring them up to a specified average income level. Theoretically, this is designed to replace all other welfare benefits – as well as the considerable load of bureaucracy that comes along with it. What toying with this idea amounts to is a recognition by governments that welfare doesn’t work – “so let’s just give them the money!”