This memo will include the discussion on whether there are adverse effects of welfare programs on work. The structure of the memo includes the background of the welfare programs, and the argument how the recipients of the incentives failure to work cannot be accrued earnings from the programs. The causes of the reduction of labor will also be looked into. Consequently, the importance of welfare programs and the benefits that they have will be considered, and their effect on labor production will be evaluated.
The provision of social assistance programs to the disadvantaged and poor citizens has been on the rise in the developing countries. The programs are aimed at transferring funds so as to reduce poverty to those people who are low-income earners. The programs are very effective in improving the living conditions of the recipients. However, there have been questions on the labor output of the recipients. It has been noted that there may be chances that the programs discourage work. On the provision of food stamps, the same can be said. The recipients are treating the food benefit stamps as income and using it on other needs. Therefore, this serves as a substitute for the money that would have been earned if the individual worked. Therefore, there is decrease in labor.
However, according to studies that have been made, there is no credible evidence that the programs do directly reduce labor output of the recipients. Therefore, the observation the programs may be serving to encourage bad behavior, such as laziness among the poor has no grounds.
Welfare programs and work
The safety net programs were made to ensure that low-income families achieve a basic level of consumption. Therefore, a family is guaranteed to benefit from the programs if they have no income. The earnings of the individual are corresponded by a respective decrease in the earnings from the program. As such, if the family wants to continue receiving the benefits, they will reduce their work output, which will in turn have negative results on their income, but a positive one on the benefits that the receive. The guarantee that the family will receive benefits even if their work rate reduces thus has an adverse effect on the programs. According to the standard static labor supply theory, there are high chances that the programs will reduce the supply of labor, in extensive as well as intensive margins. True to it, the introduction of the food stamp benefits has led to the reduction of employment and hours worked, according to a study conducted. Therefore, the recipients may decide not to work at all so that they can keep the benefits. However, this is just but a theory. More evidence needs to be availed so that there will be reason to blame the programs for reduced work output.
According to a World Bank report, after an examination of the spending of the cash from the programs was conducted, it was noted that the money was not squandered on leisure activities such as alcohol and tobacco. It was also noted that the rate of births to single parents were not increased by the introduction of the welfare payments. Coincidentally, the termination of the payments did not result in the decline in the rates of single motherhood. This shows that people are not willing to be unable financially, or in this context, fail to work so that they can receive the payments. The payments may help to reduce poverty but they do not them fail to work. Its core objective was to get the poor into jobs, a feat that it achieved. Then, there was an increase in the labor supply from single mothers. The job market is also not very attractive. There are few job opportunities, and the ones present require one to be skilled so that they can be employed. The poor people on the other hand are uneducated and thus they lack skills to perform some jobs (Porter). Therefore, they might fail to find jobs, not because they are lazy, but the opportunities are simply scarce. Thus, when the benefits are scrapped off, these people will be left without any source of income, and it is unlikely that these will produce a positive impact on the response of the recipients working (Gunn).
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The income effect is thought to have negative effects on work. However, according to studies made, the tax rate in developing countries show that the income from the taxes is low. Thus, it cannot be counted upon to maintain a family to the extent that they are comfortable enough to stop working. The small gain is therefore unlikely to lead to a negative supply of labor. In some of the programs, eligibility is not determined by the work status. Therefore, a beneficiary will not become ineligible just because they work more or less. As such, no effect is felt on the supply of labor. In some of the programs, the labor supply in wage employment may reduce but there the increase of labor force in self-employment supersedes this. Therefore, an increase is noted, rather than a decrease in the overall output of labor. In Uganda for instance, the Youth Opportunities Program played a major part in helping the youth in the country become self-employed. It was even noted that the number of hours worked increased when the youth become self-employed. As such, they did not fail to work so that they could benefit from the group. The programs may also provide money which can be used to start businesses. Thus, this increases work output.
There is evidence that suggest that the supply of labor of the secondary worker in a family is more responsive to the programs. As such, the wifes supply of labor is expected to decline more than that of the husband. However, in most cases, the breadwinners in a family are usually men. Therefore, the fact that the working hours of the husband are not affected by the transfer programs show that the program do not negatively affect labor.
Many countries have adopted the idea of having programs that assist the poor. The programs provide funds to the disadvantaged so that they can afford basic commodities such as food. The programs have been successful in their core objective, and many families have managed to get out of poverty as a result. However, there have been concerns that the programs have made the recipients to develop bad behavior, mostly so becoming lazy. So as to determine whether the concerns hold any grounds, several studies have been conducted. The results of the studies have, however, shown that the concerns are not true. As such, no tangible evidence was found that would prove that the programs made the beneficiaries lazy and to consequently stop working. The earnings from the programs are so meager that they cannot entirely support a person who is not working. It is therefore not logical for a person to cease working because he will receive the earnings. The programs have been found to increase the labor output in countries such as Uganda. Also, it was observed that the money from the programs was not used on alcohol or tobacco, which are the main leisure activities that the money can be spent on. Therefore, the assumption that the programs act as disincentives to work is false, and holds no grounds.