Welfare paternalism

By Eric Crampton 04/08/2014

Paul Ryan’s welfare plan, including stronger reliance on case managers to guide clients out of income support and into work, reminds me an awful lot of the Beaulier and Caplan piece on behavioural economics and welfare. It was published in Kyklos; the link above goes to the ungated version.

I’d paraphrased their paper a few years ago:

If we take behavioural economics seriously, we’ve good reason to believe that the anomalies it describes are found primarily among the poor and are exacerbated by the welfare system. Poor people are more likely to exhibit behaviours that reflect more than just high rates of time preference: they demonstrate little ability to foresee the consequences of actions. The poor (and less educated / lower IQ – the two go together) are more likely to be heavy drinkers, to be obese, to smoke, to buy lotto tickets, to take illegal drugs, and to commit even non-economically motivated crimes (theft would not be surprising, but violent crime isn’t lucrative). Low IQ amplifies behavioural anomalies. And, the dole makes things worse. If you start out with big self-control problems, you’re likely to overestimate your ability to motivate yourself to find work – “I’ll go on the dole for now but will look hard for work tomorrow”. Absent the income backstop, you’d have to look for work. Worse, if welfare payments are more comfortable than the first year of work, after which work is better as income rises, folks with high discount rates and self-control problems may decide never to leave even though it would be in their long run interest. Consequently, welfare payments may make welfare recipients worse off, contra neoclassical economics.

Ryan’s plan has recipients working with case managers to develop short- through long- term goals, with wraparound tailored support in place of some current federal programmes:

The OG system will promote a more holistic form of aid to move individuals and families out of poverty. One promising method this proposal envisions is the use of case management. Here’s an example of the number of steps illustrating the OG in practice:

  • First, each state will approve a list of certified providers that are held accountable for providing quality service and achieving results (such as moving people to work, out of poverty, and off of assistance).
  • Next, a person will select a provider, and the provider will conduct a comprehensive assessment of that person’s needs, abilities, and circumstances. 
  • Then, the two of them will develop a customized plan to address the recipient’s needs. The plan could take the form of a contract—with sanctions for failing and bonuses for exceeding expectations. The plan would offer financial assistance to address immediate needs, like food, clothing, child care, and housing. But it would also work on setting goals, learning skills, and developing a broader support system.
  • At the most basic level, successful completion of a contract will involve an able-bodied individual obtaining a job and earning enough to live above the poverty line. Each state may choose to define success slightly differently insofar as those basic conditions are met.

I’m not a particular fan of paternalistic approaches. They’re insulting. But at least this variant is targeted at those who have demonstrated that they need a bit more of this assistance. Further, help to get out of poverty already comes with strings. Between this kind of approach and one that simply provided a minimum income with no strings, well, it’s a tough call. I don’t like the paternalism, but I do expect it could be more effective in getting people into better situations, conditional on there being some sufficiently competent and empathetic army of social workers to do the job. [update: link fixed]


0 Responses to “Welfare paternalism”

  • seems to me that these approaches address exactly the wrong group of unemployed people – feel free to correct me with relevant data, but:

    Current levels of unemployment are higher than our last “low” by some 2.5%, or around 35,000 jobs (memory grab data – probably adrift, but not by orders of magnitude).

    This means that around 35,000 people who previously were employed and so presumably motivated enough to find and then go to work currently are not.

    So, you have to find AT LEAST that many jobs just to get back to the baseline of hardcore unemployment.

    Other research tells us (and as an HR professional, I concur) that employers prefer to take on people who have the least amount of time away from the workforce. The longer the gap, the less likely the employer will make an offer.

    Ergo, quit focusing on the long-term unemployed – its those at the employment margins that will give the best “get them off welfare” solution.

    • The approach here-mentioned is better for helping the longer term unemployed and is complement to welfare, rather than part of unemployment insurance or a job-seeker’s benefit.

  • If the Ryan plan’s adopted, the states will experiment with different delivery methods. I also expect that the US plan, which would combine case managers with serious threat of having all benefits withdrawn, might have different results than case managers alone.

  • We have heard of the Wisconsin model years ago, and here we have another man coming from Wisconsin, offering something more along the lines of holding the poor and welfare recipients responsible for their lot, while not addressing other important issues.
    Paul Ryan: http://en.wikipedia.org/wiki/Paul_Ryan

    Yes, there are many diverse ideas about “welfare reform”, and how to motivate those receiving welfare for longer “to get off their backsides” into work. We have the same being done here in New Zealand, where MSD are increasingly using contracted private service providers, getting paid nice fees and so for their delivery, while “assisting” people into paid employment.

    Like in the UK they now also put increasing pressures on sick and disabled, and even their doctors, to not sign them off as unable to work, but rather have them go out and compete with the fitter and healthier to find work.

    Some links to info re this:



    There is a drive to let problems get solved by “intensive case management” and such outsourced agencies as proposed by Paul Ryan, who are allowed to “experiment” with new measures and approaches. The responsibility is laid upon the affected poor, sick and those on the margins of society. Their personal flaws seem to be all that is being looked at, so they are offered certain options, while bound by contracts to perform and make the right choices, and when they fail, they get sanctioned, in the worst case have their support reduced or stopped altogether.

    At the same time nobody really addresses other important issues, like employers’ reluctance to hire certain people for reasons of not having worked for a longer time, for having a disability, illness or for having failed in their lives – in whatever respect.

    It is already hard enough to survive on welfare, and I know hardly anybody, who chooses to live off a benefit, rather than have regular, sufficient income and a better life.

    So perhaps the whole approach that seems now so popular is not working, because we have governments fail to deliver the conditions for enough employment, for incomes that enable people to live a decent life, for providing sufficient incentives for training? Also do employers need to be held to account, while perhaps also giving them some incentives, like subsidies from the government, to hire long term unemployed, like sick, disabled, reformed criminals and whatever there are. Last not least employment needs to offer some stability and reliability, and not simply be in the form of casual, part time work, which does not pay enough to survive on.

    Perhaps a Universal Basic Income, serving at the same time as a basic tax credit, or tax free income, only needing top ups for certain impaired and other groups of people (students, those unable to afford rental accommodation), is a better solution to the present welfare system? It would at least save hundreds of millions in admin costs.

    All kinds of pressures and incentives will though achieve little, when there are not the job and education opportunities that the affected need to improve their conditions. Presently the focus is all on cost saving, no matter what, while the governments leave too much to other parties to sort out.

    I do not think we need further ideas and advice from the US, where they have worse social outcomes than we have here, and have tried for decades to experiment with endless measures, with tighter criteria for access to welfare.

    And re evaluation of policy, we are still waiting for the present NZ government to present us their results in transparent figures, which are not forthcoming: