Work Without Pay: Work Incentives and Patterns in a Salaryless Environment

Abstract

In most Western, industrialised countries the relationship between work and welfare is close, but asymmetric. The effect of employment policy on welfare recipients or welfare systems is usually a minor consideration when determining the former; whereas the effect which welfare policies are expected to have on work patterns is often the controlling consideration when welfare rates and conditions are decided. In fact, one of the most influential factors in the establishment of social welfare policies is the presumed effect of such policies on incentives to work. Almost all social welfare programmes throughout the world have written into them a “wage stop” which guarantees that recipients of grants—sometimes even of social insurance payments—will not receive as much income from such programmes as they could receive from working. So pervasive and deep is this fear of a work disincentive that even those who cannot work, such as the aged, the handicapped, and children; and those whom public policy says should not be required to work, like the mothers of infants, are usually limited as to the amount which they can receive from welfare payments, regardless of need, to somewhat less than the amount which they would receive if they were able to work. In Israel, for example, social welfare grants are fixed at 40% of the average wage; in France, old age pensions will rise by 1975 from even lower rates to 25% of the annual wage at age 60, and 50% at age 65 [International Labour Review, 1972], whereas unemployment insurance benefit, which was 35–40% until 1974, rose to only 70% of the average annual wage [Oechslin, 1972]. In the United States, “… In 1968, the average weekly unemployment insurance benefit was about one‐third of the weekly wage in employment that was covered under the programme” [Handler, 1972]. By thus making it impossible for many persons to acquire through welfare what they theoretically could (but actually could not) acquire from work, the fear of work disincentives, operating through the wage stop, is one of the factors guaranteeing the existence and continuation of poverty.