Should the UK cut welfare benefits for the people with disabilities and for those out of work, thereby increasing poverty, to finance more prisons and ammunitions? Opinions differ - and a heated debate is under way about the future of the British welfare system. Professor Maximilian Kasy , Department of Economics , argues that we should create a truly comprehensive safety net for all, rather than undermining the existing system in the name of austerity.
Much of the debate focuses on the budgetary cost of welfare benefits, and on the labor market participation of recipients. Little of this debate is based on clear principles, a vision of the society we want to live in, or rigorous evidence on the effect of alternative policies.
Professor Maximilian Kasy, Department of EconomicsThere are some principles that most economists, regardless of political persuasion, would agree to.
First, coercion, surveillance, or conditionality do not increase the wellbeing of the recipients of benefits. Only by increasing the options effectively available to people can we make them better off. Forcing benefit recipients to take any available job or spend down their savings before receiving help causes economic inefficiency by distorting incentives.
Second, tax and transfer policy requires normative choices regarding how much we care about different people. One can choose not to care much about the wellbeing of the those with disabilities or those out of employment - but there is no "objective reason" to do so (and it is not the choice I would make).
And third, important questions about the impact of transfer policies, including their impact on labor market participation, can only be answered empirically.
The best way to assess the impact of such policies is to use randomised experiments where we compare two similar groups, one that receives the benefit and one that doesn't. This allows us to learn about the impact of benefits on the labor market outcomes, tax contributions, and wellbeing of recipients.
What experiments teach us about job guarantee programs and basic income
I have been involved with two such randomised policy experiments that concluded recently.
The first was a guaranteed job program for long-term unemployed workers in a town in Austria, implemented by the public employment service, running from 2020 to 2024. Recipients were offered either employment in a social enterprise, or subsidized private employment, both at market wages.
The second experiment was a basic income trial in Germany, implemented by the NGO Mein Grundeinkommen, running from 2021 to 2024. Recipients were between 20 and 40 years old and employed at the start of the experiment. They received 1200 Euro per month, no strings attached, for three years.
Both experiments were implemented as randomised controlled trials, and our analysis was pre-registered. In both cases, our research team was independent, did not received payment, and we were guaranteed to publish our findings regardless of what those would be.
These experiments took place outside the UK, but it seems likely that many of their conclusions hold for the British context, as well.
Two striking findings have emerged from these experiments.
First, everyone wants to work! In the job guarantee program, everyone who was offered a job accepted this job. In the basic income trial, there was no decline of employment in the recipient group, relative to the control group.
This finding strongly suggests that work requirements, and the surveillance and coercion that they entail, will not solve problems of unemployment, but only decrease the wellbeing of recipients. Unemployment is a matter of the availability of opportunities, and not due to a lack of desire to participate in meaningful work.
Second, both basic income and guaranteed jobs strongly increased the wellbeing and mental health of recipients.
Basic income improved wellbeing by improving the autonomy of recipients. Recipients had a greater sense of agency and control over their lives, in both their work and their leisure time, due to the safety and absence of surveillance associated with a basic income.
The job guarantee improved wellbeing by improving recipients' sense of purpose and meaning and social belonging. Recipients benefitted from employment above and beyond the monetary remuneration that they received. These different mechanisms reflect the different needs of different groups of people, the young and employed in the case of our basic income trial, the long-term unemployed and marginalised in the case of the job guarantee program.
Austerity and cuts, or a vision for the future?
Where should we take the British welfare system? One option is to invoke the logic of austerity and talk of welfare traps to justify cutting the support network for those most in need.
No objective logic compels this choice, however. Instead, we should ask how we can create a society that provides safety and opportunities for all, by moving the institutions of the welfare state forward into the 21st century.
Where should we take the British welfare system? One option is to invoke the logic of austerity and talk of welfare traps to justify cutting the support network for those most in need. No objective logic compels this choice, however. Instead, we should ask how we can create a society that provides safety and opportunities for all, by moving the institutions of the welfare state forward into the 21st century.Professor Maximilian Kasy
The principles of liberty, equality, and solidarity are good guiding principles to do so.
Liberty suggests that we should improve the set of choices and opportunities available to those worst off, rather than imposing surveillance and control on them.
Equality suggests that we should create a safety net for all, rather than punching holes into the existing net, so that some are excluded and fall through.
And solidarity suggests that we should - especially in a rich society like the UK - be willing to bear the cost required to enable social participation for all.
These principles might be realized in various ways, and there is not one policy which solves all problems. But I believe that a basic income for all and guaranteed jobs for those in need point the way forward to a society providing opportunities for all.
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