The welfare state is the name for a collection of different government policies and programs designed to help the poor. Those policies and programs may include healthcare benefits, unemployment benefits, old age pensions, child benefits, some types of education subsidies, aid to the disabled, food stamps, housing subsidies, minimum wage rules, collective bargaining rights etc.
The welfare state is criticized in a number of ways. I’ll just mention a few arguments against it, without going into much detail and without replying to them:
- it creates dependency and destroys self-reliance, responsibility, effort and other virtues
- it rewards the undeserving and promotes subsidized idleness
- it violates property rights because the taxes necessary for funding welfare are a form of theft
- it imposes slavery on the productive and the responsible because it forces them to work for the benefit of the lazy and the irresponsible
- it destroys incentives for taxpayers to become productive
- it’s self-destructive because it destroys the prosperity that it wants to redistribute (the destruction of incentives results in the destruction of prosperity), or because it renders poverty more attractive
- it’s not sufficiently targeted to the most needy: wealthy families may get child benefits, and wealthy pensioners may get healthcare subsidies
- it requires a heavy state bureaucracy that usurps the right to invade the privacy of potential welfare beneficiaries (in order to ascertain whether people deserve benefits: are people really unemployed or unemployable? does their health status merit health benefits? etc.)
- it can be gamed and people may engage in welfare fraud.
Some of these criticisms are evidently more pertinent than others, but let’s not evaluate them one by one. If we assume that there’s some truth in some of them, then it may be worthwhile to look at some possible alternatives. People often propose non-state solutions such as private charity (enhanced and encouraged by way of tax policy, education etc.). An advantage of private charity is that it fosters solidarity, virtue and a sense of belonging. However, it’s also counter-cyclical in the sense that it’s least available when most necessary (e.g. during economic recessions). Moreover, it tends to be unreliable and unequal (it may not cover all the needs of all poor people all of the time).
Another possible alternative is to keep a system of state provision of welfare, but to radically alter the specifics of the system. For example, one could give people a guaranteed and unconditional basic income at a level high enough to cover basic needs. Every individual would receive the basic income whatever his or her predicament, current or future. It would be funded with tax revenues, and therefore wouldn’t be a reply to the theft and slavery criticisms of welfare, but those criticisms are weak anyway (because they imply that all state activity, including policing and infrastructure, are illegitimate). It would, however, be a strong reply to the privacy infringing aspects of the current welfare system. A basic income, since it’s unconditional, would not require intrusions into the private lives of citizens in order to ascertain whether they deserve a benefit or not. It would undo the complexity of many current programs and hence also remove the need for a large bureaucracy. And it would counter the charge of assisting the undeserving: although many undeserving would receive a basic income, few would complain about it since everyone would receive it. Welfare fraud also would obviously become impossible.
An added advantage of a basic income system of welfare would be that it allows people to take more risks. They know that they won’t be destitute if things don’t work out. More risk taking can be socially advantageous because it can result in more innovation, more productivity etc.
However, notwithstanding the set of advantages, a basic income system will probably not be a perfect substitute for existing programs. It’s questionable, for example, whether a basic income, even one that is set at the highest sustainable level, will be enough to cover certain catastrophic healthcare costs. In general, a basic income theory doesn’t take into consideration the fact that different people have different needs and abilities and therefore require different amounts of resources.