Poverty before Politics
16 April 1977
SUGGESTED
Monetary Policy
Economic Theory
Economic Theory
25 June 2024
How welfare benefits undermine work incentives
Social security benefits now discourage people from working. Indeed it is surprising that ‘voluntary’ unemployment is not more prevalent.
The impasse requires dramatic surgery: A reverse income tax should replace unemployment, sickness, retirement and other social security benefits; personal income taxes should be reduced for all income groups, particularly families with children, with a maximum marginal rate of 50 per cent; and employees’ national insurance contributions should be abolished.
As they showed in the 19th century, the British people can be trusted to learn how to handle their money to provide welfare for themselves. The welfare state interrupted this process by discouraging self-provision and by the inflation that has attacked the savings and insurance of people too poor to hold assets in other forms.
The impasse requires dramatic surgery: A reverse income tax should replace unemployment, sickness, retirement and other social security benefits; personal income taxes should be reduced for all income groups, particularly families with children, with a maximum marginal rate of 50 per cent; and employees’ national insurance contributions should be abolished.
As they showed in the 19th century, the British people can be trusted to learn how to handle their money to provide welfare for themselves. The welfare state interrupted this process by discouraging self-provision and by the inflation that has attacked the savings and insurance of people too poor to hold assets in other forms.
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