Welfare to Work

 

Check out this Economist article about the considerable success of the Clinton administration's welfare reforms. I'm not sure why some people are surprised that they worked. People are, after all, more or less rational beings. If you offer them clear and good incentives to work rather than stay on the dole, then they will probably work.

I would argue for going a little bit further than simple welfare-reform, however. I think a small negative tax rate for low earners (not a negative income tax, which is a different concept and one I strongly disagree with), together with a removal of the minimum wage, would be a much better way to help the unemployed than simply providing them with unemployment benefits. For example, the state might top up the first Lm100 you earn at a 30% rate, the next Lm100 at 20% and so on up to an established ceiling. This would have the added benefit of motivating some people to move from the black economy into the formal one.

Maybe instead of preventing people who are relatively unproductive from working for lower wages (and then paying them unemployment benefits) we should motivate them to earn as much as they can on their own steam and then reward them for that, while offering them the possibility of paid training if they want to invest in raising their productivity. I think it would be a little bit more dignified than living on the dole.

I don't seriously expect any of this to happen in the foreseeable future, least of all in Malta. But the nice thing about blogging is that even ideas whose time has not come, and that one would not dare express in 'real life', may be freely aired.