Do family benefits provide a welfare pedestal?

The concept of a welfare pedestal has been popularized by Noel Pearson. As a lawyer and passionate advocate for the interests of aboriginal people who live on the Cape York Peninsula of North Queensland, some readers might expect that he would spend his time arguing for more government hand-outs to remedy social problems in aboriginal communities. However, Pearson recognizes that the welfare programs are actually a major cause of the social problems in those communities and his main focus is on finding ways to stop hand-outs from harming his clients. He is not against government help for his clients, he just wants to ensure that it does them more good than harm.


The insight behind the welfare pedestal is that welfare payments can provide perverse incentives by encouraging some people to remain on welfare rather than to seek paid employment. Over the last decade or so, concern about an emerging problem of inter-generational welfare dependency (in non-indigenous communities as well as indigenous communities) has led to some tightening up in the provisions attached to unemployment benefits. It is too soon to claim that the problems associated with unemployment benefits and pretend work schemes have all been resolved, but the problems are now widely recognized and some appropriate remedial action is being taken.

The example of a government program contributing to the welfare pedestal that Pearson gives in his recent lecture, ‘Pathways to Prosperity for Indigenous People’, is family benefits. He suggests:
‘Life on the welfare pedestal in a country that distributes money through a generous family tax benefit system is quite a rational choice’ (The Sir Ronald Trotter Lecture, New Zealand Business Roundtable, 2010).

I had not previously thought of the family tax benefit in that way. I have tended to view the family tax benefit as a kind of negative income tax, providing net benefits for families with low and modest incomes. I was previously aware of adverse incentives resulting from fairly high effective marginal tax rates for people on fairly modest family incomes above the point where the means test begins to cut in (about $45,000). According to the way economists usually look at these things, however, a family with four children obtaining $19,600 per annum from family benefits has no disincentive to obtaining additional income from work of more than $25,000.

In another paper Pearson acknowledges that the absence of punitive marginal tax rates is probably not an important consideration when people in Cape York Peninsula make their decisions about how many hours of the week they allocate to work or leisure. He writes:

 ‘Indigenous parents are having large families at an earlier age. Their welfare payments add up to a significant yearly wage. This income is received without them ever having to make any active decisions about education or work. When they have started receiving family payments, they face this choice: have an income which they are prepared to exist on for minimal work obligations or work longer hours for a limited increase in income and significantly less leisure time.

The behaviour of people in our communities indicates that many of our people do not intend to increase their income by increasing their labour supply. In some remote communities, it has been difficult to find applicants for the real jobs that do exist, despite the fact that the vast majority of people are unemployed’.

Pearson argues that ‘conditions and incentives to make active and beneficial life choices should apply to family payments’ even though he acknowledges that problems arise because such payments ‘are not indigenous-specific schemes’.

That poses a question: If people make the choice to live on generally available family benefits rather than to earn higher incomes, why should we view this as a problem? I see no problem in individuals choosing to live on low incomes. We should respect the choices that some individuals make to live a life of poverty (and of chastity too, if that is their choice). I can’t see why anyone should have a problem with individuals making whatever income/leisure choice that they desire.

I can see a problem, however, in governments providing family benefits to people who do not have adequate regard for the well-being of their children. I think we (taxpayers/voters) should insist that family assistance should only be provided to parents when they meet conditions such as ensuring that their children attend school regularly. Perhaps it would not be too difficult for a prime minister who has a special interest in educational opportunity to find a simple way for such a condition to be applied to family tax benefits across all sections of the community.



Does Adam Smith's 'impartial spectator' provide a sufficient basis for cosmopolitian ethics?

One of the benefits I have obtained from reading Nicholas Phillipson’s excellent book, ‘Adam Smith, an Enlightened Life’ is a better understanding of what Smith was trying to achieve in writing ‘The Theory of Moral Sentiments’ (TMS). He apparently saw the book as a contribution to a ‘science of man’ based on the observation of human nature and human history. As such, it provided a theory of sociability as well as a theory of ethics.

Phillipson suggests that TMS can be viewed as a response to earlier writings of other scholars. In the interests of brevity, an appropriate place to begin the story is with David Hume’s view that human personality had been refined by the civilizing process - that humans were happiest when they were active and were best able to live an active life in a commercial society. By contrast, Jean Jacques Rousseau claimed that humans were naturally indolent and had only been truly at one with themselves in the ‘savage state’, before they discovered commerce and developed a vain desire for superiority over one another. Smith agreed with Hume - the TMS provides his view of how humans learn morality from the experience of common life and how this can lead to the improvement of society.

Smith acknowledged that everyone wants to better their condition. At one point he even seems to imply that everyone places higher priority on improving their relative position in society than on achieving an easier and more pleasurable life (TMS: 50). (My grandmother, whose life became easier and more pleasurable in the 1950s after she obtained her first refrigerator and washing machine, might have thought that comment to suggest that Smith was not sufficiently aware that he lived a privileged life. But I digress!)

Smith also makes the point that individuals should be responsible for looking after their own interests: ‘Every man is, no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so’ (TMS: 82). (I think Smith makes a stronger case for individual freedom here than who make the dubious claim that each individual is always the best judge of his or her own interests. But I digress again!)

Impartial spectators condemn violations of fair play among individuals competing to better themselves:

‘In the race for wealth, and honours and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is at an end. It is a violation of fair play that they cannot admit of’ (TMS: 83).

Smith’s ethics is based on the simple proposition that when individuals reflect upon their own past actions from the viewpoint of an impartial spectator they feel remorse when they have acted unjustly. His response to critics who suggested that he was reducing the principles of ethics to popular culture was that while children might seek to be universally agreeable, mature people who have important interests to manage find that they cannot please everyone. While some people might be content to follow popular culture, those who are morally responsible and fitted for public life have to establish their own impartial spectators as a judges in their own minds (Phillipson, p164-165).

Irrespective of whether we find it useful to imagine an impartial spectator embodied within our selves, it is clear that humans do have the capacity to reflect on their own behaviour and to follow the dictates of conscience rather than always seeking immediate pleasure or following selfish interests. This is not always easy, however. As Jonathan Haidt points out, our efforts to become morally responsible may be hindered by our inner lawyers who seek to excuse us and blame others for our misdeeds. Haidt suggests that it is worthwhile acknowledging our faults to ourselves:

‘When you find a fault it will hurt, briefly, but if you keep going and acknowledge the fault, you are likely to be rewarded with a flash of pleasure that is mixed, oddly, with a hint of pride. It is the pleasure of taking responsibility for your own behaviour. It is the feeling of honor’ (‘The Happiness Hypothesis’, p79).

Identity economics, developed by George Akerlof and Rachel Kranton, may provide a useful framework to consider the process of character development that Adam Smith was discussing. Everyone obtains satisfaction from acting in accordance with their identity and is discomforted by acting contrary to it. A person who perceives himself or herself as the kind of person who respects the rights of others is likely to obtain satisfaction from acting in accordance with this ideal. This person may develop a reputation for trustworthiness and is likely to be trusted.

However, I don’t think it is particularly useful to try to think about development of identity and character outside the context of social interactions that reward particular behaviours and penalize others. It seems to me to be a fact of life that a person who identifies strongly as a member of a small community and has limited social interactions outside that community is less likely to feel conscience-stricken if he or she acts unjustly towards a stranger than towards another community member. The ethics of respect for the rights of strangers is no doubt encouraged to some extent by abstract ideals that would be endorsed by impartial spectators, but is likely to be more strongly encouraged by mutually beneficial commerce which offers ongoing rewards for ongoing cooperation between strangers.



Related post:
Do moral instincts always promote human flourishing?

Does big government weaken the social fabric?

Perhaps I should confess at the outset that I cannot provide a definitive answer to this question. What I am about to present is some evidence suggesting that big government might weaken the social fabric. I think the evidence is sufficiently strong to suggest that the question should be considered seriously. (I provided similar evidence a couple of years ago – and I might have to write about it a few more times before many people take notice!)


The current post is one of a series in which I am looking at how values differ between high income countries with big governments and those with smaller governments. Previous posts have looked at child qualities that are encouraged, attitudes toward work and success and tolerance of neighbours who are different.

The indicators I am using to measure strength of the social fabric are estimates of the percentages of populations who say that the following activities are never justifiable: falsely claiming government benefits; cheating on taxes; and accepting a bribe. As in previous posts in the series I have focused on 14 high-income countries with broadly similar European cultural heritage for which data is available from the most recent World Values Survey.

In the table below these countries have been ranked by size of government, using government spending as a percentage of GDP as an indicator of size of government. (For each variable the five highest numbers are shown against a red background and the five lowest ratings are shown against a blue background.)

The data in this table provides evidence that people in high income countries with big governments tend to have more permissive attitudes toward a range of anti-social activities than those in countries with smaller governments. That doesn’t establish causation, but I think it should make researchers interested in trying to understand what is happening.

Why should we be concerned if big government does tend to make people more relaxed about welfare fraud, tax evasion and bribery? Can’t the problem be solved by just employing more public servants to prevent such anti-social activity? I don’t think so. Increased surveillance poses further problems including the added cost of service delivery and the increased intrusion of government officials into the private lives of citizens.

Are people who live in welfare states more tolerant?

I am not sure why I ever thought that people who live in welfare states would tend to be more tolerant than people in countries with smaller governments. It might have something to do with all the talk about social solidarity and social cohesion by those advocating collectivist policies. Rather than thinking about egality and fraternity I should have been thinking about liberty - and the historical links between respect for the rights of others and civility.


World Values Surveys ask a relevant question about the people respondents would not like to have as neighbours. People were asked to choose from a long list including drug addicts, heavy drinkers and people with criminal records. Reluctance to live next to people belonging to some of these groups may have more to do with safety concerns than with intolerance. Three groups that seem to me to provide a fairly neutral test of levels of tolerance in different countries are people who have aids, immigrants or foreign workers and homosexuals.

As in other recent posts on differences in values between people living in countries with relatively big and relatively small governments (here and here) I have focused on14 high-income countries with broadly similar European heritage for which data is available from the most recent World Values Survey (WVS 2005 – 2008). These countries have been ranked by size of government, using government spending as a percentage of GDP as an indicator of size of government (OECD Economic Outlook data on general government outlays as a percentage of nominal GDP, averaged over the three years 2005–08).

In the table below the five highest percentages for each variable are shown against a red background and the five lowest percentages are shown against a blue background.

Apart from Swedes, it seems that people who live in countries with big governments are relatively intolerant about who they want as neighbours. Social solidarity apparently does not include people who are perceived to be different.