The State of Welfare

Thanks to a combination of injury and the British spring – with accompanying rain, wind and sleet – I’ve spent more time staring at my twitter feed than is necessary. But…it hasn’t all been in vain, via the Future Foundation I came across some interesting data from the 29th British Social Attitudes report. A summary of the report can be found here.

One sub-section deals with ‘attitudes to the recipients of welfare’. On this topic the report concludes that “people are more sceptical about whether benefit recipients deserve the help they receive than during the last recession in the early 1990s and attitudes show little sign of softening”. These results are of particular interest as I’ve spent the last four months attempting to theoretically model the role that ‘deservingness’ plays on motivating altruism in individuals.

In behavioural economics these models are known as ‘models of other-regarding preferences’, as unlike standard economic theory they assume that individuals derive utility from other people’s payoffs as well as their own. [The most well-known is the Fehr-Schmidt model of inequality aversion, in which individuals behave altruistically in order to minimise inequality in outcomes.] The model I devised assumes that altruistic behaviour is motivated by a belief that the recipient of that altruism is deserving of help. Deservingness is determined by, amongst other things, the difference between money earned and money received. As an illustrative example, imagine you know someone who worked eight hours at an agreed rate of £10 per hour, earning a payoff of £80 but only receiving £40 in payment. The model assumes that information about this discrepancy (or other types of information when this detail is not available) would motivate altruistic behaviour.

Clearly, our ‘altruistic donations’ to the welfare state are not voluntary. However, if this is an accurate model of altruism and if people are starting to become sceptical about the deservingness of benefit recipients, this has implications for people’s willingness to see their money go to people they deem ‘undeserving’. Indeed the BSA report shows that over the last eight years views toward governments role in welfare have changed. Growing numbers of people agree that unemployment benefits are too high while fewer people agree that the government should be the main provider of support to the unemployed.

There are a number of ways to look at this last bit of information. Either people think that government is an inefficient provider of welfare to the unemployed and private charities would provide welfare more effectively. Or, people think welfare recipients are not deserving and they don’t want their tax money being spent on them against their will…My money is on the latter. As with so many things in economics, I think the remedy to this lies in information. Honest and reliable information, communicated effectively, regarding the circumstances of who are receiving benefits would allow people to make informed beliefs about their deservingness and therefore, optimal decisions about their own altruistic behaviour and attitudes. Charities learnt the effectiveness of this type of information a long time ago, perhaps the government should look towards them as an example.