Nowadays, somedeveloped countries in Europe and North America have very lenient conditionsfor welfare policies. For example, in the United States, government welfarepayments are commonly known as “benefits”, and welfare traps oftenindicate that one is completely dependent on welfare and little or noself-sufficiency.
This will result in some people with basic working abilities livingby great welfare. However, this is very unreasonable. Everyone is constantlytrying to find the most favorable employment opportunities, no matter whatcapital he can master. In fact, this is his own advantage, not what he thinksof society. But naturally studying his own strengths, or more certainly, hispreference for the most socially beneficial employment. By pursuing his owninterests, he often promotes society more effectively than it actually does. However,this is based on the desire for assets and status.
A competitive environmentcan boost people’s motivation, but excessive welfare policies can make somepeople who are less motivated generate the idea of getting money without laborand effort.Welfare directlyaffects the accumulation, affecting innovation and upgrading of economicstructure. A society should raise the level of consumption and implement highwelfare on the premise that it is necessary to raise the level of production.The production here is not a simple reproduction but an expansion ofreproduction. Nor is it a mere expansion of production scale, but an expansionof reproduction through technological innovation and upgrading of industrialstructure.
Such expanded reproduction has no borders and can provide a steadyflow of consumer information. And such an enlarged reproduction necessarilyrequires an increase in the organic composition of capital and must besufficiently accumulated. And this could be one of the reasons of high welfarehinders economic development.High welfare isprone to moral calamity, resulting in the waste of social resources andnational inertia. The high welfare provided by the state is a kind of publicgoods, which, like the big pot of rice under the planned economic system, inChinese proverb, it is a pity you don’t take since people around you all wouldtake.
Thus it lays down moral calamity. For example, under the high welfare,the utilization rate of social security resources is not high, such as thewaste of medicines and other medical resources in public medical services.Some peoplecould have been able to work normally. However, because of the high welfare,they did not choose to take active employment, over enjoying the leisure timebrought by social security and unemployment insurance, and choosing to retireearly; over-reliance on the state, self-accumulation, weakening the enthusiasmand ability of self-protection and so on. Once these phenomena are universal,the social resources are seriously wasted and the national spirit is no longerpositive, it will affect economic development.
Highwelfare trap (not the word “welfare trap” defined by UK government) refers to aseries of social security measures provided by Western European countries afterWorld War II, including pension, medical treatment, childbirth, work-relatedinjury and so on. The reason why high benefits become “traps” lies inthe fact that the state violates the basic principle of “living as hard aspossible” and provides benefits to the citizens far beyond thegovernment’s financial ability. Since these welfare meals are too much and toohigh, they have crushed the finances and can only get caught in the viciouscycle of consuming food and clothing. The social welfare of “cradle tograve” in high-welfare countries once attracted the envy of the world.However, since the 1980s, the economic stagnation of high-welfare countries hasgradually changed people’s minds. The OECD has deliberated on the crisisbrought about by high welfare, with the topic of “Welfare countries incrisis.” Peoplewho depends on welfare caused serious unemployment, resulting in highunemployment rates, making full employment policies difficult to achieve.
Asworkers rely too much on the welfare system, undermining people’s employmentmotivation, unable to mobilize the enthusiasm for work, resulting in thephenomenon of welfare dependence. In Western countries, due to the government’srelatively good benefits to the unemployed, some unemployed people are nolonger actively seeking new jobs and have long relied on social welfare relief.The original intention of the welfare state in formulating the universalhigh-standard welfare treatment was to stabilize the ruling party’s politicalpower and post-war social stability. However, the welfare model withsocial-democratic nature weakened the “self-regulation ability” of “invisiblehand” through capitalist market economy to a certain extent. In somenorthern European countries, there is not much difference in welfare subsidybetween laborers and non-workers, and as a disappointed affect, laborers evenhave to pay a higher tax.
As a result, the unemployment rate remains high andis not appropriate incentive mechanism to improve the enthusiasm of workers,and people who rely on government subsidies tend to be more and more.