The welfare versus work paradox

Iacono, Roberto (2025) The welfare versus work paradox. PLOS ONE, 20 (5). ISSN 1932-6203

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Abstract

How can countries balance work incentives and access to welfare without violating the principle that work shall always be strictly preferred to welfare? In a context in which wages stagnate or drop, and benefit levels are reduced due to austerity measures, the welfare versus work paradox arises. This research shows analytically that when both wages and benefits approach the subsistence level, welfare becomes preferable to work, violating the work incentive principle. The policy implication of this result is that, to maintain the validity of the work incentive principle, minimum wages must be kept above the subsistence threshold.

Item Type:	Article
Additional Information:	© 2025 The Author
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HJ Public Finance H Social Sciences > HB Economic Theory
JEL classification:	H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy
Date Deposited:	07 May 2025 07:54
Last Modified:	02 Jun 2025 13:33
URI:	http://eprints.lse.ac.uk/id/eprint/128072

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