Work Incentives and Welfare Provision

The 'Pathological' Theory of Unemployment

Doris Schroeder

• Publisher: Routledge
• Year: 2018
• eBook ISBN:
  9781351783576
• Topic: Philosophy
• Subtopic: Philosophy History & Theory

This title was first published in 2000:  Over the past decade the welfare state has come under sustained attack not only from quarters which never approved of its policies, but also from political theorists who used to support it. With the collapse of communism, the policy of comprehensive welfare provision came under renewed scrutiny. It was argued that its impact on work incentives is most detrimental. Examining in detail current unemployment debates within Western welfare states, this book seeks to verify or refute the view that non-work is increasingly chosen by work shy individuals - the 'pathological' theory of unemployment. Drawing from a range of disciplinary perspectives - from social philosophy and the history of philosophy, to occupational psychology and feminist economics - this interdisciplinary analysis reveals that the "pathological" theory of unemployment, with its reliance on a deficient depiction of human nature and its disregard of non-pecuniary work incentives and empirical evidence on benefit fraud, cannot be upheld. Schroeder presents an alternative explanation for the phenomenon of widespread Western unemployment through new insights into an 'external barrier' theory of unemployment, namely technological displacement combined with a refusal to return to a two-tiered Victorian society. By effectively combining empirical data with philosophical deliberations, the book provides an important contribution to the welfare state debate.

1 Introduction

In the 1950s and 1960s, enormous hopes were pinned on the welfare state. In Britain, William Beveridge predicted that want, idleness, ignorance, disease and squalor could be defeated forever. In Germany, the economic secretary Ludwig Erhard announced the permanent end of unemployment and related hardships. At the root of this optimism lay the Keynesian belief that governments can actively control economic cycles and thereby prevent the ills of mass unemployment. The welfare state represented an attempt to wed social well-being with economic success; to avoid the social costs of laisser-faire capitalism whilst simultaneously reaping its benefits (Mishra, 1984: 6). When the oil crisis of the 1970s developed into a serious recession, the faith into Keynesianism began to wither and the social and the economic started to drift apart. In the 1980s, the New Right movement established itself firmly on the political stage, especially in Britain and the United States, arguing that welfare provision has adverse effects on the economy. The Keynesian bond between economic and social welfare was separated. At the same time, in the late 1980s, another attempt to reconcile social and economic goals failed: soviet-style communism.

The rapid and unexpected demise of communism threw political analysts in the East into a moral vacuum whilst disorienting their colleagues in the West (Gellner, 1996: 7). In this climate, long-standing opponents of the Western welfare state argued that it suffered from ‘guilt by association’ (Lemke and Marks, 1992: 5). Social democrats were forced into defensive positions because the social market economy was regarded as a subset or soft version of communism (Hutton, 1995: 16). One proponent of this thesis was Nevil Johnson. Commenting on the collapse of communism, he (1991: 27) argued that Western social democrats should stop clinging to ‘socialism dressed out as social democracy and stiffened with an egalitarian conception of the welfare state’. He went on to claim that anybody who wants to uphold the ideals of social democracy must be ‘either remarkably perverse or simple-minded’ (ibid.). In a short period of time, in the early 1990s, all forms of socialism including Western social democracy, the social market economy and the welfare state were pronounced failing or in crisis. Famously, the end of history was announced and more moderately the ‘end of the social democratic century’ (Dahrendorf, 1992: 136).

The early 1990s were not only characterised by disorientation versus triumphalism in the realm of political philosophy, but also by the recurrence of serious mass unemployment, particularly in Continental Europe. In 1960, Nobel Laureate Gunnar Myrdal (1960: 50) predicted that West Europeans will never again tolerate pre-war unemployment levels. In 1929, at the time of the Great Depression, three million Germans were unemployed (Immisch, 1966: 101). In 1998, the number reached four million.

Together, the collapse of communism and the resurgence of mass unemployment had a strong impact on one particular criticism of the welfare state; the claim that welfare provision creates work disincentives. On the one hand, it was argued that ‘the failure to provide incentives is … a central reason for the failure of the Soviet System’ (Stiglitz, 1994: 68). On the other hand, it was alleged that the principal cause for ever increasing social security budgets in the West were work disincentives created by the welfare system (Germanis, 1992: 384, Parker, 1982: 24). According to Yung Chul Park, there can be no doubt that high European unemployment levels are caused mainly by the social security net. He argues that ‘despite good intentions, welfare provision … is not exactly conducive to work incentives’ (Park, 1997: 41 - my translation). Hence, proponents of the work incentives argument against the welfare state can point to incentives problems within the Soviet system and high unemployment levels in Europe to allege factual backing for their claim. But can their criticism stand detailed investigation?

The overall objective of this book is to refute or validate the claim that Western-style welfare provision seriously undermines work incentives. Given the findings of eminent economists and political theorists that system collapse in the East occurred partly due to a failure to provide work incentives, it is paramount to identify potential parallels in the West. The communist experiment is as close as social scientists will ever get to test tube-conditions (Novak, 1998: 1). It is therefore important to learn as many lessons as possible from its outcome and to question any elements in the Western system which might be closely related to the Eastern system. Although there are various explanations for the failure of communism (e.g. huge bureaucracies, economic inefficiencies, epistemic impossibility of economic planning) this book will concentrate on the work incentives argument.

Investigations will be started by introducing the ‘work incentives’ argument against the Western welfare state in detail and by outlining why it will be referred to as the ‘pathological’ theory of unemployment. The third chapter will look at the history of work. Can a human universal be identified in the appreciation of work? Has work in the past been regarded as a necessary evil or a fulfilling, integral part of human lives? The fourth chapter will provide the conceptual groundwork for further discussions by defining work incentives in relation to action, intention, coercion and threats. Furthermore, it will detail the so-called narrow and broad views of work incentives. Chapter five will examine the concept of human nature which lies at the bottom of the work incentives argument, namely the depiction of human beings as Homo economici. Chapter six rests on relevant empirical findings and looks at benefit fraud, tax evasion and ideological elements in the ‘lazy scrounger’ debate. The seventh chapter will introduce an alternative to the ‘pathological’ theory of unemployment in the form of various ‘external barrier’ explanations. Finally, chapter eight will detail three visionary, but realistic, solutions to unemployment applicable in Western welfare states. To close, a résumé is being provided.

The book is situated within the field of political philosophy, the boundaries of which are briefly explained in chapter five. However, material will also be drawn from economics in line with Philippe van Parijs’s (1995: 2) observation that the last two decades saw a ‘cross-fertilization of economic theory and political philosophy’. The revival of this approach is seen as a return to the discipline’s roots. As Anthony Skillen (1995: 1) observed: ‘I can think of no British philosopher until this century… who was not deeply immersed in social and political and economic issues’. In addition, research from the fields of psychology, biological sciences and feminist studies will be brought forward to support the main line of ideas. In my opinion, Ray Monk (1998) is right when he says that philosophy becomes ‘intolerably narrow, boring and useless’ if it does not engage with other disciplines and this book will try to avoid the insular, the austere and the remote in favour of the relevant, the practical and the interdisciplinary.

Also, following Raymond Plant (1991: 344), questions of political philosophy will be understood as inquiries within particular societies and given sets of values. This book will be restricted to the welfare state debate at the end of the 20th century. Although the main focus will be on Britain, Germany and North-America, the book will deal with the Western welfare state as a whole rather than its particular manifestation in one individual country.

2 The ‘Pathological’ Theory of Unemployment

‘They pretend to pay us and we pretend to work’ (Fukuyama, 1992: 11). This is how Soviet workers saw their relationship with communist rulers suggesting that neither did they earn much nor did they work hard. The work incentives argument is pivotal to explanations about the collapse of communism. Economist Joseph Stiglitz (1994: 68) wrote that the ‘failure to provide incentives is generally viewed as a central reason for the failure of the Soviet System’. Meinhard Miegel (1991: 17, 20), director at the Institute for Economy and Society in Bonn (Institut für Wirtschaft und Gesellschaft) believes that Eastern Europe under communist rule has not been able to foster well motivated and qualified workers. Michael Novak and Alan Greenspan (Novak, 1998: 1) argue that the separation and subsequent reunification of Germany was ‘as near as social scientists ever get to observing a controlled experiment’ and that the socialist experiment proved devastating for human capital, including the work ethic. Harold Perkin (1996: 203) claims that Soviet workers put all their effort into ‘malingering, absenteeism, alcoholism on the job, and avoiding work by whatever means they could’. According to him, ‘a system that pays people to cheat and shirk rather than work constructively … is a formula for disaster’ (ibid.).

Perkin’s formulation of the work incentives problem in the Soviet Union sounds reminiscent of the 1990s welfare state debate. Economist Michael Beenstock (1996: 57) argues that ‘over-generous provision of unemployment benefit by the state has harmed work incentives and created an unemployment problem’. In Britain, Frank Field (1996: 11) maintains that a ‘nation of cheats and liars’ is being recruited by the British welfare system. Before leaving office, British Conservatives decided to employ MI5 to target benefit cheats (Norton-Taylor and Hencke, 1997: 1) and the subsequent Labour government launched the first ever anti-fraud website with tips on how to report cheats (May 1999, http://www.dss.gov.uk/hy/bfraud). The problem Frank Field (1996a: 15) sees in the system is that comprehensive welfare provision offers income independent of work which is allegedly attractive to an ever increasing number of criminal fraudsters. He (1996: 15f) states that the British social security budget is exploding at an extraordinary rate; reflected in the fact that a third of the British population relied on means-tested benefits in the mid 1990s.

All over Western Europe, social security budgets have expanded rapidly over the past two decades as has unemployment in many countries. Social protection expenditure as percentage of GDP for the EU was 18.0 in 1970, 24.4 in 1980 and 26.0 in 1991 (Taylor-Gooby, 1996: 117). Explanations are diverse, but they can be classified into two major categories: ‘pathological’ and ‘external barrier’ interpretations.

‘Pathological’ and ‘External Barrier’ Explanations of Unemployment

The term ‘pathological’ theory was chosen by Mary Hawkesworth (1992: 390) to characterise Lawrence Mead’s explanation for poverty in the United States. Mead’s theory alleges that poverty is rooted in character or behaviour problems of the poor themselves. In contrast, an ‘external barrier’ explanation for poverty would maintain that economic and social factors beyond individual control, such as the unavailability of jobs, cause poverty and deprivation. To clarify this point, Lawrence Mead’s standpoint will be summarised briefly.

Mead (1986: ix) claims that the welfare state is in crisis not because of its size, but because of its permissiveness. Income is given as an entitlement without setting any obligations in return, such as working, keeping families together or coping with school (ibid. 9). Mead believes that an inclusive society can only be established and maintained if its citizens function well (ibid. 6). By this, he means that they have to accept a range of social obligations, namely ‘the capacities to learn, work, support one’s family, and respect the rights of others’ (ibid.). A civic society can only be built if people are competent in all these areas. This can be achieved, according to Mead, by introducing an authoritative element into social policy, i.e. by enforcing compliance with social obligations (ibid. 12). Workfare, he believes, is the best means to produce better ‘functioning’ people (ibid. 1, ix) and reduce the disproportionately high numbers of family break-ups and crime amongst welfare recipients (ibid. 9).

Mead refuses poverty explanations which assume external barriers such as the unavailability of paid work or racial discrimination (ibid. 11). According to him, experts have looked long enough for these external impediments without success (Mead, 1997: 6). It is not the unavailability of jobs which accounts for unemployment but rather difficulties in keeping jobs due to individual pathologies (Mead, 1986: 24). To strengthen this claim, he argues that 10 million illegal immigrants did not have problems in finding jobs in recent years in the United States (ibid. 35). Since the late 1960s, he thinks, functioning difficulties rather than social barriers account for poverty (ibid. 13). However, he does admit that poverty and non-functioning do not always go together. There are ‘needy people who function well’ and better-off citizens who do not (ibid. 22). But still, in the majority of cases, he maintains, that ‘low income and serious behavioral difficulties go together’ (ibid.)

Charles Murray, who famously coined the phrase ‘underclass’ shares Mead’s views. He believes that the so-called underclass is not characterised by a level of poverty but by a type of poverty. Reminiscing about his childhood in Iowa, he (1996: 23) writes:

I was taught by my middle-class parents that there were two kinds of poor people. One class of poor people was never even called ‘poor’. I came to understand that they simply lived with low incomes, as my own parents had done when they were young. Then there was another set of poor people, just a handful of them. These poor people didn’t just lack money. They were defined by their behaviour. Their homes were littered and unkempt. The men in the family were unable to hold a job for more than a few weeks at a time. Drunkenness was common. The children grew up ill-schooled and ill-behaved and contributed a disproportionate share of the local juvenile delinquents.

The implications from this excerpt are clear. ‘Poor’ is only a term for those who have serious behavioural problems; the others will eventually work their way out of poverty. Explanations which make the poor themselves responsible for their fate were called ‘pathological’ theories of poverty by Mary Hawkesworth. If, however, a sufferer of advanced multiple sclerosis was poor because she had spent all her savings on treatment, one would not argue that the ‘pathological’ theory applies. Instead, one would maintain that the reasons for her poverty were external and beyond her control. Those explanations of poverty belong to what will be called ‘external barrier’ theories.

Just as explanations for poverty can be grouped into the classifications ‘pathological’ or ‘external barrier’, so can theories of unemployment.

The Work Incentives Argument

The benefits of the welfare state are far too easy to obtain and too attractive to resist. It subsidises irresponsibility and makes a mockery of those citizens who still believe in independence, hard work and self-reliance. The welfare state corrupts us all (Novak, 1996).

The road to a near-workerless economy is within sight. Whether that road leads to a safe haven or a terrible abyss will depend on how well civilization prepares for the post-market era … The end of work could spell a death sentence for civilization … [but it] could also signal the beginning of a great social transformation, a rebirth of the human spirit. The future lies in our hands (Rifkin, 1995: 292f).

The two major positions in the unemployment debate are represented by the above authors. On the one hand, unemployment is interpreted as an individual failure or the consequence of antisocial behaviour under modern welfare provision (the ‘pathological’ theory of unemployment). On the other hand it is attributed to problems which concern economies as a whole, which cannot be overcome by single individuals (the ‘external barrier’ theory of unemployment). Proponents of the work incentives argument against the welfare state represent the ‘pathology’ strain in the discussion. They impute work-shyness, scrounging, malingering and fraud (Cooper, 1997: 7; Sahawe, 1996) to benefit recipients and assume their underlying reasoning to be: ‘if you can have the good life anyway, why bother to work and strive?’ (Minford, 1992: 117). Social democrats, on the other hand, attribute the rise in social expenditure to external factors such as involuntary unemployment, ageing populations or globalisation.

Radicals in the work incentives debate advance rather extravagant theories. John Hospers (1992: 358), for example, claims that recipients of benefits, including unemployment assistance, are ‘moral cannibals’ who believe that they have ‘a right to live off the “spirit” of other human beings’ and who maintain that they have ‘a moral claim on the productive capacity, time, and effort expended by others’. Similarly, it is held that the unemployed ‘have slaves working for them … able to exist on the earnings of others’ (Govier, 1992: 374). In Britain, Ralph Harris (1995: 174) argues that the social security system allows citizens to ‘make some kind of a living out of being poor’.

Accusations such as these are countered by, for example, Alan Deacon (1996: 61) who argues that ‘If there are not enough jobs, then talk of work incentives or of the work-shy is both irrelevant and inhumane. To increase incentives while unemployment accelerates upwards is like trying to encourage someone to jump into a swimming pool while the water is drained out’. James Robertson (1986: 85) agrees when he insists that societies which promote the job ethic whilst leaving millions unemployed will ‘inflict great damage on those people and themselves’.

The work incentives argument against the welfare state will be at the core of this book. We will seek to substantiate the position of external causation whilst refuting t...

Table of contents

• Cover
• Half Title
• Dedication
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Acknowledgements
• 1 Introduction
• 2 The ‘Pathological’ Theory of Unemployment
• 3 The History of Work
• 4 Action, Intention and Work Incentives
• 5 Homo Economicus
• 6 Benefit Fraud, Tax Evasion and the ‘Lazy Scrounger’
• 7 ‘External Barrier’ Theories of Unemployment
• 8 Potential Solutions for Unemployment
• 9 Résumé
• Bibliography
• Index