The welfare versus work paradox

Roberto Iacono

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: H53 J38 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2025-05-06
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Published in PLOS ONE, 6, May, 2025, 20(5). ISSN: 1932-6203

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