Updated date:

Is Welfare Working?

Author:

I write about Politics and Current Events. Anything and everything economic, foreign policy, etc. will be covered.

is-welfare-working

What is Welfare?

In order to determine the success of the Welfare system, the purpose of said system must be explored. Welfare was originally created in 1935 by president Roosevelt as a way to help the unemployed during the great depression and in the past 95 years welfare has grown and changed into an $851 billion program with multiple sub programs including Snaps, Medicare, EITC, Medicaid etc. Currently, the US spends almost 75% of its budget meaning of very $4 it spends, 3 go to welfare. Welfare is a massive program that helps hundreds of millions of Americans. But does it work?

The Accomplishments of Welfare

Throughout its many years of expansion and transformation, Welfare has changed many lives. As Danilo Trisi and Matt Saenz explain, Welfare has reduced the poverty rate by over half from 26% in 1967 to only 12.8% in 2018. Additionally, in 2017 Welfare helped 43% of people who would otherwise have been in poverty. Historically speaking, Welfare has been immensely successful and necessary to millions of Americans. The question shouldn't be weather or not we should have a welfare program, the question should be is there a better alternative.

is-welfare-working

The Drawbacks of Welfare

While Welfare is incredibly effective at pulling people out of poverty, it is not very good at pulling people further. Due to cliffs and gaps in coverage, welfare often keeps people hovering barley above the poverty line. A much better metric of Welfare's effectiveness is economic freedom. In other words, how easy is it to move between classes. The United States is 17th in the word in economic freedom with a score of 76. While this may seem high its no where near the top country's who have scores of almost 90. This shows that the Welfare System in the US, while impressive and effective, still has a long way to go.

But Singapore has done something even more remarkable than its economic accomplishments. It has built an alternative to the European style welfare state.

— John C. Goodman, Forbes, 2015

Singapore: The Alternative Part 1

An impressive alternative to Welfare is Singapore, the most economically free nation on earth. However, before the US considers a system like Singapore's it must take a few things into account.

  1. Population: Singapore population is 5.6 million, a mere 1.7% that of the United States
  2. Landmass: Singapore is a single city with a tiny landmass and most of its population very close together. The United States has one drawback that makes it very difficult to increase economic freedom, rural america. In rural america, economies are fragile and opportunities for wealth and growth are nearly nonexistent. This is the biggest downfall of Welfare. Rural america is the place with the most coverage gaps and least economic freedom.
  3. Diversity: Singapore, being a very small country, is filled with people of similar wealth, with similar ideals. The united states however, vary's greatly in wealth, political views, and even culture.

If the United States takes those three points into account, it is entirely possible to implement a system similar to that of Singapore.

Singapore economic freedom

According to the Heritage Foundation

YearEconomic Freedom RatingWorld Ranking

2018

88.8

2

2019

89.4

2

2020

89.4

1

Singapore: The Alternative Part 2

What makes Singapore so successful? The answer is pretty simple. Instead of using a "one size fits all" solution like the US, they allow their residents to save on their own. Singapore has alternative to every US program. They force everyone to set aside 20% of their employers and their have to contribute an additional 16%. These funds go to whatever funds may arise, weather that be for retirement, housing, medical, etc. This is why Singapore is first place in the world in many of these things. For example, Singapore has a 90% home ownership rate, the highest in the world. Additionally, Singapore puts emphasis on medical expenses with 7% of wages going to medical costs. Singapore sets up a completely separate account for medical costs. While Singapore is a mostly capitalist economy, don't let that fool you. Singapore includes many more socialist aspects. One of the most successful is the roll-over system. When a Medisave account passes around $34,000, it rolls into another persons account. This system, which adapts for every different person, has been the most successful in the world.

Concluding Thoughts

While Singapore is definitely a great example of as working system, the US must be very careful when implementing a system like Singapore's. The US cannot just 'copy paste' Singapore's system. The US will need to adapt the system to fit its unique mold. If the US is to fix its current system, it would need to provide the option of having a separate, personal account built off of your own wages.the current system works for many, but a more flexible system must be adopted. If the US is to learn anything from Singapore, it is two things.

Firstly, a 'one size fits all' system will never work. It needs to be adjustable

Secondly, the transition must be smooth, coverage gaps and cliffs need to be found and ironed out to have a successful system.


The US has a fairly effective system currently but it can definitely learn many things from Singapore's successful system.

© 2020 Dan Lehavi

Comments

Ryan Kossarian from Woodland Hills, California on September 03, 2020:

Great Article Dan