Work Requirements - An Ineffective Policy

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Work requirements are stipulations incorporated into public assistance programs that necessitate individuals to engage in specific work-related activities to qualify for benefits from these programs. The primary justification for including work requirements in benefit programs is to motivate individuals to seek employment instead of depending on the assistance program.

Many countries have different forms of work requirements. In the US, the Republican government recently passed additional work requirements on certain federal assistance programs, namely SNAP (Supplemental Nutrition Assistance Program) , which assists needy families with the purchase of food, and Medicaid (health insurance assistance for low income individuals/families).

As with any economic or social issue, we can ask – what is the impact of work requirements and do they achieve their aims?

Economic Treatment of Work Requirements

The topic of work requirements was best theoretically described by Besley and Coate (1992). A fundamental principle taught in nearly every introductory economics course is that individuals respond to incentives. In line with this, economic theory posits that if people receive certain benefits, such as money for food, below certain income thresholds,it may discourage them from seeking employment. The rationale is that when they start working and make sufficient income, they will no longer be eligible for the food assistance program. Therefore, they might try to ‘game’ the system by not working at all, as then they will receive the benefit. This is referred to as the screening issue of welfare programs – ensuring that the right individuals receive the benefit.

Another reason for work requirements is what Besley and Coate refer to as the deterrent effect. This issue focuses on the reason why individuals need assistance – is it due to circumstance and bad luck, or is it due to specific choices made during the individual’s life. If it is the latter, the concern is that individuals might not have incentives to prevent themselves from falling