Effects Of Welfare On Economy

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Effects of Welfare on Economy


This paper intends to state the effects of welfare programs on society and its long term implications. Different modes of transmitting welfare onto the societal layers are discussed while also suggesting ways to improve the ongoing welfare practices in the society. All the pros and cons of welfare plans and programs of the government are thoroughly discussed while special emphasis is being given on the common men and their prosperity.

Effects of Welfare on Economy


Welfare State or more precisely, welfare is usually a measure taken on the macroeconomic level by the government of a country to promote the well being of its public. Welfare generally encompasses all the citizens of a state, and so is also called social welfare. A state is transformed into a welfare state when its governments and institutions join hand and devise policies for overall social welfare of its citizens such as through pension plans, unemployment insurance, social security plans or measures to improve health, education, housing and social protection. Throughout history, economists are especially interested in evaluating government's expenditures on its social welfare system and based on that, the current as well as future well being and health of the public can be observed. Obtaining welfare or social benefits is considered a “right” of every citizen living in a welfare state. The government takes measures of not only implementing such programs but also makes these benefits accessible to the common man. In a welfare state, a direct transfer of funds take place from the government (public sector) to the receivers of welfare, and often include contributions from the private sector as well in the form of redistribution taxation. Such a system of distributing welfare occurs in a mixed economy (Aschauer, 1989).


It was during the Great Depression in the 1930s that the concept of welfare state was first introduced in the United States. After the legislation of 1960, it was for the first time that a person who was not old enough or did not have been a handicap could receive aid of some form from the government, including general welfare payments. Prior to the Welfare Reform Act of 1966, welfare aid was considered as a “right” of everyone and states were given money unlimitedly by the federal governments to distribute short term cash aids to people and get them jobs. This Reform Act made a finite system of welfare distribution and handed over its management to the states themselves. Under this system, states offered food stamps, health care assistance, child care, housing aids, unemployment cash assistance and other benefits. But this was disbursed after meeting some defined criteria. This criteria of welfare disbursement depended on factors like gross and net income, family sizes, homelessness and unemployment conditions etc. Each and every one did not get welfare as was the case previously. Recipients were encouraged to work themselves out of welfare and earn their own livelihoods. They were motivated not to live on welfare money only, abandoning their talents and ...
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