Labor disincentives concerns

One of the most common stumbling blocks for political support of safety nets is concern over the labor disincentives of welfare dependency (box 2.6). The fear is that potential beneficiaries will either work less after receiving the benefits or, if eligibility is tied to earned incomes or unemployment, will reduce their work efforts in order to qualify for the transfer. Both arguments and the evidence differ substantially across groups of countries, classes of programs, and types of beneficiaries. 

When times are good and policy makers are optimistic that the numbers that need to be served should be decreasing or that they may be able to serve those covered better, the environment may be propitious for reforms that lead to more sophisticated targeting methods or respond to concerns about labor disincentives. At such times simple programs may be transformed into sophisticated programs. 

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