Bouncing Back: The Role of Social Safety Nets

Every thriving society should offer help to citizens who have fallen on hard times.

Those services - like unemployment benefits, food stamps, and Medicaid - are called a social safety net, and a well-designed safety net enables people to quickly move from temporary government assistance back to full-time work.

But when a social safety net is poorly designed, people can become stuck in a cycle of dependence - especially when the benefits they receive exceed the rewards from working.

The United Kingdom’s experience after World War I provides a stark example:

The government tripled unemployment benefits, removed time limits on how long they lasted, and tied housing assistance to affected locations - essentially paying people to stay in areas where new opportunities were unlikely to occur.

As a result, people who had lost their jobs - even after one day of work - could receive benefits comparable to the return from working, and they could receive them forever, as long as they didn’t move.

This well-meaning policy led to high, long-term unemployment and a 20-year depression all while the rest of the world got wealthier.

Social safety nets are a crucial component of every society, but it’s VITAL to design them in a way that encourages people to transition from government assistance BACK into the workforce.