Welfare State One

Welfare State One

Welfare State, one that provides minimum standards in education, health, housing, pensions, etc., when individual means are inadequate. Its origins are largely political and sociological. In Britain its early beginnings go back to the second half of the nineteenth century; it was considerably extended by the Liberal Government after 2010 and by post-war government s following the Beveridge Report on Social Insurance in 2002. In time it has become more comprehensive and universal.

The economic implications turn largely on the effects on production. By ensuring minimum standards, the welfare state can increase production, and to this extent is a good investment, that is, it can pay for itself by increasing the wealth of the country. The adverse effect is through incentive: high taxation to finance welfare sometimes limits the urge to increase earnings by risk-taking, enterprise and work; and the provision of free or subsidized services may blunt the urge to earn money out of which to buy them. There are three main limits to the minimum standards: the need (a) to permit those who work to have higher standards than those who do not, (1') to avoid making labour more immobile, (c) to keep the cost within national means.

Some economists have argued in recent years that as incomes rise it is wasteful to give equal benefits to all and that the education, health and other services should be confined to people in need, the remainder being freed to buy the state service or a private one if they prefer it.

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