Rewarding Failure

In a business, a hard working successful employee is rewarded. Take the example of sales. If an employee makes a large sum of money for the company, they will be rewarded with bonuses and raises. They will receive part of the money they earned back. If an employee makes no sales, they will be fired. This system benefits both the employee and the business, as it aligns their interests and makes them work together toward a common goal.

But how would you feel if instead of getting fired, the employee who is failing to produce gets the bonus? The successful employee gets a pay cut, a slap in the face, and they watch the other employee get a cupcake. Do you think the employee who is failing to produce is going to try any harder?

The benefits structure in the U.S., a system intended to help the poor at their most trying times, is also an incentive program for failure. It was intended as a pillow, but has become a crutch. It has gotten to the point where people will refuse extra income, because it does not offset the benefits that they would lose. This system has the perverse effect of shackling people in poverty, because the jump in income required to get them functioning independently is usually too great to occur all at once.

There is no shortage of federal programs which give benefits based on income levels. Income-Based Repayment, Economic Hardship Deferment, and Unemployment Deferment all apply to federal student loans. Students can also receive Federal Pell Grants and scholarships based on their income. Medicaid provides health care services, as does the Children’s Health Insurance Program (CHIP), Consolidated Health Centers, the Preventive Health and Health Services Block Grant and more. There is also a multitude of programs designed to reduce the cost of housing for low-income individuals, such as the Low Income Home Energy Assistance Program (LIHEAP). Additionally, programs designed to alleviate the cost of food are extremely prevalent.

In December 2011, the number of people on the Supplemental Nutrition Assistance Program (SNAP), or food stamps, rose to 15% of the population. There is also the Child and Adult Care Food Program (CACFP), the Commodity Supplemental Food Program, the Emergency Food Assistance Program (Food Commodities), Nutrition Assistance for Puerto Rico, the Senior Farmers’ Market Nutrition Program (SFMNP), Community Food and Nutrition Program and many others.

All of these often overlapping programs have unintended consequences. Many of them can go on indefinitely, a lifelong benefit derived from income. According to a CBO report, the bottom 20% of earners received 40% of total transfer payments from the government (average $23,000 per household in 2009). Comparatively, they paid 0.3% of all federal taxes. No matter what the intentions, the cornucopia of rewards has a vast array of side effects, which are just starting to manifest.

In America, the idea of rags to riches and social mobility is paramount. Unfortunately, the more help you offer to the weakest individuals, the less mobility you afford to them. To alleviate what may be temporary suffering, you can doom a person to a life of quiet desperation. If you give a man a fish, you can feed him for a day. If you give a man a fish every day, he’ll never learn how to fish.

Additional Resources

Benefits.Gov: http://www.benefits.gov/

CBO the Distribution of Household Income and Federal Taxes, 2008 and 2009: http://www.cbo.gov/sites/default/files/cbofiles/attachments/43373-06-11-HouseholdIncomeandFedTaxes.pdf

 

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