There has long been a cultural shift toward heightened restrictions on entry into our economic safety net programs. Establishment Democrats and Republicans alike over the past 40 years have increasingly added work requirements to their plans. One of the main problems with this trend is that the people shaping this policy often haven’t lived on these systems, and people on these plans don’t have much of a political voice. This comes from the economically disadvantaged having less disposable income to contribute to campaigns and less information access to find out about them.
The path forward to improving the condition of impoverished people is to replace an economic safety net with an economic floor. Scott Santens, a leading Universal Basic Income advocate states “The coronavirus crisis has made abundantly clear that a net by definition is full of holes, and that when it comes to our safety net, the holes are large enough for millions of Americans to fall through. What is needed is a fully universal and unconditional floor free of holes.”
TOP 15 REASONS TO ELIMINATE MEANS-TESTING OF ECONOMIC BENEFITS:
1. MEANS-TESTING CREATES HIGHER ADMINISTRATIVE COSTS:
This is due to increased paperwork and processing to establish an individual’s wealth and income. Looking at America’s existing programs, we see two plans that are universal as soon as you reach a certain age in Medicare and Social Security. Medicare has an administrative cost rate of 1.1% and Social Security has an administrative cost rate of 0.6%. Those are much lower on average than the collection of income-tested systems we have in America such as Medicaid, SNAP, Housing Vouchers, SSI, School Meals, and EITC which range in administrative cost from 1-10%.
2. MEANS-TESTING CAUSES MORE ADMINISTRATIVE ERRORS:
People eligible for aid end up not getting assistance due to incorrect paperwork processing. For instance, the SNAP administrative error rate has been increasing and as of 2019 it reached 7.36% and that was before it was stress-tested by the COVID-19 mass unemployment.
3. MEANS-TESTING MAKES PROGRAMS MORE POLITICALLY DIVISIVE:
With an income-tested plan, you have to debate about where to draw the line for the benefit cut-offs and declines. Furthermore, it allows a narrative to form of haves and have-nots, of one group of people taking from another. Moreover, it’s easier to consistently cut more and more people out by adding restrictions to receive the benefit.
4. MEANS-TESTING CREATES A WORK DISINCENTIVE:
If you work more to increase your income, you will decrease your means-tested benefits. Many individuals would not want to work if doing so made them financially worse off.
5. MEANS-TESTING CREATES BENEFIT DELAYS AND DISRUPTIONS:
Due to paperwork, benefits have to be delivered later after processing. This can result in delays getting onto plans or continuing to stay on programs. These delays can be as long as a whole month.
6. MEANS-TESTING CREATES AN INFORMATION RISK FOR BENEFIT DELIVERY:
Our safety net is a tangled web and it’s difficult for most to navigate. This is particularly true for people who unexpectedly fall on hard times and have not previously been on welfare programs. Additionally, individuals may not be aware of filing deadlines to ensure coverage is continued in these systems which can lead to benefit disruption.
7. MEANS-TESTING IS NOT MORE PROGRESSIVE:
The net benefit for the poor is higher than the net benefit for the rich because the rich will be spending more on taxes funding aid.
8. MEANS-TESTING CREATES POORER QUALITY PROGRAMS:
Programs not used by the wealthy are less likely to be properly funded because people with more political influence will not be recipients. According to polls, only 5% of Democrats and 15% of Republicans want to cut back on Medicare, and only 3% of Democrats and 10% of Republicans want to cut back on Social Security. These results for universal programs are significant when compared to other assistance funding desires. 10% of Democrats and 44% of Republicans want to cut “Government assistance to the unemployed”, and 6% of Democrats and 44% of Republicans want to cut “Assistance to the needy in the U.S.”
9. MEANS-TESTING CREATES STIGMA IN RECEIVING BENEFITS:
A program benefitting only the poor can harm mental health. Means-testing produces a feeling of failure from needing to accept government benefits, instead of everyone receiving them.
10. MEANS-TESTING CAN CREATE BROKEN PROMISES TO VOTERS:
When universal programs are converted to means-tested plans, some people who expected to receive the benefits & supported the initiatives may no longer qualify for them.
11. MEANS-TESTING HURTS URBAN AMERICA:
When income-tested programs are done at a federal level they may end up excluding people from high-cost areas. This happens due to their income levels appearing too high to qualify for the benefits, despite the costs of their area also being higher. This will mean that urban areas, which tend to have higher average incomes and higher average costs, will more often be excluded from benefits while still bearing the expenses.
12. MEANS-TESTING MAKES BENEFIT PROGRAMS HANDLE INCOME FLUCTUATION WORSE:
Due to income checks often being applied to the previous year’s income, many without a salary may still fail to qualify. This trend was clearly evident in the most recent year’s stimulus negotiation of direct cash benefits. Millions of people who lost income in 2020 needed to file their taxes by February 12th this year to properly have their income counted.
13. MEANS-TESTING REQUIRES EXTRA TIME DEMANDS ON THE IMPOVERISHED AND MARGINALIZED:
The poor, elderly, and disabled are most often in poverty and need assistance. In a poverty-testing benefits system, we’ve forced these groups to spend what little extra time they have, to receive the benefits they need for basic survival.
14. MEANS-TESTING HURTS VICTIMS WHO RECEIVED JUSTICE:
Settlement payments given to someone, as a recourse to damages made against them, are often counted as income. Means-testing penalizes people who receive justice by taking away their government benefits when they win compensation for damage done to them.
15. MEANS-TESTING INCENTIVIZES PEOPLE TO COMMIT FRAUD TO RECEIVE MORE BENEFITS:
Faking injuries, false reports of income, and false reporting of job searches can all be done to continue receiving benefits.
Did I miss any downsides of means-testing? Please subscribe and let me know.
I agree with you that means-tested programs create many negative incentives in our welfare state. I do not think, however, that a UBI is much better. It creates its own negative incentives.
https://frompovertytoprogress.substack.com/p/we-should-phase-out-most-means-tested
https://frompovertytoprogress.substack.com/p/why-universal-basic-income-ubi-is