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Forms, Funding and History of WFS PDF Print E-mail
Written by Angela Tan, Taiwan   
Friday, 30 September 2011 20:11



Welfare systems differ from country to country, but welfare is commonly provided to individuals who are unemployed, those with illness ordisability, the elderly, those with dependent children, and veterans. A person's eligibility for welfare may also be constrained by means testingor other conditions.Welfare can take a variety of forms, such as monetary payments, subsidies and vouchers, health services, or housing. Welfare can be provided by governments, non-governmental organizations, or a combination of the two. Welfare programs may be funded directly by governments, or in social insurance models, by the members of the welfare scheme.

In a more general sense, welfare also means the well-being of individuals or a group - in other words, their health, happiness, safety, prosperity, and fortunes.

Subsidy Subsidizing a good is one way of redistributing wealth to the poor. It is money that is paid usually by a government to keep the price of a product or service low or to help a business or organization to continue to function. In a budget constraint between ‘all other goods’ and a ‘subsidized good’, the maximum amount of ‘all other goods will remain the same but the budget constraint will shift outward for the ‘subsidized good’ because the cost of the ‘subsidized good’ is reduced for the consumer and so they have the ability to consume more of said good. Some people do not want to use subsidies because they want the poor to consume the subsidized good or service in a specific way or because subsidizing goods (such as health care) can lead to an over consumption of the good.

Voucher A voucher is like a subsidy that can only be consumed in a specific way like a school voucher or section 8 housing. For instance, families who receive school vouchers may only use them to send their children to schools to help pay tuition costs. Schools then exchange the voucher for cash. Similarly, in section 8 housing, families with this voucher can only use the voucher to pay a portion of their living costs in specified units or in a private sector. In a budget constraint between ‘all other goods’ and a ‘voucher good’ our budget constraint will shift out parallel to an amount equal to the amount of the voucher but the money we have to spend on ‘all other goods’ remains capped at the same amount we had to spend before the voucher. Voucher programs can make us worse off because of the cap on our ability to spend on ‘all other goods’ our indifference curves could limit us.

Direct Cash This is straight cash with no restrictions on how it can be consumed. Direct cash may cause greater budget constraint because the recipient can spend the cash subsidy on all ‘other goods’ or on a ‘subsidized good’. Direct cash increases the entire budget constraint and shifts the indifference curves outward allowing us to maximize individual utility.

Provision and funding

Welfare may be funded by governments out of general revenue, typically by way of redistributive taxationSocial insurance-type welfare schemes are funded on a contributory basis by the members of the scheme. Contributions may be pooled to fund the scheme as a whole, or reserved for the benefit of a particular member. Participation in such schemes is either compulsory, or the program is subsidized heavily enough that most eligible individuals choose to participate.Welfare may be provided directly by governments or their agencies, by private organizations, or by a combination. The term welfare state is used to describe a state in which the government provides the majority of welfare services; the phrase also describes those services collectively.

Examples of social insurance programs include the Social Security and Medicare programs in the United States.

Participation in such schemes is either compulsory, or the program is subsidized heavily enough that most eligible individuals choose to participate. Some opponents of welfare argue that it affects work incentives. They also argue that the taxes levied can also affect work incentives. A good example of this would be the reform of the Aid to Families with Dependent Children (AFDC) program. Per AFDC, some amount per recipeint is guaranteed. However, for every dollar the recipient earns the monthly stipend is decreased by an equivalent amount. For most persons, this reduces their incentive to work. This program was replaced by Temporary Aid to Needy Families (TANF). Under TANF, people were required to actively seek employment while receiving aid and they could only receive aid for a limited amount of time. However, states can choose the amount of resources they will devote to the program. Some people believe this is how we should reform Medicaid.


In the Roman Empire, social welfare to help the poor was enlarged by the Caesar Trajan. Trajan's program brought acclaim from many, including Pliny the Younger.

In Jewish tradition, the poor are entitled to charity (represented by tzedakah) and justice as a matter of right rather than benevolence. Contemporary charity is regarded as a continuation of the Biblical Maaser Ani, or poor-tithe, as well as Biblical practices, such as permitting the poor to glean the corners of a field and harvest during the Shmita (Sabbatical year). Voluntary charity, along with prayer and repentance, is believed to ameliorate the consequences of bad acts.

The Song dynasty (c.1000AD) government supported multiple forms of social welfare programs, including the establishment of retirement homes, public clinics, and pauper's graveyards 

According to Robert Henry Nelson, "The medieval Roman Catholic Church operated a far-reaching and comprehensive welfare system for the poor..."

The concepts of welfare and pension were put into practice in the early Islamic law of the Caliphate as forms of Zakat(charity), one of the Five Pillars of Islam, since the time of the Rashidun caliph Umar in the 7th century. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poorelderlyorphanswidows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–1111), the government was also expected to store up food supplies in every region in case a disaster or famine occurred. (See Bayt al-mal for further information.)

There is relatively little statistical data on welfare transfer payments before the High Middle Ages. In the medieval period and until theIndustrial Revolution, the function of welfare payments in Europe was principally achieved through private giving or charity. In those early times, there was a much broader group considered to be in poverty as compared to the 21st century.

Early welfare programs in Europe included the English Poor Law of 1601, which gave parishes the responsibility for providing welfare payments to the poor. This system was substantially modified by the 19th-century Poor Law Amendment Act, which introduced the system of workhouses.

It was predominantly in the late 19th and early 20th centuries that an organized system of state welfare provision was introduced in many countries. Otto von BismarckChancellor of Germany, introduced one of the first welfare systems for the working classes. In Great Britain theLiberal government of Henry Campbell-Bannerman and David Lloyd George introduced the National Insurance system in 1911, a system later expanded by Clement Attlee. The United States did not have an organized welfare system until the Great Depression, when emergency relief measures were introduced under President Franklin D. Roosevelt. Even then, Roosevelt's New Deal focused predominantly on a program of providing work and stimulating the economy through public spending on projects, rather than on cash payment.

Last Updated on Thursday, 03 November 2011 17:52
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