Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 48
raise the costs of the program. Though it is true that replacement of home deliveries with
centralized pick-up depots would eliminate delivery costs, recipients would be forced to
enter lines to accept food, creating a stigma not unlike that associated with soup kitchens
or handouts. Many qualified individuals may object to this form of humiliation and
choose to forego the benefits. Others may simply not have the means to travel to the site.
They may be physically or mentally impaired, too old, sick, or perhaps lack adequate
transportation. Consequently, due either to stigma or inaccessibility, the goal of relieving
food inadequacy may be undermined.
Cash transfers
The concerns of distribution costs associated with in-kind transfers effectively disappear
in the context of cash transfers (also commonly referred to as income maintenance
payments). Under a cash transfer regime, the government has a less overt role in the
delivery of the good. It simply provides recipients with a benefit in cash, which can then
be used to pay for groceries if they so choose. Such a program eliminates the need for the
infrastructure required by a benefit in-kind. Additionally, the high degree of stigma
associated with queuing for food is eliminated.
Income support payments enjoy much greater flexibility than their in-kind
counterparts as well. This flexibility comes in two distinct forms. First, cash transfers
allow recipients to choose their level of consumption over time according to their
preferences. Recipients no longer have to consume food immediately in the expectation
of it becoming spoiled. Second, recipients become the decision-makers with respect to
the type of food or other goods they will consume. Although they are ultimately
constrained by the amount of the payment, cash transfers still empower recipients to
select the types of food or other commodities they prefer. In terms of personal autonomy,
then, and all else being equal, cash transfers can be viewed as relatively more beneficial
to recipients than the distribution of food of equal value. This argument is similar to the
libertarian view of Friedman and others, discussed in Chapter 2, that where their own
interests are concerned, individuals are the best arbiters, and that as long as an individual
receives what he or she prefers, regardless of its objective value, he or she is still better
off than if he or she were coerced into selecting something else.
However, it is this very flexibility (or recipient discretion) which casts a shadow on
the allure of cash transfers. As mentioned earlier, the scope for fraud and abuse is a
serious concern for social welfare policy-makers. The implementation of a cash transfer
program will inevitably attract individuals who are not in need of its services, but who do
not stand to lose anything by attempting to apply. Under current FSP regulations, even
partially or incorrectly completed applications must be considered, and applications can
be made by phone. 29 There is no financial cost for making an application. Given the low
opportunity cost of applying for FSP benefits, the fungible nature of benefits creates a de
facto universal cash incentive to apply repeatedly, overstate need, conceal assets, and
traffic in vouchers. Hence the state is confronted with a dilemma. It can raise the cost of
the program by increasing the size of the administrative staff in order to better scrutinize
applications ex ante and monitor the activities of recipients ex post or, in the alternative,
it can simply choose to ignore the fraud within the system. The government would reduce
administrative costs in the latter choice but inevitably the costs of the program would rise