Apr 23, 2020
No, a social safety net is not a moral hazard.
Politicians of a certain stripe have a long standing argument for underfunding safety net programs like food stamps and unemployment insurance. It goes something like this: “giving people financial security will cause them to stop valuing work”. In their mind there is a “moral hazard” in providing financial stability to workers because only the threat of starvation, homelessness and poverty motivates people to show up to work in the morning.
Of course many of these same politicians are rich themselves or, more likely, come from rich families and have remained rich. They are financially stable and have a strong safety net provided by their friends and family. Yet they still show up for work in the morning. Their argument is that somehow a McDonald’s worker is different and won’t work unless they are in the shadow of a cloud of financial doom.
This argument is both classist and — because minorities are disproportionately represented in low income communities — racist.
What these politicians are saying is essentially — “Despite the fact that I am rich and don’t need to work I still show up. These ‘other people’ are different from me. They are morally inferior and unless financial tragedy looms over them they will sit around all day [ drinking grape soda and eating watermelon ]”. As with many racist policies that last part is implied.
What is left out of the discussion is that people work to satisfy their current needs regardless of whether those needs are related to safety ( shelter, food ) or esteem ( achievement and respect of others ). Giving people safety and financial security won’t reduce their incentives to work, it simply moves them up maslow’s hierarchy of needs from safety to esteem.
Providing a real social safety net will change work in many ways. One thing that’s guaranteed to change for low wage workers is their willingness to do dangerous or drugerous work for low pay. A man dying of thirst in the dessert will do nearly anything for water. The same is true of a mother who’s threatened with eviction and hunger — she will do nearly anything to keep her family housed and fed. That makes workers who live without a safety net easy to exploit.
Societies that have a strong social safety net have empowered workers to demand better working conditions, better pay and access to quality benefits. Giving every worker safety and security reduces poverty and creates a more equal society. Nations like Norway, Sweden, Iceland and The Netherlands are great examples of this. They have strong social safety nets which have given them a high standard of living, better gender equality and low rates of poverty.
The advent of Covid-19 and the financial destruction it has wrought on American workers should be a wakeup call for everyone. As we re-examine our economy and see the consequences of miserly sick leave, unemployment and healthcare policies we have an opportunity to create change.
When the beneficiaries of the current system bring up the “moral hazard” be sure to keep in mind — the real moral hazard is a status quo that withholds financial security in order to exploit vulnerable workers.
