Welfare state. It was during the Greta Depression in the 1930s that the concept of welfare state was introduced in the United States.

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    EFFECTS OF WELFARE ON ECONOMY

Running Head:  EFFECTS OF WELFARE ON ECONOMY

 EFFECTS OF WELFARE ON ECONOMY

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EFFECTS OF WELFARE ON ECONOMY

Introduction

Welfare State, or more precisely, welfare are usually measures taken on the macroeconomic level by the government of  a country for promoting the well being of its public through various ways and means. Welfare generally encompasses all the citizens of a state, and so is also called social welfare. A state is transformed into a welfare state when its governments and institutions join hand and devise policies for overall social welfare of its citizens such as trough pension plans, unemployment insurance, social security plans or measures to improve health, education, housing and social protection. Throughout history, economists are especially interested in evaluating a government’s expenditures on its social welfare system and based on that, the current as well as future well being and health of the public living can be observed. Obtaining welfare or social benefits is considered a “right” of every citizen living in a welfare state. (Hulten, 1989) The government takes measures of not only implementing such programs for the betterment of its people but also makes these benefits accessible to the common man. In a welfare state, a direct transfer of funds take place from the government (public sector) to the receivers of welfare, and often include contributions from the private sector as well in the form of redistributionist taxation. Such a system of distributing welfare often is called a mixed economy.

Discussion

        It was during the Greta Depression in the 1930s that the concept of welfare state was introduced in the United States. After the legislation of 1960, it was for the first time that a person who was not old enough or did not have a handicap could receive aid of some form from the government, including general welfare payments. Prior to the Welfare Reform Act of 1966, welfare aid was considered as a “right” of everyone and states were given money unlimitedly by the federal governments to distribute short term cash aids to people and get them jobs. This Reform Act made a finite system of welfare distribution and handed over its management to the states themselves. Under this system, states offered food stamps, health care assistance, child care, housing aids, unemployment cash assistance and so on. But this was disbursed after meeting some defined criteria. This criteria of welfare disbursement depended on factors like gross and net income, family sizes, homelessness and unemployment conditions etc. Each and every one did not get welfare as was the case previously. Recipients were encouraged to work themselves out of welfare and earn their own livelihoods (Hulten, 1989). They were motivated not to live on welfare money only, abandoning their talents and skills as workers, but to find out new jobs where they could earn and live without welfare money. This new program was called Temporary Assistance for Needy Families (TANF) that posed a five year limit on welfare assistance of all kinds and rather asked the states to search job for their men, making them productive for their countries while earning adequate amount for themselves (Chipman, Jmaes, 1978).

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        Following TANF, millions of people left the welfare roll, and got jobs. Hence unemployment rates lowered and child poverty reduced to minimum. This further restricted the welfare money from reaching illegal immigrants and developed an organized culture where people and states were both benefitting. It was undoubtedly one of the most evident victories of American government. Critics however argued that this reduction of people on welfare roll did not happen because they got employed; rather they attribute it to their change of classification by the state. According to them the state deliberately classified them into workforce, rather than giving them ...

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