Structural Dilemmas in Existing Welfare Systems and a Possible Direction for Redesign

Abstract

The core aim of this paper is to conduct a systematic diagnosis of several mainstream welfare schemes currently in use, arguing that they share a common root cause: while providing subsistence guarantees (the ‘floor’ function), welfare programs also, directly or indirectly, assume the function of supplying beneficiaries with freely disposable purchasing power. Because these two functions are bundled into the same transfer payment or the same supply mechanism, welfare levels, work incentives, and fiscal sustainability become locked in mutually reinforcing constraints that are difficult to reconcile. This paper successively examines the incentive dilemma of cash-based welfare, the paternalism dilemma of in-kind/service-based welfare, the hidden costs and stigmatization arising from means-testing, and the problem of cost escalation caused by the blurred boundaries of welfare coverage. On this basis, the paper puts forward its central argument: these dilemmas do not stem from the poor design of any particular welfare scheme, but rather from a fundamental design flaw — the structural non-separation of the ‘subsistence guarantee’ function from the ‘purchasing power’ function. The paper concludes by briefly sketching a possible direction for redesign — confining welfare to a materially minimal subsistence supply while leaving purchasing power entirely to be provided by the labor market — leaving the specific institutional details and operational mechanisms for future research.

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