Recently, the German minister of labour Ursula von der Leyen has been criticised for her reform of the pension supplement system (through which low pensions are supplemented by payments from the government budget). The critics accused her of having built into the system a lot of bureaucratic hurdles – as a result, so the critics, the group of people eligible to the system’s services would be very narrow and the criteria of exclusion are very hard to defend from an ethical and practical standpoint. While von der Leyen’s critics are probably right, there is another problem here that gained less attention: the efficacy of bureaucratic screening that is supposed to minimise cheating.
There is a broader idea behind von der Leyen’s reform proposal, one that is independent of the particular criteria of exclusion that she chose. This is the idea that only those should get government support (in form of various social services) who really “deserve” it. Therefore, so the argument goes, there is a need for a complex system of hurdles and filters that aims at minimising the opportunity for “cheating”.
This idea is not wrong in itself (except for the particular criteria for exclusion, but – as already pointed out – these don’t influence my main argument). At least, if seen in isolation. But if we take a broader view, there are at least two problematic side effects that should be borne in mind: the costs of bureaucracy and the influence of screening devices on social bonds of trust.
Where does the “filtering idea” actually come from? It has two major sources. One can be viewed as reflecting a certain sense for justice: it is not acceptable for many people that there are individuals within the society whose primary goal is to cheat the welfare state – often they are therefore called “social parasites”. The second concern is of budgetary nature: the government’s financial means are limited, so it seeks ways to minimise expenditures (i.e., among others, to omit unnecessary, unfounded ones). The better we can identify those who really deserve support, the less money is spent “in vain” – so the logic goes.
Let us first turn our attention to the “budgetary” argument. The problem with it is that it is too narrow – it ignores the costs of bureaucracy. The extension of bureaucratic structures to better “filter out” the cheaters leads to direct costs such as increasing costs of labour (since more employees are needed for checking applications, monitoring etc.) and in many cases also increasing costs of technology (new IT systems are needed, their integration into the overall system has to be secured etc.). Not to mention the lump-sum additional costs of system reform. But there are also indirect costs – people who would like to apply for certain sorts of social support have to invest time and other resources to convince the authorities that they fulfill the formal criteria. These resources could be used otherwise, in a more productive (or welfare enhancing) way – their use in filling out application forms has an opportunity cost. Also, large bureaucratic systems tend to become increasingly difficult to manage (due to their complexity) and inefficient – thus further increasing the (indirect) costs of reform. One should therefore ask whether the savings due to less cheating outweigh the costs of more bureaucracy.
But there is another, less “economic” issue as well. It has to do with justice and social capital. While it is right that it is a bad thing when cheaters “free ride” on the system of social services, increasing the screening effort may well lead to a situation in which needy people feel like “supplicants”. The law guarantees them certain social services, but they are forced to probe, in an often humiliating and exhausting way, the they really “deserve” them. Every citizen who would like to get support from the state is viewed as a potential cheater. This may well result in an increasing dissatisfaction with public authorities and, as a consequence, in lowering the threshold that allows cheating (“They treat me like a criminal, so why should be honest to them?”). In this manner, more tense screening may actually backfire and increase the tendency to cheat – a self-reinforcing loop (more screening → more cheating → more screening → more cheating…).
It is understandable that we, as a society, would like to prevent certain individuals from cheating the system of social support. But, given that attempts to do so are costly – due to increased costs of bureaucracy and the consequences of an erosion of societal bonds of trust – in some cases it may be netter to refrain from additional screening measures because they may lead to increasing net costs. Maybe a few cheaters are better.