The Poor law debates

Just as welfare reform is
a controversial topic today,

so is it debated
by the classical economists.

So let's go back and look at
the Poor Law reforms of 1834

and the debates leading up to that.

The Poor Laws in England date from
a series of experiments under

the Tudor monarchs
and eventually they are finalized

under the rule of Queen Elizabeth in 1601.

What the Poor Laws did overall
is switch relief from

being the responsibility of the church
to a responsibility of the state.

But note this is happening
in England, not in Scotland.

In Scotland during these centuries,
relief tends to stay within the church

and the parish responsibility.

Over the next two centuries,
there's a great deal of experimentation

with different ideas for helping the poor
often at the parish level.

These ideas include:

subsidized food, what is called
"outdoor relief", and that means aid

without requiring that the recipient
enter a kind of poorhouse;

direct transfers, wage subsidies,
public employment,

and also what is called
"Indoor relief" which means giving aid

but requiring that the poor enter
some kind of parish poorhouse.

By the time we get to about 1803, however,
there's a common understanding that

poor relief in England isn't
working very well.

So by that time about
11% of the population

or about one million individuals,
they are receiving poor relief.

It's also the case that very early
in the 19th century,

per capita poor relief costs are rising.

Part of the problem was simply that
the English economy was becoming

more volatile in the late 18th century.

Now, perhaps the Poor Laws
were not to blame for this

but in any case, there was
a common understanding that

some kind of reform would be required.

It also happens, by the late 18th century,

that wage subsidies become an especially
prominent way of helping the poor.

And this blurs the categories of
who is actually a poor person,

who deserves to receive relief,

and who is simply
someone who's a worker.

Since back then, virtually everyone
was poor by modern standards,

it's difficult to use our modern
intuitions for who deserved aid

to analyze policy back in, say,
the late 18th century.

In any case, economists were also
extremely critical of the Poor Laws

during that point in time,
and leading the charge was Malthus.

It was a common critique of
the Poor Laws that they fell victim

to the Malthusian argument.

For more background on this,
see our videos on Malthus,

but to sum it up quickly,

the fear was that
if you pay people to be poor,

you will in the longer run
support more poor people,

you will encourage people
to be more poor and, most of all,

you will encourage poor people
to have more children

that will expand the supply of labor,
wages will go back down for the poor,

and it was believed by the Malthusians,
that for these reasons,

poor relief would be self-defeating,

and it actually could make the lot
of the poor worse rather than better.

As you can see from our videos
on Malthus and also population,

it's not clear this argument
was actually true,

but at the time
it was extremely influential.

In any case, the government
eventually created a commission

and this later gave rise to a report
called the Poor Law Report of 1834

which is a very famous document
reflecting how classical economics,

and indeed the Victorians
thought about welfare reform.

If you read this report, keep in mind,

there were few formal
economic statistics back then.

So for the most part, the reform was
based on a mix of going around,

and seeing what was happening,
and sending out questionnaires.

Perhaps the most influential figure
behind the writing of the report

was Nassau Senior.

He was a leading classical economist.

For the most part,
he was a defender of laissez-faire,

and he was the individual
who wrote most of the report,

and caused the report
to be a kind of channel

for how classical economists were
thinking about welfare reform.

Another important individual behind
the report was Edwin Chadwick

who later became famous as
a public health reformer

and for helping build
the public sewers of London.

He was very much a believer
in administrative centralization

and arguably because of his later
efforts in the field of public health,

he was one of the most important
individuals in all of 19th century England.

In any case, the Poor Law Report was
pretty brutal and pretty negative

about how Poor Laws were operating
during the early 19th century.

It blamed the Poor Laws for
what it called a "Malady of pauperism",

and it argued that benefits
were so generous

that even the middle class often
started applying for aid.

The report spent a lot of time
detailing what seemed to be

fraudulent claims or feigned illnesses.

Again, for the purposes of obtaining
money from the government.

Obviously, you can see echoes of
this kind of argument

in today's critiques
of some welfare programs.

It was also very much a criticism
of the Poor Laws by the report,

that they broke down
bonds of friends and family

and substituted
state intervention into areas

where local communities should
be supporting poor individuals.

There is, of course, an ongoing debate
to this day as to how much

the resources of centralized government
are needed to help out the poor.

The Poor Law Report also had a very
sophisticated understanding

of wage subsidies and the more
general idea of tax incidence.

So recall that, by the late 18th century,
a lot of relief for the poor

is taking the form of wage subsidies,

but arguably, these subsidies are
often captured by the employer,

not the employee.

For instance, let's say that a worker
is being paid 100 to take a job

and then policy comes along
and says to that worker,

"You will receive
an extra 20 for your work."

Well, you might think naively
that means the worker will get 120,

but, under the theory of tax incidence,
that doesn't have to be the case.

Sometimes, what can
happen is, for instance,

now the worker is getting
only 80 from the employer.

The worker is still
receiving a total of 100

because that's 80 plus 20,

but the actual value of the 20
is being captured by the employer

and not by the worker.

It seems a lot of that was
going on before the time

when the Poor Law Report came out.

As analyzed in the report,
the Poor Laws at that time,

they required a lot of local oversight,

and there was a group
of individuals called overseers

responsible for enforcing the law,

and it was widely believed that
they became corrupt and abusive,

and the report details this
at great length.

There's also considerable
worry in the report,

and at the time, more generally,

that the Poor Laws were
encouraging illegitimate children,

or as they were then called, "Bastards."

Most of all, there was a great worry
that the Poor Laws at the time

were extremely expensive.

Keep in mind that back then,
most people did not live

in houses which looked like this.

Revenue was hard to come by,
the share of government

as a percentage of GDP
seems to have been very small,

and in general, what might appear to us
to have been a trifling expenditure,

was at the time,
actually fairly burdensome.

So what were the proposals of
the Poor Law Report of 1834?

Well, most of all, the authors of
the report recommended that,

in order to receive aid,
that workhouses be required.

That is, these individuals would have
to actually take on some kind of job,

and this meant the abolition of
what was then called "outdoor relief."

It was understood that this meant
getting quite tough with the poor,

but as the report wrote, I quote,

"...it is a hardship to which the good of
society requires the applicant to submit."

That is, it was believed that
if the receipt of welfare

was linked to work,

individuals would have
a smaller incentive

to defraud the system
or to try to collect benefits,

when benefits were not,
to them, rightly due.

The report also wanted to make it
much harder to collect benefits

by a process called "settlement"
which, at the time meant that

if you changed your residence and
could establish residence in a new parish,

you might claim poor relief there.

It was believed by the authors of
the report that this led to excess fraud,

and there was very much a call for
tightening up, or even eliminating,

this way of getting funds.

This sounds mean and maybe it was mean,
but I would stress a general point that,

when you go back to
the early 19th century,

there basically isn't any good way
of running a welfare state

or a welfare program.

Look at it this way, again to stress:
Most people were extremely poor.

So if you take what we would
consider as modern

a decent level of support for the poor,

that will virtually, by definition,
have a negative impact

on the work incentives of
the so-called middle class.

Finally, and this seems to have been due
to the influence of Edwin Chadwick,

the Poor Law Report called for the
centralizing of administration

of the Poor Laws.

You will note that the report
was extremely influential

and a version of
these recommendations

was, in fact, voted
into law shortly thereafter.

The happy ending to this tale
is that English growth,

especially for the working class,
really did pick up starting in the 1840s.

So in this sense,
we never got a clear test

of how the new Poor Laws might
have performed relative to the old.

To read more on this topic,
first I can recommend

a very useful short survey piece
by Joseph Persky called

Classical Family Values, that's in
the Journal of Economic Perspectives.

A very useful short and single book
treatment is by Anthony Brundage,

and that's just called
The English Poor Laws.

It's very illuminating to read
the actual Poor Law Report of 1834

and that is available online and free
from the Library of Liberty,

run by Liberty Fund.

It's extremely readable and it gives you
a very clear sense of how

some of the classical economists
thought about issues involving the poor.

There's a very good book
by Raymond Cowherd

and that covers
the influence of economists,

in particular,
on the Poor Law debates.

That's called, Political Economists
and the English Poor Laws.

And there is more.

There are 2 essential articles
by Mark Blaug,

and these articles argue that
the Poor Law Report of 1834

very much overstated problems
with the Poor Laws of this time.

These articles are absolutely
classic reading on the topic.

There's a piece by
Donald McCloskey called,

New Perspectives on the Old Poor Law
which tends to push back in the direction,

claiming the poor laws did not
work well in every regard.

And finally, there's a very good book
by George Boyer called,

An Economic History of
the English Poor Law 1750-1850,

and he has several papers
related to this book

which you can find through
scholar.google.com

and you can think of Boyer
as in some ways pushing back

against Blaug and arguing that
there were indeed some truths

in the Poor Law Report of 1834.