This chapter begins by examining the relationship between government benefits and inequality and between benefits and employment. It uses a new approach to measuring comparative benefit generosity, the outlines a policy package that can potentially provide generous benefits to working-age individuals and households who need them without creating excessive employment disincentives. The package features generous transfers to those unable to work due to involuntary job loss, sickness, disability, or family responsibilities. However, benefits provided on a temporary basis should be of relatively short duration, and eligibility criteria for those provided on a permanent basis should be fairly strict. In exchange for this strictness, extensive support should be provided for those entering or returning to the work force, in the form of training, job placement, public employment, and childcare. A key component of the benefit package is an employment-conditional earnings subsidy.
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