This is the Cato Daily Podcast for Tuesday, August 25, 2015.

I'm Caleb Brown.

If welfare benefits are too generous, it may encourage people to stay on the dole rather than seek work.

In their new paper the work

versus welfare trade-off Europe. Michael Tanner and Charles Hughes

examined how the countries of Europe are encouraging or discouraging people

from seeking employment. Get your copy of the paper at Cato.org.

Well this is a continuation really of the study we did of US welfare benefits

back in 2013. This time we looked at Europe and we compared the level of

welfare benefits across countries and the possible impact that would have on

work incentives and what we found was that welfare benefits were indeed

extremely high in many countries a lot of variation but in countries like Denmark and

Finland benefits were quite high and could

quite possibly serve as a disincentive for work. And the way that kind of

manifests itself in some of these countries is it creates a high marginal effective tax rate,

which is basically a situation where a person getting a job or increasing their

hours loses most of their additional earnings to reduced benefits or higher taxes.

So at some point somebody who is receiving a certain amount of benefits yet I suppose is working or decides to up a working by earning that extra dollar

they actually lose a great deal of benefits so what does that effect do?

Well look people who are on welfare aren't lazy, but they're also not stupid.

If you're going to pay someone more not to work than they can earn from working, they're going

to give serious thought to whether or not they want to work.

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