You’ve likely come across the familiar expression: “It should be worth our time to work.” This notion is not exclusive to countries with limited public assistance; it holds relevance even in welfare-rich nations like Norway, where social safety nets are robust and designed to support those who are either temporarily or permanently out of the labour force. Whether individuals have left work by necessity or choice, the expectation that employment should provide a meaningful financial return persists across much of society. The idea underscores a broader economic principle—people will be more inclined to participate in the workforce if doing so offers a clear and tangible benefit over remaining unemployed.

This principle is known in economic and policy circles as the work incentive principle, which states that employment should always yield a financial advantage compared to receiving unemployment benefits. Roberto Iacono, an associate professor at the Norwegian University of Science and Technology (NTNU), has extensively studied the interplay between minimum wages and welfare provisions. His findings, published in PLOS, examine what happens when both the minimum wage and welfare benefits are reduced to very low levels. His research highlights the consequences of eroding the financial differential between working and claiming benefits—a differential essential to maintaining a motivated and engaged workforce.

In many developed countries, minimum wage laws are established not only to protect workers but to ensure that work remains an attractive option. By guaranteeing a baseline income, governments aim to keep more people within the labour market, thereby strengthening economic productivity and reducing dependency on state support. This aligns with the goals of the work incentive principle. When people who are capable of working see that their efforts will be financially rewarded, they are more likely to remain employed. From a macroeconomic perspective, this promotes a healthier and more resilient economy, thereby reducing the long-term strain on public resources.

However, the picture is not always so straightforward. One major limitation of the work incentive principle is that it can fail to account for those who genuinely cannot work due to illness, disability, or other barriers. When the financial advantages of working are preserved by keeping unemployment benefits extremely low, individuals who are unable to participate in the workforce may find themselves living in poverty. Thus, while the principle may work well in theory, in practice, it requires careful balancing to ensure that no vulnerable group is left behind. Social equity must be considered alongside economic efficiency in the formulation of wage and welfare policies.

A significant concern raised by Iacono’s research is what happens when the financial difference between low-paid work and welfare becomes negligible. In such a situation, the incentive to work disappears. If the minimum wage is set too low, particularly in comparison to subsistence-level welfare benefits, people may rationally choose not to work at all. This scenario is counterproductive to the very aims of the policy. As Iacono points out, when neither option offers a path beyond bare survival, the work incentive principle effectively collapses. For the principle to function, wages must be not only above benefit levels, but consistently above what is required to make ends meet.

The broader implications of these findings are especially relevant for policymakers across the developed world. While many countries continue to uphold welfare systems designed to catch those who fall through the cracks, they often do so in tandem with stagnant or insufficient minimum wages. This creates a fragile equilibrium in which the value of work is eroded over time. Iacono’s research presents a compelling argument that societies cannot rely solely on low wages to sustain high employment. If work is to remain a viable and desirable option, it must offer more than the mere avoidance of poverty—it must provide security, dignity, and the hope of progress. This, ultimately, is the only sustainable foundation for an inclusive and active workforce.

More information: Roberto Iacono, The Welfare versus Work Paradox, PLOS One. DOI: 10.1371/journal.pone.0321564

Journal information: PLOS One Provided by Norwegian University of Science and Technology