Means Testing

MEANS TESTING IS THE PROCESS by which people are assessed for their eligibility for public assistance schemes, such as welfare payments or tax credits, on the basis of their existing income. Since universal provision of payments can be very resource-intensive, restricting transfers to those with genuine need can enable schemes to continue without being prohibitively expensive.

However, the very complex nature of many programs and eligibility criteria makes the process of application expensive and subject to administrative error, not to mention fraud, while filling out forms and presentation for interview represent possible barriers to access for a number of people. Furthermore change in personal circumstances also affects eligibility for meanstested benefits, including those for whom the benefit is clearly intended, and this can lead to further sources of administrative error.

Means-tested benefits are subject to criticism from people who object to government transfers generally. They claim that these benefits promote a culture of reliance and underachievement. Means-tested benefits are also subject to criticism when they are too restrictive or complex and hence fail to reach those who would need them the most. However, these forms of criticism usually concern administrative rather than ideological issues.

Means testing has a long history in European economies and was for a long period associated with the notion of the “deserving” and the “undeserving” poor—the former being those willing and able to improve their lot and the latter not, with little thought being given to why some people were unable to improve themselves. It has been used in the United States since the time of the Great Depression and its merits are continually debated with respect to expensive schemes such as Medicare. Ross Perot, a 1992 presidential candidate, [Page 696]advocated greater use of means testing to determine eligibility, but there has been little progress subsequently as the issue has become mired in partisan politics. Internationally, means testing is expanding to former Communist countries that previously offered, if some times only nominally, universal levels of benefit. Greater capacity in developing countries is also enabling a larger provision of means-testing terms of government welfare provision, and there is a need for high-quality research to determine the long-term impacts of such schemes and to identify the best practice in managing them. Irrespective of optimal arrangements for distribution of resources, poorly considered or presented schemes will arouse widespread resentment.