Economic Justifications for Cashless Debit Card in Welfare Payments

This document discusses the economic justifications for distributing welfare payments via the cashless debit card system. It explores the impact of the system on poverty reduction, accountability, and access to basic necessities. The document also examines the ethical framework underlying the case for the cashless debit card and the arguments for and against the program based on different ethical perspectives.

Microeconomics
Students Name
Institution

Microeconomics 1
1. What are the economic justifications for distributing welfare payments via the cashless
debit card? [5 marks
Majorly, the introduction of a cashless debit card system in welfare payments is inspired by
the desire to protect its recipients from social vices. The likelihood of welfare recipients to
engage in socially harmful behaviors in certain areas has to lead to cashless systems of welfare
payments. Such social evils such as alcoholism, gambling, and drug abuse have necessitated this
new cashless system (Department of social services, 2019). Through the cashless debit system,
recipients of welfare payments are guaranteed access to basic human necessities such as access
to food, shelter especially for marginalized or vulnerable people (Langton 2017).In a way, this
cashless system is meant to reduce poverty. The economist who supports this cashless system
holds the view that the fact that the card addresses the needs for targeted vulnerable groups of
persons. Through cashless debit systems, economic livelihoods are improved through basic
access to necessities. Through cashless systems, there is accountability due to the existence of a
paper trail as compared to the alternative as depicted in the graph below. Cashless economies
provide efficiency and safety in the financial markets.
Gabriel A.2017,Graph,Viewed 22 April 2019,
https://www.reddit.com/r/dataisbeautiful/comments/5pzae2/less_cash_less_crime_the_effects_of
_replacing/

Microeconomics 2
] (b) Are they consistent with the standard economic argument that payment in kind is
inferior in welfare terms to payment in cash? [see Unit 3 lectures, Week 4]? [5 marks]
Typically, budgetary constraints influence consumption. The cashless welfare payment
system agrees with the assertion that payment in kind is effective in welfare benefits as
contrasted with cash benefits. This is because budgetary constraints influence the income-
expenditure (Cunha, De Giorgi & Jayachandran 2015). The fact that cashless payment systems
are incorporated in welfare payments has made it easy for recipients to benefit from rationing
and vouchers based on the budgetary allocations. Through a voucher system, recipient’s
consumption choices are restricted to certain products which are usually basic in nature thus
boosting the welfare of the recipients. Despite the successes of the cashless system, it leaves out
other crucial factors such as data security and consumer choice. In addition, cashless welfare
payments are only beneficial to recipients who are customers of financial institutions. The fact
that the vulnerable recipients might lack an account with these financial institutions makes the
paperless system not ideal in welfare promotion.
2. (a) What ethical framework underlies the case for the cashless debit card you described
above? [See Unit 5 lectures, Week 5]
Arguably consequentialism underpins the cashless debit card systems for the distribution of
welfare payments. Basically, consequentialism holds the view that policies or actions are
determined by the consequences within which they are meant to serve (BBC.Com 2019). Simply
put, consequentialism is based on the mantra that the end is justified by the means. Essentially,
this ethical theory is based on the principles that the results of an act determine whether the act

Microeconomics 3
was right or wrong. In addition, the ethical theory of consequentialism is of the view that if an
action gives rise to good consequences, then it is more appropriate. In this scenario, the
government is allocating welfare benefits to distribute welfare payments for the specific purpose
of preventing socially harmful activities. In a way, the cashless dictated system promotes good
by removing the temptation of engaging in harmful acts such as gambling and alcoholism.
B) Would it matter for this case if people using the cashless debit card were worse off
compared to being able to allocate their own expenditure? Why or why not? [5 marks]
Notably, the use of the cashless debit system for welfare payments is not fully beneficial to the
welfare recipients. This is because the implementation of the policy depends on the stores in
which these cards are used. In the event that a merchant store offers both restricted and
unrestricted products, a welfare card recipient can end up buying restricted products thus making
them worse off (Arthur 2017). Due to the benefits accruing from using the cashless welfare
systems such as controlled expenditure, discourages crime due to the intangible nature of the
currency, there are several setbacks that make welfare recipients better off without the cashless
system. For instance, in the case of a data breach, the intended welfare recipients might be
cheated out of their welfare benefits. Also, due to the fact that the cashless systems work on
technology failure of technological equipment could deny the recipients access to basic services
thus leaving them worse off (Pritchard 2019).

Microeconomics 4
3. What arguments are there against the program based on the ethical framework you
identified in Question 2? [5 marks]
According to the deontology approach to ethics, decisions or policies are either right or wrong
from the outset regardless of the consequences (Misselbrook 2013).In essence, these ethical
perspectives provide that persons are obligated to act according to specific rules regardless of the
consequences. In this scenario, the fact that most of the welfare recipient income expenditure has
been allocated to them denies them the issue of choice. This ethical perspective is based on the
human rights declaration which accords all human beings the right to choose and access to basic
necessities such as food, shelter, clothing and health care (Wright 2015).In a way, deontological
ethics are an opposing force to the consequentialism perspective.
4. What arguments can be made for and against the program based on an opposing ethical
framework? [See Unit 5 lectures, Week 5] [10 marks]
Worth noting, deontology ethics does not accord any importance to emotions. It only spells
out the rights and duties of persons irrespective of the moral implications or consequences unlike
the consequential approach to ethics (Barrow & Khandhar 2019). Whereas consequentialism
focuses on the moral consequences of an action, deontology focuses on the action
itself( Chakrabarty 2015). While consequentialism makes an action right or wrong based on the
outcome, deontology determines the rightness of the act without the result thus making
deontology a better approach due to the fact that consequences are immaterial to the outcomes of
the act. Basically, deontology upholds human rights by dictating that actions be duty bound.
Unlike consequentialism, deontology is human rights-based thus the likelihood of propelling
justice as compared to consequentialism which is based on consequences rather than rights and

Microeconomics 5
duties. However, deontology fails to focus on the consequences of the duties and rights but the
action itself.
5. (a) Taking into account both the economic and ethical argument, is income management
via the cashless debit card justifiable on balance or not? [10 marks]
According to Cohen (2017), the moral arguments promoting the welfare allocations outweigh
the economic reasons for welfare benefits. Due to rights and duties approach, governments are
under obligation to provide basic necessities for its citizens hence the rolling out of the cashless
welfare system. On an ethical front, income management through the cashless system is justified
in the sense that it aims at eradicating the spread of social evils. Based on the CSSA findings,
there was reduced alcohol and gambling participation due to the cashless distribution of income
(Catholic social services Australia 2017). The fact that the cashless system denies recipients the
freedom of choice makes it unethical based on deontological ethics. Also, the fact that
government has duties to provide for the welfare of the people while upholding the rights of
citizens to choose creates an ethical conflict which is not fully justifiable through income
management.
However, on an economic front, income management is both a good and a bad thing.
According to a recent report survey done by the CSSA, welfare recipients hold the view that
their economic standing is now worse off due to the cashless income management
system(Catholic Social Services Australia 2017). Economically, the cashless system encourages
accountability of public funds. In addition to accountability, the cashless system made promotes
cash efficiency due to the quick nature of the transaction and controlled expenditure. Also,
income management has been praised for its ability to control cash flow thus boosting economic
activity in the country. The control of welfare benefits through debit system is on the rise as

Microeconomics 6
depicted in the gra below..In the effect that the cashless systems prevent the consumption of
certain goods might lead to a reduction in government revenue and rising public debt. Due to the
high cost of welfare payments, public debt might rise at the expense of investments.
Reserve Bank of Australia,2018,Graph,Viewed on 22 April 2019,
https://www.mja.com.au/journal/2010/192/10/impact-income-management-store-sales-northern-
territory
(b) If so, should it be applied to all recipients of government payments (pensioners,
students, if not, why not??
Whereas cashless debit approach to welfare might have its successes, I don’t think it should
be implemented to all recipients of welfare benefits. This is because of the different needs and
vulnerabilities of the persons receiving the payments. The fact that the cashless systems deny
recipients the freedom to choose how they spend the income is a violation of the freedom to
choice guaranteed under International conventions instruments such as the United Nations

Microeconomics 7
Universal Declaration of human rights. The fact that the system is focused on reducing social ills
such as gambling and alcoholism might hinder students from accessing resources required in
education. In my view, the cashless system should be addressed directly to persons identified as
being addicted to these social evils as contrasted to a universal application of the income
management approach.

Microeconomics 8
References
Arthur, D. (2017). The computer says no’: automatic product blocking for the Cashless Debit
Card. Parliament of Australia. [Online].Available at
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/
FlagPost/2017/June/Cashless_Debit_Card_-_automatic_blocking[Accessed18 April 2019]
Barrow, M.J & Khandar, B. P. (2019).Deontology. NCBI. [Online].Available at
https://www.ncbi.nlm.nih.gov/books/NBK459296/[Accessed 18 April 2019]
BBC.Com. (2019).Consequentialism.BBC.com.[Online].Available at
http://www.bbc.co.uk/ethics/introduction/consequentialism_1.shtml[Accessed 18 April 2019]
Catholic Social Services Australia. (2017).The Cashless Debit Card: Learnings from Trial Site
Communities and Recommendations. CSSA. Org.[Online].Available at
https://www.cssa.org.au/storage/cssa-report-cashless-debit-card-trial-nov17-final.pdf[Accessed
18 April 2019]
Chakrabarty, S. (2013).Comparing Virtue, consequentialist and deontological Ethics-Based
corporate social responsibility: Mitigating microfinance risks in institutional voids. Journal of
Business Ethics. Vol 126, Issue 3,PP 487-512.
Cohen, P. (2017). On Health and Welfare, Moral Arguments Can Outweigh Economics. New
York Times. [Online].May 7.Available at

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https://www.nytimes.com/2017/05/07/business/economy/congress-benefits-
fairness.html[Accessed 18 April 2019]
Chunha, M.J., De Giorgi, G. & Jayachandran S. (2015). The Price Effects of Cash versus In-
Kind Transfers.Federal Reserve Bank of New York.[Online].Available at
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr735.pdf[Accessed 18
April 2019]
Department of Social Sciences. (2019). Cashless debit card. Australian government [Online].
Available at https://www.dss.gov.au/families-and-children/programmes-services/welfare-
conditionality/cashless-debit-card-overview[Accessed 18 April 2019].\ Langton, M. (2017). The
Cashless Debit Card Trial is working and it is vital – here’s why. The Conversation.
[Online].May, 3.Available at https://theconversation.com/the-cashless-debit-card-trial-is-
working-and-it-is-vital-heres-why-76951[Accessed 18 April 2019]
Misslebrook, D. (2013). Duty, Kant, and Deontology. NCBI. [Online].Available at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3609464/[Accessed 18 April 2019]
Pritchard, J. (2019). The Pros and Cons of Moving to a Cashless Society. The Balance.
[Online].Available at https://www.thebalance.com/pros-and-cons-of-moving-to-a-cashless-
society-4160702[Accessed18 April 2019]
Wright, B.J. (2015).”An introduction to moral frameworks”. Stanford University Press.pg,3-21