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Universal benefit


A benefit available to all citizens of a country regardless of income. Universal benefits may be conditional on other criteria, such as age for pensions, or disability. The argument for making benefits universal rather than means-tested is that means-testing is expensive and open to abuse, and is an irasion of privacy. The objection to making benefits universal is that this extremely expensive, and may involve most of the money going to people who are not in severe need. The alternative is to use means-testing to target the available funds towards those in greatest need. In economies where the bulk the labour force receives occupational pensions, state pensions could be larger if they were means-tested. This, however, would create disincentives both to saving before retirement age and to continuing work after it; pensions which are universal benefits have neither of these side-effects. See also targeting.


Reference: Oxford Press Dictonary of Economics, 5th edt.