Welfare may be provided directly by governments or their agencies, by private organizations, or by a combination. The term welfare state is used to describe a state in which the government provides the majority of welfare services; the phrase also describes those services collectively.
Welfare may be funded by governments out of general revenue, typically by way of redistributive taxation. Social insurance-type welfare schemes are funded on a contributory basis by the members of the scheme. Contributions may be pooled to fund the scheme as a whole, or reserved for the benefit of a particular member. Participation in such schemes is either compulsory, or the program is subsidized heavily enough that most eligible individuals choose to participate.
Participation in such schemes is either compulsory, or the program is subsidized heavily enough that most eligible individuals choose to participate. Some opponents of welfare argue that it affects work incentives. They also argue that the taxes levied can also affect work incentives. A good example of this would be the reform of the Aid to Families with Dependent Children (AFDC) program. Per AFDC, some amount per recipeint is guaranteed. However, for every dollar the recipient earns the monthly stipend is decreased by an equivalent amount. For most persons, this reduces their incentive to work. This program was replaced by Temporary Aid to Needy Families (TANF). Under TANF, people were required to actively seek employment while receiving aid and they could only receive aid for a limited amount of time. However, states can choose the amount of resources they will devote to the program. Some people believe this is how we should reform Medicaid.