Fig 1.
The Welfare versus Work Paradox.
This figure illustrates the paradox graphically. The blue line represents the declining real wages, and at any point in time, it guarantees a higher living standard than welfare transfers (red line). This corresponds to the work incentive principle. Both lines are at any point in time above the black line, which indicates the subsistence level (kept constant for simplicity). Benefit levels from transfers are also decreasing due to a decline in welfare generosity. In the final period of time, the red and blue lines become tangent with the black line, leading to the paradox.