Means-tested benefits are designed to direct support to those most in need, but their effects can extend far beyond the households directly affected. Evidence from Uruguay shows that when benefit eligibility is automatically monitored through payroll records, enforcement decisions can influence behaviour across workplace networks. After seeing a colleague lose benefits, some recipients changed their own behaviour to avoid a similar outcome, reducing registered earnings and shifting away from formal employment. These responses spread through conversations at work, particularly among colleagues in similar roles and smaller workplaces.
This show that focusing only on households that lose benefits can underestimate the wider costs of enforcement. While eligibility checks remain essential to ensure public support reaches intended recipients, it is also important to recognise that enforcement can create indirect responses among others who learn about the rules. Clearer communication may help reduce uncertainty, but its effects should be carefully evaluated, as greater awareness could also encourage strategic adjustments.
