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Lendaddys' reason for failure: The welfare system is not based in any logic or understanding of human nature. The system actually robs the receivers of dignity, confidence or any form of pride. The basic motivators of the human have been removed. There are no negative nor positive motivators built in (punishment/reward). Adversity is a great motivator, the actual goal here is to remove that motivator?
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Okay, eliminate abuse and funding from the problem. It's an attitude and motivation problem.
Expectancy theory: "The strength of a tendency to act in a certain way depends on the strength of an expectation that the act will be followed by a given outcome and on the attrictiveness of that outcome to the individual." (Robbins, Stephen P., Organizational Behavior)
As it is now, there's no reason for those on welfare to even think that there will be some reward for working hard. They grew up in a trailor park or in the ghetto, where their parents, grand-parents, cousins, friends, and everyone they've ever known has lived. I don't think the thought of hard work = success occurs to many of them at all.
So... How do you motivate these kinds of people? Obviously throwing money at them isn't working.