The recent series of columns in The Financial Post by Diane Francis on Ontario's welfare system have focused on how much a family can collect on welfare compared with income from employment.

The prolific journalist and her team of informants have worked up a good froth over the various cheaters, scammers, abusers, parasites and ''poverty pimps'' with which the Ontario system is apparently overrun.

The columns involve a reshuffling of pithy sentiments from Diane, mixed with the latest true confessions from welfare scammers who only did it to get even with the system.

EXTRA INCOME

The thrust of the series is that a family of four could earn generous amounts on the dole, thanks in part to an increase in welfare rates this year.

Not only are these princely payments swelling unemployment and bankrupting the treasury, but the NDP government is cutting back on the system's policing measures.

I will leave it to others to deal with the fact that 42% of Ontario welfare recipients are children, that only 25% of welfare cases are unemployment-related, and so forth. What is most in error is the analysis implicit in the series.

In all likelihood some people are abusing the system - just as some people cheat on their taxes. But one of the lessons of perestroika is that the answer to black markets and corruption is not more policing: it's to remove the incentives that give rise to anti-social behavior.

If people are better off on the dole than earning a wage, there are three possible courses of action. The approach favored by some on the right is to cut welfare payments. The left's favorite is to raise the minimum wage. But the incentive- based approach is to reduce the conflict between the two: to allow people to keep more of their social assistance payments even as they go back to work and start earning an independent income.

The biggest work disincentive to those on welfare is not the absolute size of the cheques they receive from the government, but the relationship between welfare and earned income. If a dollar more in earned income means a dollar less in social assistance, then the recipient has effectively entered the 100% tax bracket - about twice what Ken Thomson or Paul Reichmann pay.

GENEROUS AMOUNTS

At higher incomes and much lower marginal tax rates, it might be true that the extra income from welfare would reduce work effort. But at very low levels of income and confiscatory marginal tax rates, the suggestion doesn't hold up - particularly given Ms. Francis's evident concern with the disincentive effects of high tax rates on those further up the income scale.

As John Kenneth Galbraith - a man I rarely quote - has put it, the gist of this sort of analysis is that the poor don't work because they have too much money, while the rich don't work because they have too little.

A consistent approach for both rich and poor is to say that the real harm to work effort comes not from giving money to people when they don't work, but taking it away from them when they do. If we want to keep welfare from becoming a ''poverty trap,'' the goal should be to smooth out the withdrawal of payments as income rises to not more than, say, 50 cents on the dollar. The practical catch, of course, is that the more slowly payments are withdrawn, the less society can afford to pay as a basic minimum. But the principle is clear.

The simplest way to do this is to give everyone the same amount: a single, universal income supplement, with some add-ons for children and certain special cases like the disabled, taxed back at income tax rates. It's called the guaranteed annual income. Far from being a ''socialist'' dream, it was first proposed by Milton Friedman.