The problem is that when people are making choices, they calculate the pros and cons for them.
If there's not much gap between how much money you can get when working against how much you get when not working/working less then it's natural that many people will choose not to work, or work less. Working is effort, and less pleasant than doing whatever you like.
But then you get fewer and fewer working people supporting everyone else. It's not sustainable.
It isn't possible to give people the same level of lifestyle when they don't work as when they do without removing the incentive to work. Yet somehow, that's what we seem to keep trying to do as a country. It's pushed as the morally 'right' goal, for everyone to have a 'decent lifestyle': where 'decent lifestyle' is defined as what you get when you work a basic job. Which simply doesn't make sense. The problem isn't that not enough money is being allocated for welfare by the state (it's actually ever-increasing): the problem is that this unachievable goal causes a spiral.
I think a good solution would be to have childcare - which is the main barrier to work for parents - funded by the state universally (not means tested) out of taxation - exactly the same as schools - so that everyone pays for it spread out over their lifetime.
Additional support can then also be directly targetted in kind to children who need it by childcare and school settings: it might be less efficient, but then you can be sure the kids get the benefit.
Then you can give genuinely basic welfare support, knowing that the expensive bits are already covered elsewhere. Importantly, the whole package of accomodation, money given to parents towards children, other money should be significantly less than you would get working a NMW job.
It gets rid of the lifelong disadvantage women end up with when deciding that it doesn't pay for them to work with small children, it also means absent fathers don't get away without contributing (because everyone does), and also means the state doesn't double-pay into those families where the father is supporting financially (they currently have to assume he won't). It gets rid of those cliff edges which make working not make sense.