It would most certainly increase crime (which would cost more).Decreasing benefits would do a good enough job of that.
kd
On another comment you made.
"Not to mention the fact that if you saw a general 'averaging' out of the wage rate, so there was more even distribution, you'd be at risk of seeing a lower level of Gross National Happiness. - Increased income doesn't effect your happiness, but income in comparison to your 'comparison group' (friends/neighbours/family/average for country/average for area, etc...) does. By levelling everyone out more you'd probably see a decrease in Happiness surveys. "
This is completely and utterly wrong, this is one the biggest made up loads of tosh I've ever read.
Not to mention you contradict yourself here.
First you say.
"increased income doesn't effect your happiness, but income in comparison to your 'comparison group' (friends/neighbours/family/average for country/average for area, etc...) does"
That is true, relative poverty is what causes cracks in society & damages social cohesion, the gap between the rich & poor (look at the stat's if you don't believe me, by comparing income equity/poverty per nation to crime rates).
Then you say.
"By levelling everyone out more you'd probably see a decrease in Happiness surveys."
So, large difference in wages = unhappiness
So decreasing the difference in wages = more unhappiness.
Very logical, you should write a book.