Exactly. The point is to make it so that you can survive like that but you always have incentives to work, even a little. If you don't you will walk around in clothing that is obviously provided by the state (manufactures of clothing will work hard to make sure their clothing doesn't look like that), living a state area, eathing state food (may be pretty healthy, actually) - so everybody will know you belong on the bottom of society.

Yet nobody really suffers like they do today, nobody has to go hungry (this also helps those whoes parents aren't good with money, since they will still get food) nobody has to become homeless.