At the Margins of the Welfare State

Social Assistance and the Alleviation of Poverty in Germany, Sweden and the United Kingdom

Christina Behrendt

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138731042
• eBook ISBN:
  9781351741880
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

The persistence of poverty in advanced welfare states casts doubt on the fundamental operating procedures of income distribution and redistribution. What are the reasons for this apparent failure of the welfare state in alleviating poverty? Why are some countries more effective than others in this respect and what can explain these variations in effectiveness? Addressing one of the major puzzles in comparative welfare state research, this volume examines why there is income poverty in highly developed welfare states. Focusing on the basic safety net of the welfare state, it offers a systematic analysis of the effectiveness of minimum income schemes in a comparative study across three highly developed welfare states: Germany, Sweden and the United Kingdom. Blending insights from a combination of institutional information and quantitative data from income surveys, the author evaluates the causal mechanisms for the persistence of income poverty in highly developed welfare states and derives conclusions for political reforms

Chapter 1

Welfare States and the Alleviation of Poverty

If poverty prevails, the welfare state is a failure. (Ringen, 1987: 141)

Industrialized welfare states have established elaborate systems of income redistribution and spend a considerable proportion of their national income on social policies. In a complex wickerwork of taxes and transfers, resources are redistributed in multiple ways, between the rich and the poor, between the young and the old, between families with children aind the childless, between healthy and sick people, and so forth. The redistributional impact of the welfare state is so large that some groups of the population even receive the largest part of their income from the welfare state.

Nonetheless, poverty has not been eradicated. The expansion of the welfare state during the 20th century and the economic boom after World War II led many people to believe that poverty would disappear or would at least be reduced to an insignificant minimum affecting only marginal groups of the population. Yet, a sizeable proportion of the population live in economic poverty in all industrial welfare states. According to one of the most common standards used in comparative poverty research, on average roughly one in ten households live in relative income poverty in OECD countries (cf. Atkinson etal., 1995).

Given the amount of income redistribution for social purposes, the persistence of poverty in industrial welfare states calls for an explanation. If industrial welfare states offer elaborate systems of income maintenance, why is there still a considerable amount of poverty?

The alleviation of poverty has been one of the major aims of modern welfare states, if not the most important aim. Although welfare states differ in terms of aspiration, institutional design and policies, this objective is in principle embraced by all welfare states (cf. Goodin et al., 1999: 21-36). In this vein, Stein Ringen has proposed to use the issue of poverty alleviation as a yardstick for the general effectiveness of the welfare state.

It is important to raise the issue of poverty, because of the historical significance of the problem, because its elimination has been the first priority of the welfare state, and because it offers an opportunity for discussing social policy on a basis of consensus. While there is a disagreement about the responsibility of government with regard to overall inequality, its responsibility in relation to poverty has been accepted for generations and is not seriously contested today. If poverty prevails, the welfare state is a failure. (Ringen, 1987: 141)

If modern welfare states are not effective in alleviating poverty, their very purpose is fundamentally challenged, irrespectively of whether they are effective in achieving other goals or not. Poverty is thus one important indicator for a welfare state’s effectiveness and therefore deserves a more thorough analysis.

The persistence of poverty in advanced welfare states casts doubt on the fundamental operating procedures of income distribution and redistribution. What are the reasons for this apparent failure of the welfare state in alleviating poverty? Why are some countries more effective than others in this respect? What can explain these variations in effectiveness?

In spite of the strong impact of the welfare state on the income positions of individuals and private households, the mechanisms and effects of redistribution are far from clear. A number of studies have assessed the magnitude of total welfare state redistribution (cf. Beckerman, 1979; Mitchell, 1991), but could not offer a detailed explanation of the persistence of poverty in industrial welfare states.

Minimum Income Schemes and the Alleviation of Poverty

As the basic safety net of the welfare state, minimum income schemes play a critical role for the alleviation of poverty in modern welfare states. However, their role in poverty alleviation has seldom been systematically researched. This book therefore proposes to shift the analytical focus from the welfare state as a whole to minimum income schemes.¹ These schemes are explicitly designed for the purpose of alleviating poverty and are ultimately responsible for guaranteeing an adequate standard of living.² They step in if neither the primary income distribution through the market nor redistribution through social insurance and related schemes can protect people from poverty.

As the ultimate safety net of the welfare state, minimum income schemes are finally responsible for the effectiveness of the whole social security scheme. If this net does not hold, the effectiveness of the whole system is called into question. If it does, at least a minimum standard of protection is guaranteed. An effective alleviation of poverty in industrial welfare states is thus critically dependent on these minimum income schemes. A closer analysis of this basic safety net of the welfare state therefore promises valuable information on the persistence of poverty in industrial welfare states.

In spite of their importance for the alleviation of poverty, minimum income schemes have rarely been the focus of the mainstream of comparative welfare state analysis.³ Most major studies have addressed social insurance schemes while social assistance was considered as a relic of the old poor law tradition that would subsequently be eliminated with the maturing of social insurance schemes (cf. Atkinson, 1999: 3). Nevertheless, these expectations have not been fulfilled; social assistance schemes still make up – and always have made up – a considerable portion of social expenditure in Western European welfare states. Only in recent years has rising expenditure on social assistance in a time of persistent mass unemployment in many Western European welfare states appeared to attract the interest of comparative welfare state research towards social assistance schemes and other minimum income schemes. A number of large-scale reports have sought to systematically compare the institutional design of minimum income schemes in industrialized countries.⁴ Consequently, several scholars have attempted to integrate minimum income schemes into welfare state typologies or establish new typologies of social assistance schemes (Eardley et al., 1996a; Leibfried, 1992; Lodemel and Schulte, 1992).

It is not only comparative welfare state research which has underestimated the role of minimum income schemes – poverty research has also showed little interest in these schemes.⁵ Although social assistance schemes are explicitly aimed at alleviating poverty, poverty research has seldom thoroughly assessed the relationship between minimum income schemes and poverty. When assessing the causes of poverty, poverty research has largely scrutinized factors to be found in the distribution of earnings, the labour market, the social structure, and also social transfers for specific groups of the population, yet it has often neglected the basic safety net of the welfare state.

The incidence of poverty in advanced welfare states seems to have been attributed to a general mismatch of concepts of poverty and societal minimum income standards embodied in these schemes. While some observers appear to have tacitly assumed that social assistance benefits are too meagre as to provide a sufficient protection from poverty, others have sought the causes of this discrepancy rather in the measurement of poverty. The widely-used relative poverty line of 50 per cent of median equivalent disposable income in particular has been criticized as reflecting income inequality rather than a standard of subsistence, thus overstating poverty in rich countries (cf. Krämer, 1997; Blackburn, 1998).

The lack of knowledge about the relationship between minimum income schemes and poverty is only one example of a more general deficit. Whereas comparative social policy research has extensively analyzed the genesis and institutional similarities and differences of social security schemes, research into the outcome dimension is still underdeveloped. In particular, only a small number of studies have systematically evaluated the quality of social security schemes in a comparative perspective (cf. Dixon 1999).

This book makes an effort to step into this gap and to offer an evaluation of welfare state outcomes. It seeks to explain why extensive Western European welfare states are not successful in alleviating poverty. As the basic safety net of the welfare state bears the ultimate responsibility for the alleviation of poverty, this book focuses on minimum income schemes and assesses their effectiveness in protecting people from poverty. At its core is the idea that different welfare state arrangements produce different outcomes. A systematic analysis of the relationship between the basic safety net of the welfare state and the incidence of poverty thus promises to yield useful insights into the effects of the welfare state and the causes of poverty. The methodical framework of this analysis is based on a combination of qualitative information on institutional structures and quantitative micro-data on private household incomes.

Combining Institutional Information and Micro-data on Poverty

In order to gain a broad and detailed picture of the effectiveness of social assistance schemes, this book combines different types of qualitative and quantitative information. In addition to some aggregate data such as social expenditure ratios, the main focus is on micro-data from national household surveys that allow a detailed assessment of the income position of private households and the effects of redistributive policies. In order to shed some more light on this central puzzle – why is there poverty in extensive welfare states? – these data are confronted with more qualitative evidence on the institutional design of social assistance schemes. Information on the institutional frameworks stems from a broad variety of sources, including national and comparative studies on social assistance schemes and welfare states in general, national and international statistical sources, and citizen advice handbooks. For Britain and Sweden, a number of academic and administrative experts have been interviewed in order to supplement information from the literature with first-hand evidence.

This approach combines two research strategies that have been dubbed ‘institution-by-institution’ and ‘group-by-group’ approaches. The ‘institution-by-institution’ approach focuses on specific social security schemes -such as pension schemes or social assistance schemes – and emphasizes similarities and differences in the institutional design of these schemes. In contrast, the ‘group-by-group’ approach emphasizes the benefit packages available to individuals and private households (Hauser, 1997). Whereas the former approach is more focused on the organization of social policies, the second one is more concerned with the income position of individuals and households and the distributive effects of social policies.

The combination of these two approaches can help to broaden the focus of research while avoiding the blind spots inherent in each of these approaches. In addition, this allows the cross-checking of micro-data on plausibility. Survey data has often been criticized as providing a flawed basis for the assessment of poverty because of methodological problems. Confronting these data with institutional information on social security benefits and the operating procedures of these schemes can lead to a more informed interpretation of these data.

This book intentionally takes a simple stance to the analysis of the effects of welfare state institutions. It focuses only on the direct impact of social assistance schemes on poverty, and does not consider trends over time, long-term effects or side effects. A fully-fledged test of these claims would require an evaluation of the dynamic patterns of welfare receipt and poverty that would go far beyond the scope of this book.

The combination of institutional information with micro-data from the Luxembourg Income Study also governs the time frame of this analysis. As the most recent LIS data refer to 1994 (Germany) and 1995 (Sweden and the United Kingdom), this book mainly refers to the situation in the mid-1990s.

Choice of Cases

In contrast to one-country studies, comparative research allows one to depart from parochial policy analysis and to gain a new perspective on the particular characteristics of the countries under scrutiny. Therefore, three countries are analyzed in more detail – Britain, Germany and Sweden. These three countries have often been considered as paradigmatic cases for three distinct ‘poverty regimes’ (Leibfried, 1992) or ‘social assistance regimes’ (Eardley et al., 1996a; Lodemel and Schulte, 1992; Ledemel, 1992), with typical policy structures in poverty alleviation.⁶

Stephan Leibfried’s proposition of ‘poverty regimes’ bears a strong resemblance to Esping-Andersen’s (1990) welfare state regimes⁷ – here dubbed as Scandinavian, Bismarck and Anglo-Saxon poverty regimes – and adds a fourth, South-European world of ‘rudimentary’ welfare provision (Leibfried, 1992). The critical factor in determining poverty regimes is the relationship between work and welfare as embodied in the social rights of citizens. Both the Scandinavian and the Anglo-Saxon poverty regimes put a strong emphasis on work, although in a different manner. In Scandinavia, work is considered as a social right, and strong positive work incentives are entrenched in the social assistance schemes. In the residual welfare states of the Anglo-Saxon countries, work incentives are expected to follow a different logic, as they are enforced by a very low level of benefits and negative sanctions. The ‘Bismarck’ poverty regime stresses the right to social security as a result of earlier contributions. Finally, the rudimentary welfare states of Southern Europe have proclaimed a right to both work and social welfare, though this right is only partly implemented.

Whereas Leibfried refers to variations in the institutionalization of social citizenship, Lodemel and Schulte address institutional arrangements of public support for the poor (Lodemel, 1992; Lodemel and Schulte, 1992). They argue that a fully-fledged analysis of welfare state regimes should consider the ‘internal divisions’ within welfare states, notably the relationship between social insurance schemes and means-tested social assistance. Social assistance schemes complement social insurance in the sense that they provide a minimum income with a strong emphasis on entitlement in countries with a low degree of decommodification, and are markedly separated from social insurance schemes in countries with a strong degree of decommodification (Lodemel and Schulte, 1992: 531-533; cf. Lodemel, 1989).

Countries of the ‘Nordic’ cluster (comprising Denmark, Finland, Norway and Sweden) are characterized by a marked division of social assistance and social insurance, as generous social insurance benefits leave a marginal or ‘residual’ role to social assistance schemes.⁸ Unlike most social insurance benefits, social assistance is administrated at the communal level with a high level of discretion and a strong emphasis on social work treatment (cf. Ditch et al., 1997). The ‘marginal’ character of the Scandinavian social assistance schemes not only shows in its small significance within the welfare state, but also in the stigmatizing effects of these benefits. Lodemel (1997) has denominated this aspect of the Scandinavian welfare states as a ‘welfare paradox’.

Whereas these schemes funnel relatively high social...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• List of Abbreviations
• Acknowledgments
• Chapter 1 Welfare States and the Alleviation of Poverty
• Chapter 2 Poverty and Poverty Alleviation in Industrialized Welfare States: What Do We Know?
• Chapter 3 Mapping the Reduction of Poverty through Minimum Income Schemes
• Chapter 4 Methodological Puzzles and Pitfalls in the Measurement of Poverty
• Chapter 5 Is the Entire Population Eligible for Social Assistance Benefits?
• Chapter 6 Do Social Assistance Schemes Provide Adequate Benefits?
• Chapter 7 Do Social Assistance Schemes Encourage Take-up?
• Chapter 8 Conclusion
• Appendix
• Bibliography
• Index