Welfare's effect on poverty
Encyclopedia
The effect of social welfare on poverty is controversial. Since the goal of welfare programs is to reduce poverty
, it has been debated, primarily in the United States, whether or not welfare programs achieve this goal.
Proponents argue welfare has reduced poverty in developed countries while opponents argue welfare creates a negative incentive
to not find work and thus sustains or even creates poverty.
s poverty decreases after countries adapt welfare programs. Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries whose welfare states commonly constitute at least a fifth of GDP.
, Bradley et al. and Lane Kenworthy measure the poverty rates both in relative terms (poverty defined by the respective governments) and absolute terms, (poverty defined by 40% of US median income
) respectively. Kenworthy's study also adjusts for economic performance and shows that the economy made no significant difference in uplifting people out of poverty.
The studies look at the different countries from 1960 to 1991 (Kentworthy) and from 1970 to 1997 (Bradley et al.). Both these periods are roughly when major welfare programs where implemented such as the War on Poverty
in the United States.
The results of both studies show that poverty has been significantly reduced during the periods where major welfare programs were created, which is most effective on lowering poverty rate in France and the least effective overall within the United States.
) have favored reducing or eliminating welfare. The landmark piece of legislation which reduced welfare was the Personal Responsibility and Work Opportunity Act
under the Clinton administration.
Conservative and Libertarian
groups such as the Heritage Foundation
, and the CATO institute
assert that Welfare creates a dependence and makes an incentive to not find work. This dependence is called a "culture of poverty
" which is said to undermine people from finding meaningful work. Many of these groups also point to the large budget used to maintain these programs and assert that it's wasteful.
In the book Losing Ground, Charles Murray
argues that welfare not only increases poverty but also increases other problems such as single-parent households, and crime.
Socialists argue that welfare states and modern social democratic policies limit the incentive system of the market by providing things such as minimum wages, unemployment insurance, taxing profits and reducing the reserve army of labor, resulting in capitalists have little incentive to invest; in essence, social welfare policies cripple the capitalist system and increase poverty. By implementing public or cooperative ownership of the means of production, socialists believe there will be no need for a welfare state.
US specific:
Poverty reduction
Poverty is the state of human beings who are poor. That is, they have little or no material means of surviving—little or no food, shelter, clothes, healthcare, education, and other physical means of living and improving one's life....
, it has been debated, primarily in the United States, whether or not welfare programs achieve this goal.
Proponents argue welfare has reduced poverty in developed countries while opponents argue welfare creates a negative incentive
Incentive
In economics and sociology, an incentive is any factor that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way...
to not find work and thus sustains or even creates poverty.
Proponents of welfare reducing poverty
Studies show that in welfare stateWelfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
s poverty decreases after countries adapt welfare programs. Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries whose welfare states commonly constitute at least a fifth of GDP.
Table of poverty levels pre and post welfare
Two studies compare countries internationally before and after implementing social welfare programs. Using data from the Luxembourg Income StudyLuxembourg Income Study
The Luxembourg Income Study, asbl is a non-profit project which produces a cross-national database of micro-economic income data for social science research. The project started in 1983 and is headquartered in Luxembourg. In 2006 the database included data from 30 countries on four continents,...
, Bradley et al. and Lane Kenworthy measure the poverty rates both in relative terms (poverty defined by the respective governments) and absolute terms, (poverty defined by 40% of US median income
Household income in the United States
Household income is a measure commonly used by the United States government and private institutions, that counts the income of all residents over the age of 18 in each household, including not only all wages and salaries, but such items as unemployment insurance, disability payments, child support...
) respectively. Kenworthy's study also adjusts for economic performance and shows that the economy made no significant difference in uplifting people out of poverty.
The studies look at the different countries from 1960 to 1991 (Kentworthy) and from 1970 to 1997 (Bradley et al.). Both these periods are roughly when major welfare programs where implemented such as the War on Poverty
War on Poverty
The War on Poverty is the unofficial name for legislation first introduced by United States President Lyndon B. Johnson during his State of the Union address on January 8, 1964. This legislation was proposed by Johnson in response to a national poverty rate of around nineteen percent...
in the United States.
The results of both studies show that poverty has been significantly reduced during the periods where major welfare programs were created, which is most effective on lowering poverty rate in France and the least effective overall within the United States.
| Country | Absolute poverty rate (1960–1991) (threshold set at 40% of U.S. median household income) |
Relative poverty rate (1970–1997) |
||
|---|---|---|---|---|
| Pre-welfare | Post-welfare | Pre-welfare | Post-welfare | |
| Sweden Sweden Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund.... |
23.7 | 5.8 | 14.8 | 4.8 |
| Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
9.2 | 1.7 | 12.4 | 4.0 |
| Netherlands Netherlands The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders... |
22.1 | 7.3 | 18.5 | 11.5 |
| Finland Finland Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside... |
11.9 | 3.7 | 12.4 | 3.1 |
| Denmark Denmark Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark... |
26.4 | 5.9 | 17.4 | 4.8 |
| Germany Germany Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate... |
15.2 | 4.3 | 9.7 | 5.1 |
| Switzerland Switzerland Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition.... |
12.5 | 3.8 | 10.9 | 9.1 |
| Canada Canada Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean... |
22.5 | 6.5 | 17.1 | 11.9 |
| France France The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France... |
36.1 | 9.8 | 21.8 | 6.1 |
| Belgium Belgium Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many... |
26.8 | 6.0 | 19.5 | 4.1 |
| Australia Australia Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area... |
23.3 | 11.9 | 16.2 | 9.2 |
| United Kingdom United Kingdom The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages... |
16.8 | 8.7 | 16.4 | 8.2 |
| United States United States The United States of America is a federal constitutional republic comprising fifty states and a federal district... |
21.0 | 11.7 | 17.2 | 15.1 |
| Italy Italy Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and... |
30.7 | 14.3 | 19.7 | 9.1 |
Opponents of welfare reducing poverty
Opposition to welfare programs has been primarily in the United States. Members of both the Republican and Democratic Party (as well as third parties such as the LibertariansLibertarian Party (United States)
The Libertarian Party is the third largest and fastest growing political party in the United States. The political platform of the Libertarian Party reflects its brand of libertarianism, favoring minimally regulated, laissez-faire markets, strong civil liberties, minimally regulated migration...
) have favored reducing or eliminating welfare. The landmark piece of legislation which reduced welfare was the Personal Responsibility and Work Opportunity Act
Personal Responsibility and Work Opportunity Act
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 is a United States federal law considered to be a fundamental shift in both the method and goal of federal cash assistance to the poor. The bill added a workforce development component to welfare legislation, encouraging...
under the Clinton administration.
Conservative and Libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
groups such as the Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...
, and the CATO institute
Cato Institute
The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
assert that Welfare creates a dependence and makes an incentive to not find work. This dependence is called a "culture of poverty
Culture of poverty
The culture of poverty is a social theory that expands on the cycle of poverty. Proponents of this theory argue that the poor are not simply lacking resources, but also have a unique value system...
" which is said to undermine people from finding meaningful work. Many of these groups also point to the large budget used to maintain these programs and assert that it's wasteful.
In the book Losing Ground, Charles Murray
Charles Murray (author)
Charles Alan Murray is an American libertarian political scientist, author, columnist, and pundit working as a fellow at the American Enterprise Institute, a conservative think tank in Washington, DC...
argues that welfare not only increases poverty but also increases other problems such as single-parent households, and crime.
Socialists argue that welfare states and modern social democratic policies limit the incentive system of the market by providing things such as minimum wages, unemployment insurance, taxing profits and reducing the reserve army of labor, resulting in capitalists have little incentive to invest; in essence, social welfare policies cripple the capitalist system and increase poverty. By implementing public or cooperative ownership of the means of production, socialists believe there will be no need for a welfare state.
See also
- Criticisms of welfareCriticisms of welfareThe notion, and the extent of, the modern welfare state has been criticised on both economic and social grounds, from both the Left and the Right of the political spectrum.- Libertarian & Conservative criticisms :...
- Welfare reformWelfare reformWelfare reform refers to the process of reforming the framework of social security and welfare provisions, but what is considered reform is a matter of opinion. The term was used in the United States to support the Personal Responsibility and Work Opportunity Act...
- Welfare economicsWelfare economicsWelfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...
US specific:
- War on PovertyWar on PovertyThe War on Poverty is the unofficial name for legislation first introduced by United States President Lyndon B. Johnson during his State of the Union address on January 8, 1964. This legislation was proposed by Johnson in response to a national poverty rate of around nineteen percent...
- United States welfare state
- Welfare queenWelfare queenA welfare queen is a pejorative phrase used in the United States to describe people who are accused of collecting excessive welfare payments through fraud or manipulation. Reporting on welfare fraud began during the early 1960s, appearing in general interest magazines such as Readers Digest...
- Social Security debate (United States)Social Security debate (United States)This article concerns proposals to change the Social Security system in the United States. Social Security is a social insurance program officially called "Old-Age, Survivors, and Disability Insurance" , in reference to its three components. It is primarily funded through a dedicated payroll tax...
- Cloward–Piven strategy