Chapter 1 Introduction
1.3 Why study social assistance?
Before moving on to describe the structure of the report, it is worth asking why it might be considered important to study social assistance schemes and what the policy context is for such research. In answering these questions we review very briefly the development of social welfare systems. the growing interest in forms of social protection based on selectivity and the previous research carried out in this area.
Public welfare in most of the countries in the study began with forms of local poor relief which represent the antecedents of contemporary social assistance schemes. In the course of the first half of the 20th century, Poor Law provision in most countries was overlaid, if not entirely superseded, by systems of social insurance and, later, categorical non-contributory benefits, which served purposes wider than simply the relief of poverty. Social assistance schemes themselves were substantially revised and codified in many countries in the decades following World War H, although some have retained more of their poor relief features than others.
There are many different ways of looking at the developments in social welfare systems in the 20th century. The most basic view might be that two main traditions have emerged - those countries with systems of social protection based primarily on contributory social insurance and those relying mainly on other arrangements. Alternatively the traditions could be seen as those where means-tested assistance schemes were increasingly seen as residual elements of social protection, as in most of the countries of continental Europe, and those where targeting through income- and means-testing became an increasingly important strategy. Examples of the latter tradition would be the antipodean countries and, to a lesser extent, the UK and the USA.
Both these approaches are over-simplistic, however. since the welfare mix which different countries have adopted is more complex than that suggested by a single dichotomy. A number of more comprehensive typologies have been developed to classify and explain the nature of welfare states, among which one of the most influential has been that of Esping-Andersen (1990). He classified countries into three `welfare regimes', based on indicators of social stratification and on scores of what he calls 'decommodification'. This refers to the extent to which entitlement to benefits (particularly pensions, sickness and unemployment benefit) frees workers from dependence on competition in the market place. Thus those countries with flat-rate, universal benefits based on minimum qualifying periods score more highly than those relying on contributory and earnings-related benefits. His three regime types were Conservative/Corporatist, among which he includes Austria, France. Germany and Italy-; Liberal, including Australia. Canada and the USA; and Social- Democratic, incorporating the Scandinavian countries.
There have been many criticisms of Esping-Andersen's typology. Lewis (1992), for example, has argued that the concept of decommodification is over-identified with the position of male workers and gives insufficient attention to the contribution women make to the enhancement of welfare through unpaid work. Bradshaw et
al.'s (1993a) study of child support suggested a rather different grouping of regime
also suggested that Australia is wrongly allocated to the liberal grouping on the basis of its means-tested system, without recognition of the outcomes deriving from it. and have proposed a fourth regime type based on countries with a labourite tradition. In general. Esping-Andersen's model is relatively insensitive to variations between countries with extensive social assistance schemes, and later chapters of this report attempt to map these differences onto his typology of welfare regimes.
Most countries have seen periodical re-enactment of debates about the basis on which social protection should be financed and delivered. However, since the oil shocks and the so-called `crisis of welfare' which ensued from the international economic problems of the 1970s (O'Connor. 1973; Gough, 1979), these arguments have increasingly centred on an opposition between 'universal' and 'targeted' benefits. To some extent it can be argued that this is a false dichotomy. As Atkinson (1993). among others. has pointed out, it is difficult to give any examples of true `universal' benefits anywhere in the world. Genuine universalism requires some form of basic or citizenship income. In practice virtually all existing benefits involve some degree of conditionality or are targeted in some way, either towards certain categories of people, such as those with children in the case of child benefit, by contingency in the case of disability benefits. or on the basis of contribution records for social insurance benefits. Means-testing is but one form of selectivity. Arguments for selectivity on the basis of resources do appear to have been gaining
ground, however- for a number of interconnected reasons. First, the view that a
level of social security expenditure which requires relatively high taxation and employer costs can damage economic effort, particularly in the context of global competition, has become increasingly dominant in international political and economic discourse. This is a view which has been forcefully expressed by the UK government in negotiations with its EU partners on the social dimension of the Union. It is also a common thread which runs through the OECD's analyses of member countries' recent economic performance. as well as through the Jobs Study, which examined unemployment and proposed strategies for coping with labour market change (OECD, 1994a). While the European Commission and many of the EU governments have resisted any wholesale reduction of insurance-based social protection, and indeed have recently emphasised the importance of the social dimension (Commission of the European Communities. 1994a). the White Paper on Growth, Competitiveness and Employment (Commission of the European Communities, 1994b)_ nevertheless recommends a range of measures aimed at increasing employment, which include reductions or restructuring of employers' non-wage costs and boosting of work incentives through income-related supplements to earnings.
A further, parallel stimulus to interest in social assistance has been the identification of a growth in what has been called `new poverty' in the European and other developed countries (Room- 1990). This poverty is thought of as new in t wo senses: first there has been a `rediscovery' in a number of countries that genuine problems of poverty exist in spite of overall increasing affluence; and secondly there have been changes over time in the composition of the poorest groups. There is some debate as to how new much of this poverty actually is and even more on how it should be measured on a comparative basis. Various researchers (for example, Deleeck et aL. 1992: Gustaffson and Lindblom, 1993; Bardone and Degryse. 1994; Hagenaars at al., 1994; R.amprakash, 1994), have carried out or evaluated a range of different statistical approaches - all broadly based on measures of percentages of households with incomes or expenditures below proportions of the average - and have found that the results are highly sensitive to both the percentage line drawn and the equivalence scale used. It is often pointed out that such measures are not in themselves indicators of poverty as such but of relative inequality (Veit-Wilson, 1994a). It is also necessary to remember that when looking at countries such as those in this study we are talking of poverty in rich countries (Townsend. 1992), so that. for example, the official USA poverty line is more than six times the average per capita income of India ( Atkinson. 1993). In many ways the debate about relative versus absolute poverty
has become somewhat sterile. It is now a truism to say that poverty is relative, but as Saunders (1994, p.21) has argued,
To accept that poverty is relative is not to equate poverty and inequality. but rather to acknowledge that needs - the only basis for a poverty standard - are defined and determined in a social context.
This is where social assistance schemes are particularly important, because they become de facto poverty lines, based on what governments decide are minimum income levels below which no one should be expected to fall. How far these lines are based on needs is another question. As the study shows. and as Veit Wilson (1994b) has also demonstrated, it is unusual to find a contemporary 'minimum income standard' which is clearly based on a scientific or consensual measure of what different households need.
Nevertheless, in spite of the caution necessary when discussing poverty and inequality in OECD countries, one pervasive feature of the many different studies is that they tend to show broadly similar groups falling into the lowest parts of the income distribution in most countries. Thus we find that households headed by lone parents, by unemployed people, by women, by older people, large households. those without any member in employment or headed by a person with a low level of education, households in certain regions and, in some countries, those working in farming and agriculture, are all more at risk of relative poverty, as measured in the studies, than other groups.
On the other hand. poverty is not necessarily greater in countries where the groups who are particularly vulnerable make up larger proportions of the population (Hagenaars et al., 1994). This is partly because levels of inequality are affected by the general levels of social protection available in different countries and by the extent to which social security measures are directed at particular risk groups. Nevertheless, one of the characteristics of contemporary poverty in Europe is that it increasingly stems from the limitations of existing social security arrangements - particularly those based on status maintenance through insurance principles - in dealing with changes in demography, family forms and behaviour, and the labour market. Thus many of those facing poverty do so through the lack of a continuous contributory record, either. in the case of youth unemployment, because there has been no opportunity to build up a record, or through exhaustion of entitlement because of long-term unemployment. or through interruptions in labour market participation because of caring responsibilities or family breakdown. Although the prevalence of poverty is not entirely correlated with low levels of spending on social protection in different countries, it does appear to be relatively high where systems of minimum income protection are less fully developed (Bardone and Degryse, 1994). If social assistance is generally becoming more salient, as we show in the next chapter, this is particularly because of increases in long-term unemployment, in lone parenthood, in low pay and in primary earnings inequalities.
In this context the extent to which there are safety nets and the role such schemes play in relation to other parts of the social security system, both in poverty prevention or relief and in social reintegration, become important questions. The arguments for greater 'targeting' are well known. In particular, benefits targeted on those most in need are thought to be more effective and efficient at closing poverty gaps than universal payments, which may go in part to people who do not need them. In times of economic stringency, when excessive public spending is widely seen as detrimental to competitiveness and high taxation as a disincentive to individual effort, the idea that poverty can be more effectively alleviated by reallocating existing transfers is attractive. On an international level, targeting is seen as the most effective tool. as suggested by the World Bank's 1990 World Development Report, which stated that:
... a comprehensive approach to poverty reduction calls for a program of well-targeted transfers and safety nets as an essential complement to the
basic strategy. (World Bank, 1990, p.3 -- quoted in Atkinson. 1993)
In line with this strategy, economic aid from the international financial institutions. including the World Bank and the International Monetary Fund. to the transitional economies of Eastern Europe has also increasingly been weighted towards the establishment of means-tested safety nets to back up their limited insurance-based systems. Within the European union, one response to research findings suggesting high levels of poverty amongst its citizens has been to adopt a Draft Recommendation (Cor (91) 161), urging member countries to institute guarantees of minimum resources conforming to a set of broad common principles
and to supply reports on progress achieved. Basic outlines of such provisions are
now included in the annual social security tables produced by the Commission's Management Information System on Social Security (MISSOC) project.
Yet in spite of this growing interest in benefit selectivity, there are also a number of well-known drawbacks of the targeted approach. It is not necessary to elaborate them here (see. for example Deacon and Bradshaw, 1983; Saunders. 1991: Atkinson, 1992, Gough. 1994), but they include potential problems of intrusive enquiry, stigma, social divisiveness. low take-up, poverty traps and high
administrative costs. There is also a danger in concentrating on poverty relief to the exclusion of other possible legitimate objectives for social security: these might
include protection against risk; horizontal equity, redistribution over the lifecycle,
and the promotion of social cohesion (Commission on Social Justice, 1994). Finally, it is commonly argued that focusing benefits on the poor may undermine the wider support for social security which is necessary in order to finance targeted schemes which are generous enough to be effective (Saunders, 1991). Overall, there is a general problem of whether targets themselves are adequately defined and whether policy instruments are designed in such a way as to be able to hit them ( Whiteford, 1994a). However. the arguments for and against targeting are often presented at a level of principle which assumes that all forms of means testing are alike. In fact, as we have already stated, there are important distinctions. As mentioned earlier, some Australian social policy analysts in particular have argued. from the perspective of their almost totally means-tested or income-related social security system, that generalised critiques of targeting need to be tested more closely against the outcomes of differing policy arrangements (Mitchell, 1991;
Mitchell et al,. 1994).
From a policy maker's perspective, it is important to understand both how far reliance on targeted or means-tested benefits in the developed welfare states actually has increased over the last decade, whether there are any distinctive patterns or differences emerging in the way safety net benefits are designed and delivered, and the extent to which particular approaches to common policy problems have been successful or ineffective. Given the increase in many countries of long-term unemployment. a key theme here concerns both the work incentive or disincentive effects implicit in the structure of assistance schemes and the effectiveness of programmes of `insertion' or integration into the labour market. The role of assistance schemes in relation to the wider social security systems and the labour market also cannot be fully understood without some assessment of the relative value of benefit payments to different household types in the countries studied.
Although there is a growing number of comparative studies of social security provision, to our knowledge no one has previously carried out a systematic study of social assistance schemes on the scale of the study reported here. Euvrard (1989) has surveyed the key principles of the main minimum income schemes in the European Community for a conference on basic income in Europe, while Liebfried (1991) included a broad overview of the range of assistance schemes in a wider study of convergence in social welfare in Europe. As part of the strategy adopted
with the Draft Recommendation mentioned above, the European Commission in 1992 sponsored a working party of national experts who have produced reports from the member countries on their systems for guaranteeing minimum resources, to which we have had access. As was mentioned above. the MISSOC project has also begun to include basic descriptive tables on minimum income schemes for the EU countries, but at present they only provide an outline of provision and cannot give any indication of the spread or impact of social assistance.
A number of important studies have been mounted of groups of related countries, in particular Scandinavia, such as that by Fridberg (1993). Overbye (1994) has also looked at the ways different European countries have combined insurance and assistance schemes, such that the distinction can be blurred but in ways that vary between countries for different risk groups, Stjerno (1994) has compared assistance schemes in the Nordic countries with a number of other European countries to see
how their institutional features conform to the common idea of the `Nordic model'.
One study, by Lodemel and Schulte (1992), has compared the broad principles and features of social assistance schemes in a selected number of EU countries to see
how they impact on welfare state typologies such as that of Esping-Andersen. They
highlighted four main features which. they argued, differentiated social assistance regimes from one another:
• the existence of generalised minimum income schemes as opposed to those only for specific categories of people
• an emphasis on income maintenance rather than on social integration and treatment
• the balance between legal rights to benefits and discretionary access
s
central versus local (or regional) responsibility for legislation, administration and finance.On this basis Lodemel (1992) posited four regime types, as follows:
1. Nordic: including all the Scandinavian countries, with decentralised and largely discretionary systems aimed at `marginal' groups and emphasising social work treatment.
2. Latin: including the southern European and Mediterranean countries, as
well as France, with less developed general assistance schemes and an emphasis on 'insertion".
3. Continental: including Austria. Belgium, Germany. Luxembourg and the
Netherlands, with common roots in Bismarckian social insurance, general rights-based assistance alongside categorical schemes, emphasis on subsidiarity but a lesser degree of decentralisation than in the Nordic countries.
4. British:the UK model is seen as a distinct tradition, deriving from limited social insurance provision which led to more extensive assistance. This became nationally organised, with a complex set of rights and entitlements, and is based almost entirely on income maintenance with little social work involvement.
We discuss in later chapters how far Lodemel's typology is supported by the more detailed evidence available from this study.
Another approach taken by Mitchell et al. (1994) i Australia has been to use Luxembourg Income Study micro-data for a number of countries to look at the outcomes, in terms of benefit generosity and poverty alleviation, generated by different policy mixes of universal and targeted benefits. Their argument challenges what they see as a Eurocentric, and in particular a Nordocentric, obsession with the instruments of provision rather than the actual outcomes, and they conclude
that by these criteria the means-tested Australian system performs relatively well compared to other countries with different policy mixes.