Welfare Policy:
The primary factors that attribute to the stark differences in welfare
policy among the United States of America and various countries of the
European Union, specifically the United Kingdom
by M. Katharine Brunson
Abstract
In this comparative research paper, general American and European welfare policy is analyzed. It is ironic that the United States can crush the cruelest of regimes, yet cannot alleviate the social miseries within her own land, which happens to be the world’s richest country. The United Kingdom on the other hand, offers a much more comprehensive and acceptable welfare system for her citizens. This is consistent with the social service trends in the rest of Europe. This paper discusses the primary reasons for the differences in welfare policy between the two most powerful democratic states in the world, the United States of America and the United Kingdom.
Introduction
Political views can roughly be divided into “leftist” and “rightist” standpoints. The left wing is typically more liberal in thought and is a strong supporter of institutional welfare. Institutional welfare provides for every citizen, regardless of economic status. Furthermore, leftist policies support public provision through high government intervention and collectivist ideas. The United Kingdom clearly outlines these points in her social policies and welfare program. In contrast, the right wing is conservative and against most forms of public welfare. The only acceptable form of public provision is residual welfare, which is welfare implemented only as a safety net for those who can not manage, such as the low-income households or disabled peoples. The right wing tends to be more individualist in social positions and favors small government with little intervention. The United States is an example of the “right” political ideology. This fundamental difference clearly separates the political foundation of the United States and United Kingdom, especially in reference to welfare policies.
British Welfare
1929 was a pivotal year across the globe. When the United States stock market crashed, ripples were felt across Europe. As hardship and instability walked hand-in-hand into the 1930s, they met increasing unemployment and poverty. As president of the United States, Franklin D. Roosevelt took action by implementing a new economic strategy in the New Deal. This model was the “optimistic activism, experimentation, and interventionist reforms” that the country so desperately needed at the time (Yergin et al., 1998, page 22). While the USA committed herself to social justice and firmly held the belief of government responsibility towards its citizens, the USSR praised socialism and evolved communism.
The United Kingdom saw the action other global governments were taking, and decided to follow the lead. With the onset of World War II, the British government seized the national economy and used the opportunity to turn it into “a common cause rather than an area of class conflict” (Yergin et al., 1998, page 23). War proved to transform the decision makers of the government and thus, Britain built upon her wartime experiences and further developed her political institutions. The Labor party published the Beveridge Report (1942), the bestselling “report (that) set out social programs to slay the ‘five giants’: Want, Disease, Ignorance, Squalor, and Idleness” (Yergin et al., 1998, page 23). As a result, the Labor government quickly “established free medical care under a newly constituted National Health Service, created new systems of pensions, promoted better education and housing, and sought to deliver on the explicit commitment to ‘full employment’” (Yergin et al., 1998, page 25. In 1945, the United Kingdom gave birth to the first modern welfare state.
With both the Conservative Party and Labor Party fully backing the ideals of the Beveridge Report, British citizens saw many new opportunities. By 1948, the welfare state evolved into “social security, health, housing, education, and personal social services” within the government (Social Policy in the UK). The welfare state was not established to rid the country of poverty, but rather to make social services as available as public services. This belief wanted programs, such as health care and employment benefits, to be as accessible and well developed as paved roads and public transportation. This ideology would spark debate in future years.
Over the past fifty years, the British welfare state developed drastically through two major reforms; the first in the 1960s and the second in the 1980s. The first reform focused on central government. It was necessary to make economic planning and spending more efficient. Thus, efforts were made to give public expenditure responsibilities to the national Treasury. The result was a system that could distribute resources from the Treasury to respective departments and onto various specialty services in an orderly fashion.
The second major reform focused on renovating the administration of welfare, specifically health care and social care. This had three main elements to it. First, reorganization forced the administration to divide into agencies with the hope of encouraging individual assessment. A perfect example of this is the advancement of the National Health Service (NHS) trusts. Secondly, agencies implemented management positions to effectively run as businesses. Social services commonly used this tactic to promote efficiency and productivity. Lastly, the services changed to operate as economic markets. Thus, a separation of purchase and provision would exist with the encouragement of competition.
For the past twenty years, continued reform in the UK has changed welfare’s cash benefits, health care, education, and public housing. The most widely utilized aspect of welfare benefits used today are cash benefits, which total 10 percent of the country’s Gross Domestic Product (GDP) (Glazer, 2003, page 111). Cash benefits consist of national insurance, means-tested programs, and non-contributory benefits. Secondly, health care is organized by the NHS, which is financed by taxes. Health care in Britain is universal and virtually free to its people, making it very popular. But, since priority is given to the most severe cases, there are long lines that can last years. Additionally, education is free to children ages five to sixteen. Thus, higher education is a direct reflection of class bias and social hierarchy. In terms of housing, owner-occupation is the most popular option because it is based on a taxation grant system. These services help to effectively alleviate social miseries for Britons.
The United Kingdom, as a welfare state, is identified, in practice, with the institutional model of welfare. A defining characteristic of institutional welfare is the fact that welfare is not just for the needy, but rather, it is available to everyone. Thus, social stigma that would commonly be associated with welfare is dissolved. This model’s foundation claims “social protection and the provision of welfare services on the basis of right” (Social Policy in the UK). The UK deviates from this model slightly. Although coverage is extensive, benefits and services are delivered at depleting degrees. Furthermore, citizens find social protection to be erratic and services to be harshly allocated.
Two of the greatest challenges facing the welfare state in the UK is the aging population as well as increasing levels of unemployment. A growing elderly population requires more time, resources, assistance, and services that a smaller middle-aged population cannot fully provide. Secondly, when the government saw that 13 percent of the population was unemployed in the 1980s, immediate action was necessary (Faher, 2000). Job training was the answer to the ridiculously high unemployment rates. By the 1990s, unemployment fell to six percent (Faher, 2000). Comparatively, in a 2004 estimate, it was reported that roughly 5.5 percent of the American population was unemployed (Faher, 2000). Continued efforts to further decrease the unemployment percentages in both countries are currently in place.
American Welfare
The United States has been branded the land of opportunity. But, opportunity does not denote equality. Nathan Glazer, professor of sociology and education emeritus at Harvard University, argues that the United States is the most unequal of economically developed countries. Compiled statistics show that the United States redistributes significantly less transfers and other social benefits in comparison to European countries. These decreased redistributions are a result of higher before-tax income inequality and a skewed income distribution in the United States.
The United States, although conservative in political ideology, is often identified with liberal policies in welfare, as the country clearly represents individualism and laissez-faire methods. The two reforms in welfare policy were in the 1930s and 1960s. In the 1930s, President Franklin D. Roosevelt’s administration offered a variety of federal provisions that paved the way for today’s social security programs. Health care benefits were the main product out of the “War on Poverty” in the 1960s.
The United States government is severely lacking a comprehensive and productive welfare system. What is ironic is alternative governmental programs are better than what the welfare system gives low-income and disabled Americans. For example, in 1999, Alabama’s welfare benefits for a family of three totaled $164 per month, whereas food-stamp allotment for the same family totaled $329 per month (Glazer, 2003, page 114). It is financially more reasonable to leave welfare and take the food-stamps. Currently, food-stamps and government housing are better options for the American poor than basic welfare’s monthly payments. So, what incentive is there for tax payers to support welfare, if the government provides more reasonable options? The problem is there is no incentive, so it should be of no shock that a deflated welfare state is in place.
The United States’ redistribution plan to society’s worse-off is much less efficient than that in European countries. For example, in 1999, social benefits and transfers totaled 11 percent of America’s GDP (Glazer, 2003, page 111). Comparatively, social benefits and transfers totaled 18 percent in countries of the European Union, with a range from 20 percent in France and Germany to 16 percent in the United Kingdom (Glazer, 2003, page 111). Additionally, family benefits, unemployment, and labor market programs amount to only one percent of American GDP in contrast to the five percent in the European Union (Glazer, 2003, page 111). These are not the only areas that the United States is lacking, because the United States also falls behind Europe in old-age, disability, and survivors benefits as well. Clearly, better services for citizens, not just the needy, are in place in Europe.
Perhaps it is the United States’ stringent classification of the “haves” and the “have-nots,” or the working versus the unemployed, which stunt the growth of a flourishing welfare system. Americans might be apathetic towards the poor, but there is definitely a strong social stigma attached with unemployment, and even welfare assistance in general. Not only are unemployment benefits much lower in the United States than in Europe, but the legal minimum wage is significantly less as well. Just how miserable is it to be unemployed in America? The least supportive European unemployment plan exists in the United Kingdom, and even there unemployed Britons receive benefits for four years. In contrast, unemployed Americans are only guaranteed benefits for six months. Furthermore, in the 1990s, the legal American minimum wage was 39 percent of the average wage, whereas it was 53 percent of the average wage in the European Union (Glazer, 2003, page 112). Even for those who are employed in America, it is not legally required for employers to offer paid vacations. France and Sweden grant paid vacations of five weeks per year while the European average rests at four weeks per year. Again, Europe offers better compensation in the form of a welfare state.
Welfare Comparison
As far as the actual welfare system, most of Europe and the United States hold opposite views. Family benefits are virtually nonexistent in the United States with the exception of particularly low-income families allocated under the Temporary Assistance for Needy Families Program. Regardless of income, benefits are available to everyone in Germany and Sweden. Healthcare is probably the service with the greatest variation between America and Europe. Germany and Sweden offer unlimited universal coverage. This means that the government pays for visits to the doctor, hospitalization, and pharmaceutical products with minimal deductibles. The United States, on the other hand, is solely reliable on Medicare and Medicaid for just a select portion of the population. Medicare is a program designed specifically for the elderly, whereas Medicaid is intended for the needy. As far as sickness and accidental injury benefits, there is no federal relief in the United States. Only five states offer some kind of sickness benefit. If the household’s primary income holder fell ill in the United States, he or she would only be guaranteed between 18 to 63 percent of the average wage (Alesina et al., 2001, page 10). This benefit would last for a maximum of fifty-two weeks. If the same household’s primary income holder fell ill in Germany, then seventy percent of gross earnings would be covered by benefits for up to seventy-eight weeks (Alesina et al., 2001, page 10). In Sweden, the same person would receive eighty percent of gross earnings under the country’s benefit plan indefinitely (Alesina et al., 2001, page 10). In terms of on-the-job accidental injury, the United States and most of Europe is covered similarly with generous supplemental considerations.
Germany relies on Sozialhilfe and Sweden on Socialbidrag to alleviate poverty within their countries. Both of these plans are unlimited and unconditional. The welfare system in America is not aimed at helping the impoverished, but rather works to give the low-income families and disabled persons employment opportunities with the hope that opportunity will breed personal success. Thus, various programs are targeted for different groups in America. One such program is the Temporary Assistance for Needy Families Program, mentioned above. Additionally, the Supplemental Security Income (SSI) is intended for the aged, blind, disabled, or people with an income of less than $5,808 (Alesina et al., 2001, page 10).
Historically speaking, there are two prominent events that distinguish America from Europe: the “wild west” movement and the absence of a strong socialist political party. The movement of Americans stretching across the continent to the Pacific Ocean marks a passage unlike anything Europe ever witnessed. The open frontier stressed individualism and personal benefits through opportunity. Through this, people came to accept that in America there is no equal outcome. One may even go as far as to call this social Darwinism or a self-selection process of sorts. As America saw people moving west, urban population density severely declined. Some historians argue that “urban density leads to political empowerment of the poor” (Alesina et al., 2001, page 37) which, in turn, facilitates riot and rebellion. In general, Europe has been uprooted by wars, observed numerous fallen monarchies, and made constant changes to constitutions in hope that modernity would bring security. Ultimately, these alterations grew a tendency to focus on majority rule and less on protecting private property. Comparatively speaking, these issues have never pertained to the United States as only two wars fought on American soil, and a single constitution has had minor, but necessary, amendments. The United States has had a very stable history.
Additionally, low population density in the United States meant that the American government was virtually immune to socialist revolution. This does not mean that class-related revolutions were nonexistent. Those riots took place predominately in the 1930s and 1960s across America. What is unique about the union riots of the 1930s and the racial riots of the 1960s, is that never once did these rebellions threaten central government.
More importantly though, the fact that feudal society never developed in the United States aided in preventing socialist development. Feudal society did not develop as a result of the huge influx of immigrants that willingly assumed the roles of the working class. Ethnic divisions were strongly felt, but the fact that everyone received equal opportunity over road that ethnic tension. American capitalism may have created inequality but always offered opportunity to all (Alesina et al., 2001, page 37). Furthermore, the two-party electoral system that existed in America made it virtually impossible for a third party to rise to power enabling the United States to “evolve as a federal system rather than as a unitary, centralized country like several of today’s European countries” (Alesina et al., 2001, page 38).
As is the case with many political, social, and economic dilemmas, race has become a factor is welfare debates. Social psychologists have research that shows humans are quick to form in-group and out-group associations. This is the “us versus them” syndrome. In-group associations tend to reflect group similarities. Out-groups, on the other hand, represent the antithesis of a particular in-group. For example, the median American voter is a middle class Caucasian. Members of that in-group would also be white, middle class, Americans. The out-group, for instance, could be a particular minority living in a much different social circle and income distribution. Humans in general are less inclined to give to persons of an out-group, or in this case, minorities. The bottom line is wealthy Caucasians do not want to see their tax dollars go to “lazy” or societies marginalized citizens. Since a percentage of tax money goes toward social services, it is easy to associate the poor with laziness and therefore unworthiness in America.
The race-based theory states that “Americans think of the poor as members of some different group than themselves, whereas Europeans think of the poor as members of their own group” (Alesina et al., 2001, page 43). It is natural to perceive members of “the other” group to be inferior to oneself. The United States, and most of North and South America for that matter, is more unified in language than in race. European countries tend to be racially homogeneous, and it is in these countries that there is the greatest social spending.
Americans are hesitant to aid the poor because the poor are perceived as lazy. Europeans tend to view the poor as simply unfortunate. This cultural differentiation is supported by the findings of a recent World Values Survey where “70 percent of West Germans express the belief that people are poor because of imperfections in society, not their own laziness, (while) 70 percent of Americans hold the opposite view” (Glazer, 2003, page 113). This fundamental difference in the perception of the poor is often referred to as “American Exceptionalism” (Alesina et al., 2001, page 3). But, this must be taken with a grain of salt. The World Values Survey recently reported that “71 percent of Americans, but only 40 percent of Europeans, believe that the poor have a chance to escape from poverty” (Glazer, 2003, page 133). This suggests that there is more social mobility in the United States than in Europe. Social mobility enables a citizen to do more with less, so it is only expected for someone below the poverty line in America to rise up against the adversity and beat the odds so to speak. Americans believe their citizens can work their way out of poverty. With this mentality, there is little to no concern with social safety nets in the form of a welfare state. In contrast, if less than half of Europeans believe their citizens can escape from poverty then a strong social intervention by the government in terms of social benefits and welfare services is clearly necessary.
Europeans may be more active in public provisions of welfare, but Americans are known for their contributions to the needy in the form of private provisions. Public welfare is what has been discussed in this paper thus far. In contrast, private welfare takes form in the efforts of donations, non-profit work, volunteering, etc. In 2000, estimated charitable contributions in the United States totaled $691 per capita (Glazer, 2003, page 114). This is more than twelve times greater than the per capita contributions of the European average, which amounted to a whopping $57 (Glazer, 2003, page 114). Granted, America is a country of extreme wealth and with that wealth comes large donations. But, private provisions of welfare are not all about the money exchange. Volunteer rates are higher in the United States than in Europe as well. Eleven percent of surveyed Americans, compared to four percent of Europeans, said they participated in a charitable group within the past year (Glazer, 2003, page 114). The Netherlands had the highest percentage of volunteer work on the continent with a total of 8.6 percent (Glazer, 2003, page 114). It is possible that Americans are more comfortable in private relief because Americans can choose how their money helps people. In terms of public provisions, it is not always clear where the money is truthfully going. This touches on a whole other topic of skepticism in the welfare state.
The established electoral systems in Europe and the United States appear to have a strong influence on the strength of welfare policy. Most of Europe functions under the Proportional Representation (PR) electoral system. This allows for marginal differences in seat chairs versus vote chairs, thus enabling small party survival. The multi-party party system is attached with the PR electoral system. Ultimately, this manifests either coalition governments or minority governments. In contrast, the United States operates under the Single Member District (SMD) electoral system. This structure tends to penalize small parties because victory is often exaggerated. Only two parties survive in the party system. Thus, the government is a single party majority government. The United Kingdom is not like the rest of Europe in electoral policy, as the United Kingdom hosts an SMD system. Even-so, the SMD system in the United Kingdom gives minorities more opportunities for power and political expression than minorities in the United States. Overall, the poor have greater representation in Europe due to the Proportional Representation system established there.
The low-income households and disabled are typically the minority in society. Given that the PR system allows minority power to thrive, it is in countries that house this electoral system that action for minorities is taken seriously and effectively. Additionally, in the United States where the SMD system thrives and minority power is squashed, there is learned helplessness, pessimism, and a lack of faith in public policy. It is conclusive that the specific type of electoral system within a country shapes the state of welfare within that particular country.
Conclusion
America’s deviation from a European-style welfare state is the result of a unique history, low population density and a federal system that prevented socialist ideals, greater social mobility for the marginalized, strength of private provisions over public provisions, and the SMD electoral system within the country. All of these aspects skew America’s welfare system. Europe has established an effective and efficient structure to help not just the low-income households or the disabled, but the entire population indefinitely.
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