Welfare state systems help the poorest

It might not be the first thing you’d consider when thinking about poverty, deprivation and inequality, but welfare state systems are highly indicative of political influence and social policy and can make a huge difference to our well-being, particularly that of women and children.

What is the Welfare State?

Not to be confused with a welfare society, welfare state, which exists in some format across the Western world, is a term used to describe the way in which the state acts to ensure a level of welfare for its citizens. It should not be assumed that all states will intervene to ensure a basic standard of living for all residents or indeed all citizens, but rather indicates that a policy approach and a system are in place. As such, welfare states and benefits will have very different priorities, procedures and outcomes in different places.

Although it is possible to outline several broad types of welfare state, the welfare approach itself tends to fall within two models:

● The state acts as a low level boundary put in place to catch all those who cannot support themselves to a state-determined minimum.

● The state takes first line responsibility to ensure citizen welfare. Welfare is considered to be a right of the individual within society.

Although the term itself can cover a wide range of economic and social priorities and constructs, the existence of a welfare state relies on some desire for equality including the sharing of wealth, and is underpinned by a responsibility of each individual for the good of society.

Which Types Exist in the EU?

There are four main welfare state types in Europe. Within those central strands individual countries will have differences according to need and socio-economic conditions, but key principals will remain constant. Each model has its critics and has a very different impact on employment markets and levels of social exclusion which is particularly important when considering mothers returning to work:

● Nordic: Denmark, Finland, Norway, Sweden and the Netherlands observe the Nordic welfare state approach which is centred on principles of citizenship and which has low entry-levels to social assistance. key to this type of welfare state is a focus on ensuring that unemployment is short-term, so public sector employment is fundamental to the running of the system. The Nordic model is dependent on a high income tax. Equality is a leading objective in these states – this can be observed when looking at an inequality map of the EU.

● Anglo-Saxon: The Anglo-Saxon model is more akin to a ‘last resort strategy’ and is observed across the UK and Ireland. Social subsidies are difficult to access and frequently dependent on employability, both in terms of the age of a recipient and in terms of employment history. The Anglo-Saxon model has been blamed for high-levels of inequality particularly among strands of the population such as the elderly and the single mother.

Greek budget cuts have provoked protests

● Mediterranean: The Mediterranean model is more complicated than other European models as it was formed much later (1970s and 1980s) than its counterparts across the EU. Like in the UK and Ireland, Greece, Italy, Portugal and Spain impose conditions on access to social subsidy but conversely, subsidy is focused in pensions rather than unemployment benefits. As such, these countries often have high levels of early retirement. The Mediterranean system has been criticized for encouraging social exclusion, particularly of single mothers who are not incentivised to return to work after having children and often find it difficult to re-integrate with society.

● Continental: The continental model, in Austria, Belgium, France, Germany and Luxembourg is similar in approach to the Nordic model although places a stronger focus on pensions. The continental system centres on the security of its citizens. The continental model has been criticized for relying too heavily on parents being married and on men being breadwinners. As such, married mothers are expected to be supported by their spouses and un-married mothers by their families.

What Impact Will Recent and Future Budget Cuts Have and How Will Our Poorest Fare?

Recent financial crises which have ricocheted across the EU are expected to impact on all welfare state systems. One sceptical US Think Tank predicted a general move towards the American welfare model. In Economics of the Welfare State, Gosta Esping-Anderson describes the American welfare system when compared with a non-specific European Model:

‘The American welfare state is designed to address market shortcomings and do what private enterprises cannot do themselves. Unlike welfare states built on democratic socialist foundations it is not designed to accomplish a Marxist redistribution of political power from capital to labour; nor is it designed to mediate class struggle, as is the case with corporatist welfare states.’

Today’s critics predict the demise of European models based on a number of surprising statistical discoveries (the average age of retirement in Greece is 53) which may or may not imply what they appear to at first glance, suggesting that EU models are frequently excessive and corrupt.

In reality however, corruption and excess will not be leading any demise of the welfare state in Europe, but spending cuts will. George Osborne’s recent budget for the UK, including proposed changes to housing benefit, disability allowances and tax credits due to come in between now and 2015, appeared quite regressive in its approach and was rightly criticised for hitting the poorest hardest.

The Institute of Fiscal Studies (IFS) said the poorest 10% of families would lose over 5% of their income as a result of the budget compared with a loss of less than 1% for non-pensioner households without children in the richest 10% of households. It added that the budget contrasted with the “progressive” plans for 2010-14 inherited from Labour, under which the richest 10% of households bore the brunt of the cuts.

Recent budget cuts will hurt the poorest

Despite signalling a commitment to cutting child poverty, the coalition appears to have hit the poorest families and is unlikely to reduce current levels. The End Child Poverty campaign has very clearly announced is discontent.

In their report, the IFS said that: “Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency budget. Those who lose the least are households of working age without children in the upper half of the income distribution. They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance.” Evidently, the cuts to welfare will not encourage our unemployed back to work, but could simultaneously push low-earners out of work and out of their homes.

In other EU countries, similar slash and burn approaches are being taken and welfare states are taking the brunt. Governments appear to be aiming for immediate cost savings at the expense of medium-to-long-term benefits.

Perhaps it is time for governments to reassess the success of their approach to welfare, but it is not a time to forget our poor.