Social Welfare Policy: A Historical and Theoretical Overview

Posted on Oct 21, 2024 in Economy

English Poor Law of 1601

3 Basic Principles:

1. Local responsibility for the poor

2. Training their children

3. Employment placement for the unemployed

Law of Settlement 1662

1. Restricting movements of laborers & the poor

2. Addressing the issue of “race to the bottom” among local governments

Speenhamland Act of 1795

1. Wage compensation

2. Addressing the problem of poverty among low-income workers (jobs did not pay enough to live)

3. Often criticized as a “catastrophe”

Poor Law Reform of 1834

1. Basic view: poverty was caused by the indigence of individuals rather than economic & social conditions

2. Work requirements for poor relief

What is Social Welfare? A Landscape View

What is social welfare?

Social transfer (or a benefit-allocation mechanism) functioning outside the economic market.

1. Direct Expenditures

   • Direct transfer from federal, state, and local government.

2. Indirect Expenditures – Tax Expenditures

   • Allow taxpayers to reduce the amount of taxes they need to pay. e.g., mortgage interest deduction, EITC tax credit

   • One form of tax benefits: tax credit

     1. Non-refundable tax credit

     2. Refundable tax credit

3. Mandated Benefits – Regulatory Transfer

   • Government requires the private sector to provide welfare benefits

   • e.g., health insurance, rent control, other mandatory requirements

4. Voluntary Transfers

   • Social welfare benefits provided by voluntary (non-profit) agencies

Comparing Generosity of Welfare States

1. Is America less generous than most wealthy countries?

   • Depending on how you measure social welfare spending.

2. Is it able to tell which countries are more generous than others?

   • Probably not. Should consider social conditions of each country.

     • Minus taxes on benefits
     • The real dollar value of government “spending” on social welfare has to take account of how much it claws back via taxes.

3 Major Perspectives on Social Welfare Policy

1. Institutional

   Identifies the key social structures that shape welfare activities.

2. Analytical

   Different approaches to studying & understanding policy (Process, Product, & Performance)

3. Political

   Interrelationships between society & government in social welfare (conservative vs. progressive)

Theoretical Perspectives on Government Spending for Social Welfare

1. Galbraith – The Dependence Effect

   1. Dependence Effect

      • Our “needs” are created by production.

      • Too much private consumption on trivial items that people do not really need (does not improve the quality of life).

      • Public spending is too low—we need more public spending on welfare programs.

   2. Progressive

2. Buchanan – Theory of Public Choice

   1. Theory of Public Choice

      • Public spending is inherently high.

      • Because politicians are incentivized to respond to interest groups while the cost of expanding spending is low.

      • Government spends too much but not necessarily for public good.

   2. Conservative

What Are the Proper Functions of Government?

1. Night Watchman

   1. e.g., police, regulation, the legitimate use of force

2. Technical Monopoly

   1. Government regulates organizations like PG&E to ensure quality.

   2. e.g., post office, electricity (PG&E), gas lines – most efficient & effective to have just one producer.

3. Neighborhood Effects

   1. e.g., malaria control, public health, fire department

4. Paternalistic Functions

   1. Services provided by government for people who can’t take care of themselves – assigns paternal role.

   2. Market does not work well.

   3. e.g., children (foster care), elderly, mentally ill

5. Redistribution

6. Stabilization

   (wage & price control, military policy)

4 Dimensions of Choice

• The basis of social allocations

• The types/nature of social provisions

• The delivery of social provisions

• Ways to finance social provisions

Eligibility – Who

Principles for Allocating Social Benefits

1. Universal

   • Everyone is eligible/qualifies. e.g., public education

2. Non-universal (Selective)

   • Means-Tested

     1. Evidence regarding an individual’s inability to purchase goods or services. Usually dependent on economic circumstances.

     2. e.g., Insurance, food stamps, affordable housing

   • Compensation

     1. Groups who have made special contributions or unfairly suffered from the system should be compensated.

     2. e.g., Veterans’ benefits, Affirmative Action in college admission, Reparations

   • Diagnostic Differentiation

     1. Professionals (e.g., specialist, doctor) make judgments on individual cases on whether one is qualified for goods or services.

     2. e.g., Disability services (physically/mentally impaired)

Provisions – What

1. Transferability: Flexibility in how you use it/consumer choice

   • High Transferability: More exchangeable, more consumer choices

     1. e.g., cash, vouchers (e.g., food stamps, school vouchers), goods (e.g., food, clothing, housing)

     2. Conservatives prefer high transferability – individualism, rely on market mechanism, small government.

   • Low Transferability: Less exchangeable, fewer consumer choices

     1. e.g., services, power (e.g., community empowered to make their own decisions), opportunity (e.g., college admission)

     2. Progressives prefer low transferability – collectivism, market creates problems, large government.

2. Social Justice in Public Assistance – Equality

   • Numerical equality: the same treatment of everyone – everyone gets an equal amount no matter what.

   • Proportional equality/equity: the same treatment of similar persons – based on the same measure of deservingness or need.

Service/Benefit Delivery – How

1. How people receive their voucher/service/etc.

2. e.g., coordination/duplication, central/decentralized, professional/non-professional, public/private

Financing – $$

1. Finance choices

2. e.g., general tax revenues vs. tax expenditures, fee for services, regulatory requirement of private finance, etc.

Path from Welfare to Workfare

1. Aid to Families with Dependent Children (AFDC)

   1. Welfare program created by the federal government in 1935.

   2. No time limits, no work requirements.

2. Temporary Aid to Needy Families (TANF)

   1. Replaced AFDC in 1996.

   2. Changes: 5-year lifetime limit (with states allowed to waive 20% for hardship cases / 20% exemption) & requires recipients to go to work while receiving the grant.

Social Security Solutions

1. Revisit the social security discussion question.

2. Big problem: social security is running out – considerations on racial, gender, & family disparities when thinking of alternative plans.