Welfare's effect on poverty

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.^[1][2]

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.

Proponents of welfare reducing poverty

Relatively modest increases in benefit levels for programs that assist nonworking individuals and low-income workers might well be sufficient to bring the United States into line with...the other affluent nations in its degree of poverty reduction.

—Lane Kenworthy^[3]

Studies have shown that in welfare states poverty decreases after countries adopt welfare programs.^[3] Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries whose welfare states commonly constitute at least a fifth of GDP.^{[4][5][6][7][8][9]} In 2013, the Organisation for Economic Co-operation and Development asserted that welfare spending is vital in reducing the ever expanding global wealth gap.^[10]

Table of welfare effect on poverty reduction

The relationship between poverty reduction and differing levels of welfare expense as a percentage of GDP.^[11]

Timothy Smeeding used data from the Luxembourg Income Study to determine the effectiveness of anti-poverty and welfare programs on poverty reduction. The data for all the countries was from the year 2000 with the exception of the United Kingdom and the Netherlands for which the data was from 1999.^[11]

Country	Social expenditures on non-elderly[11][Notes 1] (as percentage of GDP)	Total percent of poverty reduced[11]
United States	2.3	26.4
Netherlands	9.6	65.2
Sweden	11.6	77.4
Germany	7.3	70.5
Canada	5.8	46.0
Finland	10.9	69.7
United Kingdom	7.1	60.1
Belgium	9.3	76.9
Austria	7.4	75.8
Italy	4.3	57.7
Ireland	5.5	44.1
Average	7.4	60.9

Table of poverty levels pre- and post-welfare

The absolute poverty rates of various countries before and after their introduction of welfare.^[3]

The relative poverty rates before and after the introduction of welfare of various countries.^[5]

Two studies compare countries internationally before and after implementing social welfare programs. Using data from the Luxembourg Income Study, 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 (Kenworthy) and from 1970 to 1997 (Bradley et al.). Both these periods are roughly when major welfare programs were 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 when major welfare programs were created.

Country	Absolute poverty rate (1960–1991) (threshold set at 40% of U.S. median household income)[3]		Relative poverty rate (1970–1997)[5]
	Pre-welfare	Post-welfare	Pre-welfare	Post-welfare
Sweden	23.7	5.8	14.8	4.8
Norway	9.2	1.7	12.4	4.0
Netherlands	22.1	7.3	18.5	11.5
Finland	11.9	3.7	12.4	3.1
Denmark	26.4	5.9	17.4	4.8
Germany	15.2	4.3	9.7	5.1
Switzerland	12.5	3.8	10.9	9.1
Canada	22.5	6.5	17.1	11.9
France	36.1	9.8	21.8	6.1
Belgium	26.8	6.0	19.5	4.1
Australia	23.3	11.9	16.2	9.2
United Kingdom	16.8	8.7	16.4	8.2
United States	21.0	11.7	17.2	15.1
Italy	30.7	14.3	19.7	9.1

A study done by Columbia University found that since the beginning of the War on Poverty, the American poverty rate was reduced "from 26 percent in 1967 to 16 percent in 2012."^[8] However Kevin Drum has criticized the study for combining elderly (in which most of the reduction happened) with non-elderly poverty reduction which was much less significant.^[12]

Opponents of welfare reducing poverty

Decline in American welfare benefits since 1962. (in 2006 dollars) ^[13]

In the United States, members of both the Republican^[14] and Democratic Party^[15] (as well as third parties such as the Libertarians^[16]) 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^[17] and the Cato Institute^[18] assert that welfare creates dependence and a disincentive to work. This dependence is called a "culture of poverty" which is said to undermine people from finding meaningful work.^[18] Many of these groups also point to the large budget used to maintain these programs and assert that it is wasteful.^[17]

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.^[19]

Some socialists and Marxists 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 having 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.^[20][21]

Public opinion

In 2013, a NBC News/Wall Street Journal poll found that a plurality of Americans (24 percent) said "too much government welfare that prevents initiative" was the leading cause of poverty.^[22]

A January 2014 Pew Research poll found that 49% of Americans believe government aid to the poor does more good than harm as people can't escape poverty until basic needs are met, and 54% believe taxes should be increased on the wealthy and corporations to expand anti-poverty programs.^[23]

See also

• Basic income
• Criticisms of welfare
• Involuntary unemployment
• Welfare economics
• Welfare reform

US specific:

• Cloward–Piven strategy
• Social programs in the United States
• Social Security debate (United States)
• War on Poverty
• Welfare queen

Notes

1. This includes cash and near-cash spending (such as TANF and food stamps) and spending for public housing. It excludes healthcare and education spending.

References

1. Debate over Welfare Reform Lingers 10 Years Later, PBS Newshour
2. The Federal Welfare Debate: Is Congress Deserting Working Families?, Brookings Institution
3. Kenworthy, L. (1999). Do social-welfare policies reduce poverty? A cross-national assessment. Social Forces, 77(3), 1119-1139.
4. Woolf, Steven; Aaron, Laudon. "U.S. Health in International Perspective". National Research Council and Institute of Medicine. pp. 171–172. Retrieved April 8, 2013.
5. Bradley, D., Huber, E., Moller, S., Nielson, F. & Stephens, J. D. (2003). Determinants of relative poverty in advanced capitalist democracies. American Sociological Review, 68(3), 22-51.
6. Kevin Drum (26 September 2013). We Can Reduce Poverty If We Want To. We Just Have To Want To. Mother Jones. Retrieved 28 September 2013.
7. Gould, Elise and Wething, Hilary (24 July 2012). "U.S. poverty rates higher, safety net weaker than in peer countries." Economic Policy Institute. Retrieved 26 July 2013.
8. Zachary A. Goldfarb (9 December 2013). Study: U.S. poverty rate decreased over past half-century thanks to safety-net programs. The Washington Post. Retrieved 15 January 2015.
9. Kenworthy, Lane (February 2014). America's Social Democratic Future. Foreign Affairs. Retrieved 8 February 2014. See also: Kenworthy, Lane (2014). Social Democratic America. Oxford University Press. ISBN 0199322511
10. Wealth Gap Widens In Rich Countries As Austerity Threatens To Worsen Inequality: OECD. The Huffington Post. Retrieved 26 July 2013.
11. Timothy S. (2006). Poor People in Rich Nations: The United States in Comparative Perspective. Table 4, "The Antipoverty Effect of Government Spending: Percent of All Persons Poor"
12. New Study Says Poverty Rate Hasn't Budged For 40 Years, Mother Jones.
13. 2008 Indicators of Welfare Dependence Figure TANF 2.
14. Republican Party on Welfare & Poverty, On The Issues
15. Democratic Party on Welfare & Poverty, On The Issues
16. Issues: Poverty and Welfare
17. Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform and the Next Steps", The Heritage Foundation
18. Niskanen, A. Welfare and the Culture of PovertyThe Cato Journal Vol. 16 No. 1
19. Murray, Charles (1984). Losing Ground: American Social Policy 1950–1980. Basic Books. pp. 58, 125, 115.
20. Encyclopedia of Marxism: Glossary of Terms
21. Wolff, Richard D. (15 April 2013). A New Political Strategy. Democracy at Work. Retrieved 28 July 2013. "...the best solutions to pressing social problems lie in going well beyond the state and welfare ("socialist") reforms of the past in the precise sense of changing the organization of enterprises, democratizing them into WSDEs (workers' self-directed enterprises)."
22. "Poll: Americans blame ‘government welfare’ for poverty," msnbc.com
23. Most See Inequality Growing, but Partisans Differ over Solutions. Pew Research Center, 23 January 2014. Retrieved 26 January 2014.