Refuting Myths About Welfare, Poverty, and Unemployment
It is important that all people be properly informed on this topic, and see to it that conservative and neoliberal attacks on these institutions are not successful
Introduction
Social welfare programs have long been viewed as a way of papering over the cracks of capitalism, by seeking to provide a decent standard of living to everybody, regardless of income or employment status. Even socialists (who would like to transcend capitalism altogether, rather than patching up its holes) nevertheless would generally prefer that these programs exist, as the alternative (unmitigated capitalism) is so horrible as to be worth avoiding at any cost.
Of course, there are many people (liberals and conservatives alike) who would seek to scale back, eliminate, or “reform” these programs, and subject the working class to the unbridled forces of the free market. They justify their views with a series of slanders and distortions, from claiming that welfare policies do not reduce poverty, to claiming that they prevent people from working. In order to defend against these reactionary attacks on the social safety net, it is worth taking the time to refute these myths. All sources are listed at the end.
Myth #1: “Welfare Programs Don’t Reduce Poverty!”
The overwhelming majority of studies on this topic suggest that welfare policies do reduce poverty. A 1999 study in the journal Social Forces assessed the available evidence, finding that the results “strongly support the conventional view that social-welfare programs reduce poverty.” In addition, a 2003 study in the American Sociological Review found that a robust welfare state, as well as left-wing policies more broadly, had a strong impact on poverty reduction:
The more generous the welfare state, the greater is the extent of poverty reduction. In addition, long-term incumbency of left parties affects poverty reduction positively by giving the tax and transfer system a particularly redistributive profile.
Another 2003 study, this one in the journal Social Forces, corroborates these findings; to quote, “the strength of left political institutions has a significant, powerful negative impact on poverty.” A 2005 study, also from Social Forces, found once more that “social security transfers and public health spending significantly reduce poverty,” stating that welfare policies are “the primary causal influence on national levels of poverty.”
A 2006 study in the journal Comparative Political Studies looked at welfare state generosity and poverty in sixteen OECD countries, finding that “more generous entitlements to key social insurance programs are associated not only with lower relative poverty but also with lower absolute poverty. This supports the contention that promoting relative economic equality can improve the absolute material well-being of the poor.”
A 2009 study in the journal Social Forces found that “Leftist parties and union density reduce the odds of poverty,” primarily by increasing the generosity of welfare policies. In addition, the study found that “welfare generosity reduces the extent to which low education and the number of children increase poverty. Also, welfare generosity reduces poverty among those with low education, single-mother households, and young households.”
The poverty-reducing impact of the welfare state has become especially important in recent decades, as labor compensation has decoupled from productivity, and real incomes for the bottom 50% of workers have begun to fall. A 2013 study from Columbia University traced poverty in the United States from 1967 to 2011 and found that:
[W]ithout taxes and other government programs, poverty would have been roughly flat at 27–29%, while with government benefits poverty has fallen from 26% to 16% — a 40% reduction. Government programs today are cutting poverty nearly in half (from 29% to 16%) while in 1967 they only cut poverty by about a one percentage point.
In other words, while market incomes have been stagnant (and would thus have failed to reduce poverty), welfare programs have been able to make a significant (albeit insufficient) dent. These findings are corroborated by a 2019 report from the Center on Budget and Policy Priorities, which found the following:
Using a version of the federal government’s Supplemental Poverty Measure (SPM) — a more comprehensive metric than the official poverty measure — we calculate that the poverty rate has fallen by nearly half since 1967, largely due to the growing effectiveness of economic security programs such as Social Security, food assistance, and tax credits for working families. Poverty fell from 26.0 percent in 1967 to 14.4 percent in 2017 by this measure. Most of the improvement came from economic security programs. Earnings and other non-government sources of income did not improve sufficiently over this period to reduce poverty substantially.
Similarly, a 2018 analysis from Georgetown University and the World Bank found that “the level of living of America’s poorest has fallen,” and that “without [food stamps], the floor would have fallen even further in the wake of the 2008 financial crisis.” These results are deeply troubling, as they show how capitalism, left to its own devices, allows poverty to stagnate and even worsen over time. However, these findings also provide additional evidence that social welfare programs can have a strong effect on poverty reduction.
In addition, there is robust evidence that welfare programs have a beneficial impact on health and wellbeing (both physical and mental). A 2016 study in the journal Social Science and Medicine found that the United States’ stingy welfare state is taking a serious toll on population health, and that “life expectancy in the US would be approximately 3.77 years longer, if it had just the average social policy generosity of the other 17 OECD nations.”
Similarly, a 2008 study in the journal Perspectives on Politics found that “citizens find life more rewarding as the generosity of the welfare state increases, net of economic or cultural conditions.” The authors continue:
We thus echo Einstein by concluding that socialism (at least as represented by its social democratic incarnation) provides what is perhaps our best hope for improving the human condition, in so far as we agree that making “life as satisfying as possible” is the appropriate standard of evaluation.
All-in-all, the evidence on this point is remarkably clear: welfare policies do in fact reduce poverty, and they do so quite effectively. They also substantially increase population health and overall life satisfaction.
Myth #2: “Welfare Policies Discourage People from Working!”
The economic literature gives very little support for this claim; if anything, the evidence points in the opposite direction. A 2014 study in the journal Work, Employment, and Society found evidence of “increasing employment commitment as social spending gets more generous and activating.” The authors went on to say that “the notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support. On the contrary, employment commitment was much higher in all the studied groups in bigger welfare states and social differences were mostly smaller or did not vary across welfare states.”
In addition, another study conducted by researchers at Harvard and MIT found “no systematic evidence that cash transfer programs discourage work.” Together, these studies demonstrate quite clearly that welfare policies do not discourage work; if anything, they seem to increase people’s desire to find employment.
In addition, there is significant evidence that a strong social safety net increases the quality of employment, by allowing people to search for a higher-quality job. A 2018 study from Georgetown University and the National Bureau of Economic Research looked at the effects of unemployment insurance (UI), and found that “longer UI duration increases wages in the job immediately after and up to one year after unemployment and reduces separations to unemployment one year after exiting unemployment.” In other words, UI benefits helped people find better paying and more secure jobs. Similarly, a 2004 study from The Journal of Human Resources found that “greater UI generosity leads to longer job tenure.” This demonstrates that UI benefits help people to find jobs that suit them.
Myth #3: “Welfare Policies Are Bad for the Economy!”
Aside from the obvious benefits of reducing poverty and inequality, there is a large amount of evidence against the idea that welfare policies reduce growth. A 2014 study from the OECD found that while “income inequality has a negative and statistically significant impact on subsequent growth,” redistributive policies “need not be expected to undermine growth.” In fact, the study notes that such policies “are a key tool to ensure the benefits of growth are more broadly distributed.”
A 2005 study in the International Journal of Health Services compared the liberal American model to the social democratic European model, finding that “the liberal, U.S. model has been less efficient economically (slower economic growth, higher unemployment) than the social model in existence in the European Union and in the majority of its member states.” This is further evidence against the idea that a strong welfare state would harm the economy.
Conclusion
While welfare policies are certainly insufficient from a socialist perspective, they are a nonetheless important way to ameliorate the conditions of the working class in capitalist societies. In addition, they help to increase the class power of the workers, by reducing the dependence of the working class on market forces and bourgeois charity. As such, it is important that all people be properly informed on this topic, and see to it that conservative and neoliberal attacks on these institutions are not successful.
Sources
- Social Forces | Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment
- American Sociological Review | Determinants of Relative Poverty in Advanced Capitalist Democracies
- Social Forces | The Politics of Poverty: Left Political Institutions, the Welfare State, and Poverty
- Social Forces | Welfare State and Relative Poverty in Rich Western Democracies, 1967–1997
- Comparative Political Studies | The Material Consequences of Welfare States: Benefit Generosity and Absolute Poverty in 16 OECD Countries
- Social Forces | Putting Poverty in Political Context: A Multi-Level Analysis of Adult Poverty Among 18 Affluent Democracies
- Federal Reserve Bank of St. Louis | Labor Productivity and Compensation Trends
- VoxEU | Economic Growth in the US: A Tale of Two Countries
- Columbia University | Trends in Poverty with an Anchored Supplemental Poverty Measure
- Center on Budget and Policy Priorities | Economic Security Programs Cut Poverty Nearly in Half Over Last 50 Years
- VoxEu | Alongside Rising Top Incomes, The Level of Living of America’s Poorest Has Fallen
- Social Science and Medicine | Shorter Lives in Stingier States: Social Policy Shortcomings Help Explain the US Mortality Disadvantage
- Perspectives on Politics | Assessing the Welfare State: The Politics of Happiness
- Work, Employment and Society | The Bigger the Worse? A Comparative Study of the Welfare State and Employment Commitment
- Harvard University and MIT | Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs Worldwide
- Georgetown University | Do Unemployment Insurance Extensions Reduce Skill Mismatches?
- The Journal of Human Resources | The Match Quality Gains from Unemployment Insurance
- OECD | Trends in Income Inequality and its Impact on Economic Growth
- International Journal of Health Services | Economic Efficiency versus Social Equality? The U.S. Liberal Model versus the European Social Model
