Welfare

BRITAIN GOES AGAINST EUROPE'S WELFARE TRENDS

Europe has an ingrained entitlements culture. Consequently, countries are watching the efforts of Britain's government to overhaul that nation's 50-year-old welfare program. Prime Minister Tony Blair has for the past three months been trying to push unemployed workers off the dole. Blair offers those under 25 years old four months to pick one of four options:

  • Take a six-month job with a private company -- with employers receiving a subsidy equal to about $100 a week for each unemployed youth hired.

  • Do volunteer work.

  • Join an environmental task force.

  • Enroll in a full-time educational course.

The United Kingdom has one of Europe's lowest unemployment rates at 6.5 percent. But the rate among young people stands at 10 percent. In 1995, the country devoted 22.9 percent of GDP to public spcial spending -- compared to 15.8 percent in the U.S., where unemployment stands at about 4.6 percent.

For all the talk about welfare reform, Western Europe still spends 30 percent of GDP on welfare and social programs. Sweden is the highest at 35.2 percent. Welfare reform advocates say the efforts of some European countries to rein in welfare have bordered on the absurd.

  • The Netherlands finally decided to stop buying the work of would-be artists.

  • Sweden cut the benefits of women on maternity leave from 100 percent of their salary to 80 percent

In France, long-term unemployed people demonstrated an occupied government buildings last year in an attempt to get more benefits.

Source: Helen Cooper, "All of Europe Watches As Britain's Tony Blair Hacks Away at Welfare," Wall Street Journal, June 25, 1998.

IEA STUDY: MEASURING BRITISH WELFARE DEPENDENCY (SUMMARY)

The government of British Prime Minister Tony Blair has begun welfare reforms in the United Kingdom which, like those in the United States, are aimed at replacing permanent cash assistance for the able-bodied with a system requiring them to work or acquire the training necessary to make them employable.

Policy analysts propose to measure benefit dependency, to track how well these reforms succeed in increasing independence from welfare. Beginning in the 1960s -- and not counting such transfer programs as national health insurance -- this "dependency ratio" increased substantially:

  • In 1950 about 4 percent relied on national assistance, the chief means-tested benefit.

  • Today nearly 17 percent of the population relies on its successor, called income support.

  • Including some other means-tested benefits -- housing and council tax benefits -- 27 percent of the British people are welfare-dependent.

Analysts point out that an underlying assumption of welfare -- that it is necessary to redistribute income and wealth to lift people out of poverty -- is false. For instance, the British Household Panel Survey found that 46 percent of those in the lowest fifth (quintile) of income in 1991 had moved up to a higher income group by 1993.

And the measurement of poverty is relative. For instance, the Office of National Statistics found that "final income" for the lowest income quintile was understated by 47 percent in 1994-95 because the cash value of education and medical benefits was not included.

Source: David G. Green, "Benefit Dependency: How Welfare Undermines Independence," Choice in Welfare No. 41, 1998, IEA Health and Welfare Unit, Institute of Economic Affairs, 2 Lord North Street, Westminster, London SW1P 3LB, (0171) 799-3745.

"NEW LABOR" TACKLES WELFARE IN BRITAIN

Prime Minister Tony Blair's Labor Party is trying to reform Britain's welfare system -- advancing proposals that would have sent shivers down the spines of the old Labor Party. Observers say he has a monumental task on his hands.

  • Officials recently revealed that 30 percent of the United Kingdom's population receive some kind of welfare benefit -- and nearly 17 percent rely on some kind of income support.

  • Over the past two decades, there has been a sixfold increase in claims for invalid benefits.

  • Britain has the highest number of single parents claiming income support of any nation in Europe -- more than one million in 1996.

Labor's proposed reforms include a welfare-to-work program modeled on Wisconsin's successful workfare program, reductions in single-mother benefits, a proposal for "affluence testing" as a way to deny benefits to the less-needy and the prospect of taxing universal benefits for the better-off.

Serious reform advocates say the intellectual weakness in Labor's program is its faith in government as the agent of change -- which makes it unlikely it will embrace the kinds of measures essential to a really radical improvement of the system.

Source: Therese Raphael, "Taming Britain's Welfare Beast," Wall Street Journal, January 30, 1998.

U.S., British Welfare Systems Compared

The United States and Great Britain have social welfare systems that just keep getting bigger regardless of which particular political parties are in power.

Social scientists have coined the term "underclass" to describe a form of poverty explained more by self-destructive behavior - crime, drug abuse, bearing children out of wedlock and a lack of commitment to education - than mere material want. In both countries the welfare state has encouraged the growth of this underclass.

  • The portion of the United Kingdom's gross domestic product devoted to welfare was 24% in 1991, up from 21.3% in both 1980 and 1989.

  • In the U.S., the figures were 14.1% in 1980 and 14.6% by 1990.

The U.K.-U.S. comparison is clearer when the focus is solely on non-medical spending on the non-elderly.

  • In Britain, spending rose from 7% to 8.1% of GDP between 1980 and 1991.

  • In the U.S., it fell from 4.5% to 3.5% in 1990.

Although the Conservative Party has been in power in Britain since 1979, welfare benefits have continued to expand.

  • British households received the equivalent of $136.1 billion in welfare benefits in 1993, up from $64.5 billion in 1984 (not including hospital insurance).

  • The rate of increase from 1989 to 1993 was 50%, compared to roughly 30% from 1984 to 1989.

  • Meanwhile, out-of-wedlock births tripled from about 10% in 1977 to 31% in 1992.

In both Britain and America, there are very media-conscious welfare lobbies which have promoted the notion that both Margaret Thatcher and Ronald Reagan slashed away at benefits to the poor. But the facts do not bear this out.

Source: Carl Horowitz, "On the Dole in United Kingdom," Investor's Business Daily, August 30, 1995

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