Lessons For Welfare Reform From Europe


Here in the United States, both federal and state governments have grown their social welfare programs over the past several decades. One of the issues that has plagued the welfare system is the fact that it’s not even really a system. It lacks a coherent approach to getting people out of poverty and back to work. The lack of cohesion makes smooth transitions difficult.

In Europe, the welfare state apparatus is much larger than the United States. But European countries have been reforming their welfare systems in recent years because of the massive suck of resources. Their experiments offer the United States some guidance on what works and does not work when helping people in need.

Writing in The Hill, Ryan Streeter notes that while Americans aspire to have a welfare system that gets people off of public assistance and back to work, the incoherent approach is preventing those aspirations from manifesting.

Welfare in America is a patchwork of programs with differing rules and requirements, encouraging work in one program, discouraging it in another, and sometimes penalizing a recipient whose earnings increase. The largest — including Medicaid, food stamps, disability insurance, the earned income tax credit, temporary housing assistance and cash assistance — are each administered by different federal agencies.

In fact, Streeter notes that the welfare systems in the acclaimed democratic socialist region of Scandinavia are actually more work-oriented than what currently exist on this side of the Atlantic.

He points to several examples of cosmic shifts in approach to their welfare systems.

For instance, to deal with declining labor force participation, Denmark eliminated permanent disability benefits for people under 40 and refashioned its system to make employment central. Sweden reformed its welfare system to focus on rapid transitions from unemployment to work. Their program lowers jobless assistance the longer one is on welfare. The Nordic model is more focused on eliminating reasons not to work such as caregiving or lack of proper training than providing income replacement.

In other words, welfare systems do what they're intended to do when they are constructed in a way that ensures initiatives do not contradict each other.

What are some of the things that Americans can learn from Europe? Streeter identifies three in particular.

The first and most important is that all welfare programs should focus on getting people who can work into employment, or work training, as quickly as possible. Our programs currently work against each other.

The second objective is eliminating penalties on increased earnings so low-income workers do not have to think twice about getting a pay raise or a better job. The Congressional Budget Office estimates that a worker whose earnings grow from the federal poverty level to 150 percent of that level experiences the equivalent of a tax increase from 17 percent to 65 percent because of how welfare benefits phase out.

For those seeking work, they should not be effectively punished for making gains in their work life. He recommends phase-out rates so that all benefits decrease as one’s income increases, and that all rates should be the same.

The third goal is granting maximum flexibility to local agencies and organizations so they can combine resources to address a wider range of obstacles to work than is allowed under current law. This is important because, according to Census data, most poor people who are not working do so mostly for reasons other than not being able to find a job.

Since the United States is a federal system, state and local governments have more initiative than does the federal government. Given how big the country is, a federal system is preferable to a unitary government because of regional differences.

But if the overall goal is to bring a person back to employment as quickly as possible, all levels of government involved in social welfare programs need to be working in tandem, and not against each other. If different levels of government are going to be involved in this area of social welfare, they cannot undermine each other at the expense of those seeking work.

Streeter concludes by pointing out that Europe learned that welfare reform should not merely involve giving money to those who are in need, but in helping them find work so they will permanently stay out of poverty.

What do you think? Can we learn lessons from Europe in the area of welfare? Share your thoughts with us!