Can ‘New Welfare’ Address Poverty?

New welfare policies aim to cut benefit bills by increasing the number of people in paid work, improving skills and ensuring fairer access to opportunities. But how well do they work?

Picture credit: Andrew Writer

A paper published in the Journal of Social Policy shows ‘new welfare’ is much more successful at achieving higher employment than at reducing poverty, even during prosperity.

The new research from the universities of Kent and Bristol examines data for seventeen European countries over the period 2001 to 2007.

‘New welfare’ pays insufficient attention to structural factors, such as the falling share of national incomes paid out as wages, and to institutional issues, such as labour market deregulation, it says.

Such programmes are attractive to business, the research says. They provide more and better-qualified workers and they reduce social conflict, which can enhance productivity and profitability.

The approach can also benefit citizens, as it provides more widely accessible job-opportunities with better rewards. It offers a relatively low-cost approach to the difficulties governments face in maintaining support and meeting social goals as inequalities widen.

Yet while a general move towards ‘new welfare’ gathered momentum in Europe during the past two decades, it did not make the poorest better off. While employment rates rose during the prosperous years before the crisis, there was no commensurate reduction in poverty.

Over the same period the share of economic growth which went back into the jobs market fell, labour markets were increasingly deregulated and inequality increased.

This raised the question of whether new welfare’s economic goals of higher employment, improved human capital and social goals such as better job quality and incomes might come into conflict with one another.

The research shows that while improved parental leave increases employment and reduce poverty, most ‘new welfare’ polices do not. The effect of employment on poverty is limited, it says.

Other reforms which can make a difference include improved employment protections and contractual rights for workers.

Debates about the detail of welfare reforms tend to distract from the bigger picture, the researchers say. Thus not enough attention is paid to wider changes such as growing market inequality, a falling share of national income being paid in wages and fact that the middle classes gain most from improved opportunities. This, they say, can sustain inequality and drive poverty.