Structures and challenges of Social Security and Welfare in Europe and the United States - a comparative essay

Contents

1. Introduction

2. Social Security and Welfare in the United States – a short and critical overview

3. Challenges and perspectives of the American system on the basis of two state issues
3.1 Utah: Consequences of the welfare reform 1996 – a university study
3.2 Oregon: Ballot on a universal health care system

4. Social Security and welfare in Europe and the United States – a short comparison

5. Conclusion: Globalisation and the limitation of states´ ability to determine economical and social policies – a coming challenge for the general type of welfare state

6. Bibliography

1. Introduction

The following paper is a result of the course „The American Political System“ given by Prof. Slomp at the Faculty of Management of the University of Nijmegen, where the author studies as an exchange student at the moment.

In the introduction of the course the students had to think about the most important differences between the political systems of the United States and the European countries. Among other major points the class came to the result that especially the different ways and extents of providing social security and welfare for their citizens can be regarded as one of the most important differences between the American and European systems.

Moreover the different models of welfare state played an important role in the discussions between European and American exchange students in the last months and a lot of mutual prejudices dealing with the different kinds of welfare capitalism had to be cleared up. For this reason the author chose the topic of social security and welfare in Europe and the States for this assignment.

Today systems of social security and welfare are part of every modern democracy in the world and most of the people in the „western countries“ – including the US -count on the social services and provisions given by the state. Over the last 120 years and especially since World War II social and welfare policy has become one of the major cores of modern democracies, without most of them the political systems could be regarded as much more instable today. Nevertheless the differences between the single systems and their historical, economical and social backrounds are still strong, especially between America and Europe.

Accordingly to the questions given above, in the following paper the author wants to

- give a brief and critical overview of the american system of social security and welfare (Chapter 2),
- describe challenges and perspectives of the american system on the basis of two state issues (Chapter 3),
- give a short comparison of the general character of the american and european systems of social security on the basis of the course literature, the modell of Esping-Andersen and statistical data (Chapter 4),
- give a short description of the coming challenges for the – american and european - welfare states resulting from the growing global diffussion of the free market and the limitation of the States´ ability to independently determine economic and social policies connected with the so-called globalisation as a conclusion of the paper (Chapter 5).

2. Social Security and welfare in the United States – a short and critical overview

Compared to Europe social and welfare policy in the US has been started quite late: Not until 1935 Roosevelt introduced the first pension and welfare programs with the „Social Security Act“ within the scope of his New Deal-Policy. After World War II especially president Johnson extended Social security and Welfare with his „War on poverty“ in the 60s by introducing two systems providing health care for the elderly („Medicare“) and the poor („Medicaid“)^[1]. Today the state spending for social security and welfare is about 16 percent of the federal budget (see Chapter 4).

The most important part of the welfare system of the US is the so-called „Social Security“, that provides economical support to people faced with unemployment, disability and especially old age. The system, in which employees have to participate is financed by employers and employees to 50 percent each^[2]. In the 90s the social security taxes were with about 14 percent of the gross income much more lower than in Europe. On the other hand the level of benefits is only 40 percent of the former income^[3], so that many Americans must also buy private insurance, frequently with contributions from the companies for which they work. Many companies also have retirement plans by which they and their employees put aside money for their retirement pensions^[4]. When added to Social Security payments, pensions enable part of retired Americans to live comfortably, but also a lot of them have to work in a part-time-job after their retirement to pay for life and especially health care. At the end of the 20th century the American Social Security System is still well-financed but

„as the baby boomer generation retires, beginning about 2010, politicians will face an inevitable dilemma: lower benefits and generate the ire of retirees or raise taxes and generate the ire of taxpayers.“^[5]

Welfare payments or the so-called „Public Assistance“ as a second part of the welfare system of the US is certainly the most controversial purpose. Whereas the „Social Security“ is accepted in most parts of american society, the prejudices against welfare spending, that are based on protestant ethics and liberal values and the american ideal of the "self made man" are strong and can still be found in current debates about welfare. For many Americans the support of people that didn´t pay any taxes or fees before seems to be contradictory to the principle of individual self-responsibility, that has deep roots in American society^[6]. Only the support of the „truly needy“, for instance disabled people, is accepted.

Following Janda the Public Assistance “institued under the Social Security Act“^[7] includes financial and material support (in form of the so-called „food stamps“) especially to the

- needy elderly not covered by old-age pension
- the diabled and blind
- needy families with dependent children,

that can demonstrate a need for that aid.

Originally the system was financed mainly by the federal state by giving funds to each state based on the proportion of its population living in poverty and imposing national standards for the welfare programs. Already under the precedency of Reagon and Bush the federal government reduced its fund spending, but the cuts were covered by the states, until the rising costs and the beginning recession in the 90s forced them also to make reductions^[8].

With the „Responsibility and Work Oppurtunity Reconciliation Act“ in 1996 the system of welfare in the States was finally reconstructed. Within the scope of Clintons general goal to „end poverty as we know it“^[9] the federal guarantee of cash assistance was ended and lots of welfare programs were cuted. Especially the support of families with children was changed by replacing the biggest public assistance programm „Aid to Families with Dependent Children“ (AFDC) by the so-called „Temporary Assistance of Needy Families“ (TANF)^[10] – even the name of welfare had been changed visibly. To reduce families living on welfare rolls and bring them back into work the states had to create own reintegartion – „workfare“ - programs and individual recipients had to become employed within two years. Also the TANF-plan puted a general five-year-limit for receiving benefits in a lifetime, but states could decide about individual regulations. As a consequence benefits and limits started varying dramatically from state to state. Clinton and the Republican-led Congress defended the reconstruction of the welfare system with the argument that welfare should not be a usual lifestyle in american society and the state should give workless people a second chance^[11].

illustration not visible in this excerpt

It is true, that in the years after the plan the number of people on welfare rolls and the unemployment rate droped rapidly, how the follwing statistic shows:

[...]

^[1] Matthias Zeylmans: The historical development of welfare capitalism in the U.S.A. In: http://tiss.zdv.uni-tuebingen.de/webroot/sp/spsba01_W98_1/usa1.htm, 10/11/02, 18.32h

^[2] Janda, S. 351

^[3] „SSI Annual Statistical Reports“ In: Webside „Social Security Online“, http://www.ssa.gov/statistics/ssi_annual_stat/2001/index.html, 10/11/02, 19.12h

^[4] „Portrait of the USA“. In: Webside „InfoUSA“, http://usinfo.state.gov/usa/infousa/facts/factover/ch9.htm, 10/11/02, 18.54h

^[5] Janda, S. 351

^[6] „Portrait of the USA“. In: Webside „InfoUSA“, http://usinfo.state.gov/usa/infousa/facts/factover/ch9.htm, 11/11/02, 12.11h.

^[7] Janda, S. 353

^[8] Alice Bettencourt: "Ending Welfare As We Know It Versus Ending Poverty As We Know It". In: Internetseminar: Reforming the Welfare State and Social Security Systems: USA, Germany, Chile - A comparison. In: http://tiss.zdv.uni-tuebingen.de/webroot/sp/spsba01_W98_1/denver6.htm. 11/11/02, 14.02h

^[9] Webside „Public Agenda“, http://www.publicagenda.org/issues/overview.cfm?issue_type=welfare, 11/11/02, 14.31h

^[10] Alice Bettencourt: " Ending Welfare As We Know It Versus Ending Poverty As We Know It". In: Internetseminar: Reforming the Welfare State and Social Security Systems: USA, Germany, Chile - A comparison. http://tiss.zdv.uni-tuebingen.de/webroot/sp/spsba01_W98_1/denver6.htm. 11/11/02, 14.02h

^[11] Website „Public Agenda“, http://www.publicagenda.org/issues/overview.cfm?issue_type=welfare, 11/11/02, 14.39h