Academic journal article Social Security Bulletin

The Advantages and Disadvantages of Different Social Welfare

Academic journal article Social Security Bulletin

The Advantages and Disadvantages of Different Social Welfare

Article excerpt

Throughout the world, societies are reexamining, reforming, and restructuring their social welfare systems. New ways are being sought to manage and finance these systems, and new approaches are being developed that alter the relative roles of government, private business, and individuals. Not surprisingly, this activity has triggered spirited debate about the relative merits of the various ways of structuring social welfare systems in general and social security programs in particular.

The current changes respond to a variety of forces. First, many societies are adjusting their institutions to reflect changes in social philosophies about the relative responsibilities of government and the individual. These philosophical changes are especially dramatic in China, the former socialist countries of Eastern Europe, and the former Soviet Union; but they are also occurring in what has traditionally been thought of as the capitalist West. Second, some societies are struggling to adjust to the rising costs associated with aging populations, a problem particularly acute in the OECD countries of Asia, Europe, and North America. Third, some countries are adjusting their social institutions to reflect new development strategies, a change particularly important in those countries in the Americas that seek economic growth through greater economic integration. And, finally, in many parts of the world, social welfare reform is motivated by the need to adjust the costs of welfare systems to economies that are no longer growing as fast as they did in the first three or four decades after World War II.

Whatever their motivation, these changes are being discussed and debated widely. And the current discussions seem in several ways to reflect a new level of sophistication about the complexities of social welfare policy. One example of this is the recognition of the important relationships between social welfare systems and the economy in which they exist. The state of its economy will often influence a society's willingness to support its social welfare system. Healthier economies facilitate more generous social welfare systems, while economic difficulties frequently lead, sooner or later, to retrenchments. At the same time, the size and structure of social welfare systems can themselves influence the pace and rate of growth of economic activity. Social welfare systems that inadvertently discourage work activity--or encourage a shift from the formal sector to the informal sector--can reduce the aggregate amount of income available for distribution among society's members. Similarly, a system which discourages domestic savings can have the effect of slowing economic growth, while, given the proper environment, one that increases domestic savings could enhance economic growth.

Another indication of the increased sophistication of current debates is the realization that social welfare policies are developed to achieve a variety of different and often competing social objectives. These social objectives include the effective protection of the population from various economic risks, the promotion of increased economic activity, the redistribution of economic resources, the facilitation of the smooth operation of a free labor market, and the efficient operation of social institutions. No single policy will be best able to achieve all of these various objectives, so the choices actually made will necessarily reflect decisions, either implicit or explicit, about the relative importance of the various objectives.

Since assessments of the relative importance of competing social objectives will vary from country to country and from time to time, social welfare policies appropriate in one time and place need not necessarily be appropriate in another. Moreover, the degree to which a particular approach to the social welfare system does, in fact, advance a particular objective will also vary from place to place and from time to time. …

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