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Social Cohesion and Social Policy: Does
income inequality matter?
Sarah CarpentierIve Marx
Karel Van den Bosch
Centre for Social Policy Herman Deleeck
Brussels, May 15th 2008
Outline
1. Social cohesion in policy: definitions, indicators
2. Does income inequality matter ? 3. The production of equality, or the
puzzle of egalitarianism4. Conclusion
1. Social cohesion in policy: definitions and
indicators
Social cohesion as a goal of social policyBy several policy actors• Local (e.g. UK)• Regional (e.g. Walloon region)• National (e.g. Canada)• Supranational (e.g. EU, OECD,
Council of Europe)
Council of Europe (2005)
• Definition = a society’s ability to secure the long-term well-
being of al its members
Four central principles– Fair and equal access to ressources– Individual and collective dignity– Autonomy of the individual – Participation in community life
Social, economic, cultural, political cohesion & sustainability
Council of Europe (2005)
• Indicators four levels of analysis (from general to specific)– Main indicators: social cohesion trend– Indicators of public actions which are
constituents of well-being (shared responsibility)
– Specific life domains (employment, income, housing)
– Sensitive situations & vulnerable groups=> Beyond inequality and poverty measures,
but remain key indicators
OECD (2006)
• Definition – No definition – Pathologies inform about a lack of cohesion – Central concept: social development – Fostering social cohesion: a policy goal
besides of enhancing self-sufficiency, equity & health
Economic and social well-being(and sustainability)
OECD (2006)
• Indicators – Aim: capturing changes in outcomes
that social policies try to influence with limited ressources
– 3 types of indicators • Social context• Social status (outcomes)• Societal response
OECD (2006)
• Indicators – Social cohesion indicators:
social status• Overall well-being (life satisfaction)• Societal dysfunctions (suicide, work accidents)• Social conflict (strikes)• Political parcipation (voting) and trust
societal response• Number of prisoners
– Main social development indicators: employment and unemployment, inequality, poverty and deprivation
EU
• No explicit definition • 2 main conceptualisations,
rooted in historically developed policies– EU regional cohesion policy – EU social cohesion pillar of the
Lisbonstrategy
EU Regional Social Cohesion Policy
• Definition – Economic, social and territorial cohesion:
reducing economic and social disparities between regions to create an economic space attractive to invest and to work in
– Social cohesion • poorly stressed • Seen as integration in the labour market
Economic and territorial cohesion (and sustainability)
EU Regional Social Cohesion Policy
• Indicators: GDP• Policy: Structural Funds and
Cohesion Fund second largest budget item EU 2007-2013: 350 billion euro (+ 150 billion euro of public/private national means)
Lisbon strategy –social cohesion
• Lisbon strategy (2000):To become the most competitive and dynamic knowledge-based economy in 2010 with– A strong economic growth– More and better jobs – Greater social cohesion – Sustainability (2001, Göteborg)
economic and social cohesion (and sustainability)
Lisbon strategy –social cohesion
• No explicit definition of social cohesion Social cohesion = European social model – No clear concept, assumes (Jepsen & Serrano
Pascual): - Dichotomy with US- Integration of economy and social policy
- Covers solidarity embodied by (Jeanotte)- Universal social protection system- Regulation for market correction- Social dialogue
OMC: social protection and social exclusion prevail
Lisbon strategy –social cohesion
• Indicators– Outcome indicators (in line with subsidiarity principle)
(also social spending and context indicators are asked) – 3 level structure:
• 1st level: key indicators Commonly agreed • 2nd level: in-depth indicators• 3rd level: Nation-specific indicators
– Consists of • Indicators on inequality and (relative) poverty: very prominent!• Indicators about life domains (employment, health, education,
housing)• Breakdowns for vulnerable groups
Lisbon strategy –social cohesion
• Policy: – Reports (in line with subsidiarity)
• Member states: National Strategic Reports on Social Protection and Social Inclusion
• EU: Joint Report Social Protection & Social Inclusionhttp://ec.europa.eu/employment_social/spsi/
the_process_en.htm
– Aims at coordination through agenda-setting and mutual learning
Concluding
- Social cohesion has multiple meanings in policy use
- Differences in breadth of dimensions included- Hence, also multiple ways of measuring- Although, generally acknowledged as multi-
dimensional phenomenon, reduction of inequality and poverty presents consensus dimension (= seen as threats) (cf. Jeanotte)
- Indicators about poverty and income inequality (and to a lesser extent labour market participation and unemployment) are prominently used
2. Does income inequality matter?
2. Does income inequality matter?
• Evidently, policy makers say ‘yes’, but why?
• Income inequality is multi-faceted phenomenon: – Result (indicator) of inequities (exclusions)– Result of factors without normative bearing– Cause of bad things (see below)
• Current income is:– only (important) part of– yet good indicator
• of wider inequality in economic resources
2. Does income inequality matter?
• Income inequality does not necessarily imply relative poverty, but the two are in fact closely related.
S80_S20
1412108642
PO
V_O
EC
30
20
10
0
US
UK
Turkey
Sw eden
Spain
Portugal
Poland
Norw ayNetherl
Mexico
Luxembourg
Italy
Ireland
Hungary
Greece
Germany
FranceFinland
Denmark
Czech R
Canada
Belgium
Austria
Australia
2. Does income inequality matter?
• Effects of income inequality on other life-domains area of intense research and debate.
• On the one hand, Burtless and Jencks (2003): “the effects of inequality on economic growth, health, and equality of opportunity are modest and uncertain in rich countries”
2. Does income inequality matter?
• On the other hand, Wilkinson (2007): “many problems associated with relative deprivation are more prevalent in more unequal societies … this may be true of morbidity and mortality, obesity, teenage birth rates, mental illness, homicide, low trust, low social capital, hostility and racism”
• Some illustrations of this follow:
2. Does income inequality matter?
• Income inequality and rate of mental illness:
2. Does income inequality matter?
• Income inequality and educational achievement:
2. Does income inequality matter?
• Income inequality and imprisonment:
2. Does income inequality matter?
• However,• Causal mechanisms remain obscure
– Wilkinson: low position breeds stress
• Relationships disappear (or are reversed) in ‘panel-of-countries’ approach, i.e. no link between changes in income inequality and bad outcomes.
3. The production of equality,
or,The Puzzle of
Egalitarianism
3. The Puzzle of Egalitarianism
• How can public policy promote greater equality (less inequality, less relative poverty)?
• Three broad strategies:1. Income redistribution through social
insurance or social assistance2. Providing goods & services free or at
reduced cost (health care, education, housing)
3. Investing in market-income generating abilities of individuals, esp. children
3. The Puzzle of Egalitarianism
• Despite the ‘Active Welfare State’ etc. most resources go to the 1st (and 2nd strategy).
• Also, doubts about the effectiveness of the Activation Strategy
• The question is then:Does income redistribution reduce inequality?
• Looking at simple cross-country correlations, the question is yes.
3. The Puzzle of Egalitarianism• high social expenditure implies a low rate
of relative poverty.
4
6
8
10
12
14
16
18
0 5 10 15 20
social expenditure (% of GNP)
wor
king
-age
pov
erty
rate
(% w
orki
ng-a
ge p
op.)
USA
Italy
CanadaUK
GermanyAustralia
Austria
France
Belgium
Netherlands Sweden
Finland
3. The Puzzle of Egalitarianism
• But: problem of counterfactual: what would have been the level of inequality in the absence of social expenditure?
– Not necessarily the same across countries– Counterfactual problem has basically no
solution
• Suggestive evidence: Inequality in wages is negatively related to social expenditure
3. The Puzzle of Egalitarianism
– fewer low paid workers, more social expenditure
0
5
10
15
20
0 10 20 30
low pay incidence (% full-time workers)
soci
al e
xpen
ditu
re (%
GN
P)
Sweden
Finland
Belgium
Netherlands
Germany
France
AustraliaAustriaSwitzerland
Italy
UK
Canada
USA
3. The Puzzle of Egalitarianism
• Possible reasons for this relationship: – second-order effects of high benefits
and high taxes and contributions. – high wage dispersion, large market
inequalities make redistribution difficult • (social insurance for the self-employed in
Belgium)
– high level of solidariy (social cohesion?), embedded in institutions, produces low wage dispersion and enables high level of income redistribution.
3. The Puzzle of Egalitarianism
• In supranational social cohesion policies: Inequality (and poverty) are common dimensions in defintion and indicators
• Effect of income inequality on other life domains is area of intense research and debate
• Suggestive evidence that income redistribution reduces inequality
4. Conclusion
• Inequality (and poverty) constitute a consensus dimension in definitions and indicators used by social policy actors
• Effect of income inequality on other life-domains is area of intense research and debate
• Suggestive evidence that income redistribution reduce inequality