This essay discusses the Social Safety Net – the service and facilities provided by social welfare agencies for individuals and families in the community, geared to combating, reducing, or eliminating poverty and implemented through measures such as housing provision, jobs assistance, financial subsidies for household bills, and financial support for the purchase of food. Though written primarily from a U.S. perspective, details of the situation in other countries are included, highlighting areas where the systems are considered particularly faulty or inadequate.
So does it work as it’s supposed to in practice? Not always, according to Breman (2009). She writes about the situation prevailing in countries that used to be collectively termed as the “Third World” (p.29) and where the masses of the poor tend to work however they can to earn money to survive, most often working as casual labor in what is referred to as “the informal sector” (p.30), which she ironically describes as – quoting the former chief economist of the IMF (Simon Johnson) – “the underground circuits of the economy, unencumbered by the tax and benefit systems of the ‘formal sector’.” According to Breman, in contrast to that rather optimistic and cheerful view of their situation, the stark reality is that in places such as Indian cities like Ahmedabad (where Breman has previously conducted fieldwork) market stall vendors earn very little indeed from selling their produce. She cites Surajben Patni who sells tomatoes, and other produce from a makeshift shelter, making “as much as 250 rupees a day, or about $5.” Breman describes that as sufficient to feed the family of nine, including a son who had recently lost his diamond polisher’s job, while pointing out that $5 shared between nine people is around half the World Bank benchmark for extreme poverty, which is set at $1 per person per day. She adds that households in the villages south of Ahmedabad have to survive on even less – that is on the days they actually manage to find work (!) (p.30). Breman recounts her recent visit to the same city, noting that effects of the economic crisis have extended to even those poor women trying to scratch a living by scavenging on the city’s garbage dumps, struggling to survive now that rates for the rubbish they retrieve have halved. To compensate for that crippling loss of income, they now begin work at three a.m. (two hours earlier) and bring their children along to help (p.30-31).
Citing another example from India of how those outside the Social Safety Net are struggling to survive, Breman recounts the terrible situation in Surat – 120 miles to the south of Ahmedabad, where – due to the virtually overnight collapse of the global demand for jewelry in 2008 – half the “informal” workforce of diamond cutters and polishers – some 200,000 people, lost their jobs and those still “employed” had to accept serious cuts in rates and hours worked. No longer getting their $140 or so monthly wage, those highly skilled (though informally employed) workers were devastated, many committing suicide (p.32).
Breman cites these examples as instances of similar problems occurring across India, in Africa and in many parts of Latin America. The global picture in Breman’s view is quite different to that optimistic view propounded by The World Bank and the Wall Street Journal, which suggests that the informal sector is able to comfortably absorb this downturn and its effects (p.32). She strongly disagrees with their portrayal of these workers as “a vibrant new class of self-employed entrepreneurs” and describes that image as “as misleading as portraying children from the chawls of Mumbai as slumdog millionaires” (p.32).
Breman also disputes the idea that she claims is being “touted by the Western media” suggesting that people losing their ability to earn in the cities can – as was suggested by a bank official in Thailand: – go back to their country villages as “a sort of social safety net” (p.32). The reality, according to Breman, is that for most of those people, there is no family farm; they have no land to cultivate, and there is no work in their original home communities, which they had previously left for that very reason. The same situation prevails elsewhere, such as in Korea and in China, where an estimated 10 to 15 million such people are without work (p.33).
Breman sees this idea of the “informal sector” labor pool as a growing trend since the 1970s, which has generally not helped those in the lowest levels of the economy. She again quotes Ahmedabad as an example, stating that in the last twenty years or so the textile industry in South Asia suffered a decline, causing 150,000 mill workers in Ahmedabad to be summarily dismissed. There are still textile manufacturing facilities there, although much of the production is on power looms run by operators who are paid half their former wages but work 12-hour shifts instead of eight hours, and garment manufacture from those textiles is now a “cottage” industry, in which entire families participate, working around the clock. Without union support, this new generation of textile workers lives in “permanent social and economic crisis” (p.35).
Breman is not the only voice telling us that the so-called safety net either does not exist for many, or if it exists it is not doing its job well enough. De Schutter (Feb 2013) focuses on the increasing numbers of food banks operating in the UK and in other developed world countries, which he sees as reflecting the inadequacy of the social safety net provisions. He describes the function of food banks in Europe and North America as “a final frontier of social protection for those with little or no disposable income” and a means by which people that he refers to as “the working poor” (who should not need such help) can keep going without cutting back on other essential items like food, clothing, etc. De Schutter maintains that food banks should not be viewed as a normal element of the national safety net, because they rely entirely on donations and the efforts of unpaid volunteers. As such, he states, “they are charity-based, not rights-based, and they should not be seen as a substitute for the robust social safety nets to which each individual has a right.” He does see a small positive element in the existence of food banks; that they can provide up to date data on what he calls the “social marginalization in our societies, and give us a good idea about which groups of the population are being failed by the social safety net.” He recommends urgent analysis of food bank clientele to identify the system failings. Essentially, existing safety nets are either not sufficiently extensive or not generous enough, reflecting what De Schutter sees as inequality in our societies that has been growing for years and needs urgent attention, by our politicians.
In comparison with the U.S., one Social Safety Net that does seem to be relatively successful is the one in Germany. Lane (Apr 2013) writing in the Washington Post, attributes the success of that program and the currently low (5.4 percent) German rate of unemployment to the initiatives taken by the then German Chancellor Gerhard Schroeder ten years previously, who “restructured and reduced unemployment and welfare benefits while giving employers more freedom to hire and fire.” Lane reports that the measures were not surprisingly unpopular, and may have cost Schroeder a third term in office, but the OECD (Organization for Economic Cooperation and Development) has given those reforms credit for the subsequent success of Germany’s labor market. In contrast, according to Lane, the economic predicament in which the U.S. currently finds itself is the result not only of a severe financial crisis but also of what Lane calls “accumulated rigidities and inefficiencies.” He also suggests that “certain outdated or unwise policies discourage work and investment.” As an example, Lane cites Social Security Disability Insurance (SSDI), which the administration established in 1956 to assist workers aged 50 years or more who either had a terminal illness or who for other medical reasons were no longer able to work. However, the scope of SSDI has since the expanded steadily so that even workers in their 20s suffering from back pain can qualify for SDDI. The obvious consequence of that expansion is that SSDI spending has effectively tripled and now represents almost one percent of GDP. In the fiscal year of 2012, SSDI paid $135 billion to almost nine million beneficiaries plus their spouses and children. Also because those on SSDI also qualify for Medicare after two years on the program, $80 billion was added to the federal health care costs. Lane concedes that some of that cost growth is due to an increasingly aging workforce, but notes that many view SSDI as reducing the incentive to work, because its benefits compare with the wages of low income workers. Lane notes also that while Obama is currently not saying much on the issue (perhaps fearing opposition from fellow Democrats) that situation reflects a similar one in 1984 – also an election year and a time of economic decline – when President Reagan agreed to suspend efforts to trim SSDI expenditure, a measure which Lane sees as urgently needed now.
Danziger & Danziger (2005) published a critical review of the U.S. system, entitled “The U.S. Social Safety Net and Poverty: Lessons Learned and Promising Approaches.” They concede that the country’s anti-poverty programs function better today than when they were launched by Lyndon Johnson in 1964, but that most of that improvement stems from programs either introduced or expanded between the years 1965-1975, other than Earned Income Tax Credit, which by the mid-1990s had become the most effective anti-poverty measure for those families with children. Now, only the elderly citizens are provided with a safety net system that gives them protection against fluctuations in business and in the economy, while workers wages have declined in real terms and families with children experience high levels of poverty. Although there has unfortunately been little interest in launching any major anti-poverty initiative in the U.S. since around 1980, lessons learned from the situation in the U.S. influenced the UK Prime Minister Tony Blair in declaring a “war on child poverty” in the United Kingdom in 1999.
Boteach (Sep. 2012) takes another critical look at the U.S. system. She reports that as of 2011, poverty in the U.S. is defined as a family of four on a yearly income of less than $23,000, and that over 46 million were in that category last year, about the same as the year before. She concedes that the various social security programs and provisions kept many out of poverty, but notes that some important programs are due to expire, which will worsen poverty for many.
Moffitt (Oct. 2012) published a paper entitled “The Social Safety Net and the Great Recession” in which he describes how U.S. safety net spending has reacted to the current economic recession. He points out that some of the programs forming part of the safety net would be expected to be required to provide increased help during a recession; namely programs where eligibility for help is dependent upon income and/or employment; whereas programs associated with disability or retirement benefits would not be expected to cost significantly more, although supplemental funding provided by federal legislation in 2008 and 2009 for recession relief has increased expenditures above expected levels (p.2).
His conclusions (p.5-6) are that while the safety net expenditure has grown considerably during the recession, part of that growth has been merely a continuation of prior trends, for example that Medicare costs have continued to grow at approximately the same rate as before. He notes also that where increased expenditures have occurred directly as a result of the recession, the increases vary considerably from one program to another. For example, according to Moffitt, while some increases were relatively modest, expenditure on the Supplemental Nutrition Assistance Program (SNAP) increased significantly, partly due to program changes introduced earlier. Moffitt finds the most surprising outcome of his investigations is that Social Security retirement benefits have increased substantially. He attributes this increase in part to older workers giving up work and electing to take retirement benefits instead. Similarly, the unexpected increase in the costs of disability benefits may be due to workers who would normally carry on working in a stronger economy, electing to take benefits available when the economy is weakened. In summary, Moffitt notes that whilst the increased assistance provided by the various programs has not prevented a continuing rise in the poverty rate, it has nonetheless provided billions of dollars more to those needing temporary assistance.
At the other end of the spectrum, compared with the U.S. system that many feel is too costly and too generous, South Korea’s Social Safety Net is too weak, according to “South Korea Has the Loosest Safety Net in the OECD” (Dec. 2011), published in the South Korean newspaper The Kyunghyang Shinmun. The OECD cited the unemployment benefits received by Koreans as being just 30 percent of their normal wage, compared with the median figure of all OECD member states of just under 59 percent. Further, the duration of those benefits is just 34 weeks in Korea, compared with 99 weeks in the U.S. and four years in Denmark. The third issue was that only about a third of all Korean workers qualify for unemployment benefits anyway.
Conclusions
While the Social Safety Net clearly helps keep many people out of poverty, the systems in the U.S. and in a number of other countries are not functioning as well as they perhaps could, and in the case of the U.S particularly, costs of the various programs are in danger of spiraling out of control, yet poverty levels are not being reduced. A problem for the U.S. administration is that measures need to curb those expenditures could be politically unacceptable, which discourages the action needed that may turn the situation around.
Works Cited
Boteach, Melissa. (Sep. 2012). “5 Things You Need to Know About the 2011 Poverty Data.” Center for American Progress. Web. Accessed 18 December 2013.
Breman, Jan. (2009). “Myth of the Global Safety Net.” New Left Review. 59, Sep.-Oct. 2009, 29-36. Adobe PDF Library 6.0. Accessed 18 December 2013.
Danziger, S., & Danziger, S., K. (2005). “The U.S. Social Safety Net and Poverty: Lessons Learned and Promising Approaches.” University of Michigan. Web. Accessed 18 December 2013.
De Schutter, Olivier. (Feb 2013). “Food banks can only plug the holes in social safety nets.” The Guardian. Web. Accessed 18 December 2013.
Lane, Charles. (Apr 2013). “Following Germany on reforming the social-safety net.” The Washington Post. Web. Accessed 18 December 2013.
Moffitt, Robert, A. (Oct. 2012). “The Social Safety Net and the Great Recession.” The Russell Sage Foundation and The Stanford Center on Poverty and Inequality, (pages 2-6). Web. Accessed 18 December 2013.
“South Korea Has the Loosest Safety Net in the OECD.” (Dec. 2011). The Kyunghyang Shinmun. Web. Accessed 18 December 2013.
