Social Cohesion and Social Policy: Does income inequality matter?

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Social Cohesion and Social Policy Does income
inequality matter?

• Sarah Carpentier
• Ive Marx
• Karel Van den Bosch
• Centre for Social Policy Herman Deleeck
• Brussels, May 15th 2008

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Outline

1. Social cohesion in policy definitions,
   indicators
2. Does income inequality matter ?
3. The production of equality, or the puzzle of
   egalitarianism
4. Conclusion

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Social cohesion in policy definitions and
indicators
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Social cohesion as a goal of social policy

• By several policy actors
• Local (e.g. UK)
• Regional (e.g. Walloon region)
• National (e.g. Canada)
• Supranational (e.g. EU, OECD, Council of Europe)

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Council of Europe (2005)

• Definition
• a societys 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

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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
• gt Beyond inequality and poverty measures, but
  remain key indicators

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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)

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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

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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

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EU

• No explicit definition
• 2 main conceptualisations,
• rooted in historically developed policies
• EU regional cohesion policy
• EU social cohesion pillar of the Lisbonstrategy

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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)

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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)

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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)

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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

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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

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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
  Inclusion
• http//ec.europa.eu/employment_social/spsi/
• the_process_en.htm
• Aims at coordination through agenda-setting and
  mutual learning

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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

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2. Does income inequality matter?
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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

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2. Does income inequality matter?

• Income inequality does not necessarily imply
  relative poverty,
• but the two are in fact closely related.

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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

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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

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2. Does income inequality matter?

• Income inequality and rate of mental illness

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2. Does income inequality matter?

• Income inequality and educational achievement

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2. Does income inequality matter?

• Income inequality and imprisonment

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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.

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3. The production of equality, or, The
Puzzle of Egalitarianism
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3. The Puzzle of Egalitarianism

• How can public policy promote greater equality
  (less inequality, less relative poverty)?
• Three broad strategies
• Income redistribution through social insurance or
  social assistance
• Providing goods services free or at reduced
  cost (health care, education, housing)
• Investing in market-income generating abilities
  of individuals, esp. children

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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.

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3. The Puzzle of Egalitarianism

• high social expenditure implies a low rate of
  relative poverty.

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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

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3. The Puzzle of Egalitarianism

• fewer low paid workers, more social expenditure

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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.

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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

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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