Social Cohesion and Social Capit

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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
1. Social cohesion in policy: definitions,
2. Does income inequality matter ?
3. The production of equality, or the puzzle of
4. Conclusion
1. Social cohesion in policy:
   definitions and indicators
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
Council of Europe (2005)
• Definition
   = a society‟s ability to secure the long-term well-being of al its
  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
• 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
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 Inclusion
  – Aims at coordination through agenda-setting and
    mutual learning
- 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                 30

 inequality                                                   US

 does not
                                                Ireland                 Turkey
                                               Australia Italy

 necessarily             20                         UK
                                       Austria       Poland
 imply                                   Germany

 relative                             Norw
                                  Denmark ay
                                    Sw eden
                                     Czech R


 but the two
 are in fact             0
                              2            4              6         8            10   12        14
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
3.   The production of equality,
     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 assistance
  2. 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

       working-age poverty rate (% working-age pop.)



                                                       12             Canada

                                                       10                                   Germany

                                                                                       France              Netherlands       Sweden
                                                        6                                   Belgium

                                                            0          5                     10                   15                  20
                                                                                social expenditure (% of GNP)
    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


     social expenditure (% GNP)

                                  15                      Netherlands

                                                Belgium            Germany
                                                            Austria      Australia
                                  5                            Italy

                                       0                  10                            20                 30
                                                       low pay incidence (% full-time workers)
    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
    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