Does Social Diversity Undermine Public Support for Social Insurance? New Research Findings

For many decades, social policy analysts have commented on the differences between European, especially Scandinavian, countries and North America, in relation to welfare state policies. In Canada and the USA a term like “welfare” tends to be a label for programs which give out small amounts of money to the poor, who nonetheless are viewed with suspicion that they might not really need it. In the Scandinavian countries if you jump on a city tour bus, you will probably hear pride that there is not much poverty in the city, as the social policies take care of that.

Scandinavian social policy is somewhat more generous to the poor, especially in housing, child care and educational subsidies. Minimum wages are higher, with required negotiations between labour and employers’ associations. It also supports youth with higher educational subsidies. Good pension programs cover much more of the labour force than those in North America. Their labour markets are flexible and dynamic. Employers can hire and fire more easily than in other European countries, but good return-to-employment programs are in place, often administered by organized labour.

Of course, all this requires higher taxes but the general public supports these systems, although like all countries they are forced to adjust to global economic competition and high costs of ageing societies. In North America public support is high for certain programs like Canadian Medicare, Old Age Security and Canada Pension Plan, and in the USA for Social Security. But support for unemployment insurance, social assistance and taxes is low, also for the idea of “income redistribution” and other subsidies. (Remember Archie Bunker’s song Those Were the Days? ….”didn’t need no welfare states. Everybody pulled his weight…” Interesting that the American welfare state was being built during Archie’s youth and his industrial middle class income – “…I don’t work. I’m a foreman!” … was supported by a unionized work environment.)

Conventional wisdom has told us over the years that the more culturally-homogenous Scandinavian countries have a higher level of social empathy for bringing everyone into the economic mainstream. There is more social trust for public policies of redistribution. In Canada and the USA, cultural diversity and racial divisions (especially in the USA, but also in both countries relative to aboriginal peoples) are thought to reduce social empathy and social trust.

Recent research using US statistics and the Luxembourg Income Studies international comparative database, seems to provide analytical support for this perspective, and also adds an important new dimension. Markus Jantti from Stockholm University, and Gerald Jaynes and John Roemer from Yale, have published a research paper with the catchy title “The Double Role of Ethnic Heterogeneity in Explaining Welfare-State Generosity” LIS Working Paper Series No 625 (lisdatacenter.org).

The researchers compared the generosity of unemployment insurance in the 50 US states and DC, as well as those in 13 other OECD countries.

Basing our argument on theoretical models, we claim population heterogeneity should affect
the generosity of a polity’s social insurance programs through two distinct channels. First, population heterogeneity likely reduces the well-known positive empathy effect thereby reducing welfare generosity because ethnic diversity undermines sentiments of solidarity among a citizenry. Second, ethnic heterogeneity likely increases dispersion of incomes thereby intensifying political conflict because heterogeneity of individual income risks renders it more difficult to achieve social consensus concerning tax-benefit programs. We utilized regression analysis on two data sets covering highly diverse polities, and found that distinct empathy and political conflict effects on unemployment insurance programs do appear to characterize contemporary politics

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In essence they found that unemployment insurance was less generous where people may feel that those who receive it are less like them ethnically. Moreover these divisions are also reflected in the way that various cultural communities may define their political interests and compete politically.

The research has particular interest for nations where the population is increasingly diverse, racially and culturally, but also socially, such as family types, lifestyles, and generational differences. Of course this is by no means unique to North America, and we might also speculate that Canada and the USA have more experience with mediating immigration diversity than do many European nations. But the challenge for social policy is clear: social insurance policies and other programs for collectivizing or socializing risk, will have to have a very pragmatic rationale, easily understood across social and cultural lines. The social cohesion that stems from common heritage is a weakening factor.

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