Kevin Farnsworth, Social Versus Corporate Welfare: Competing Needs and Interests within the Welfare State

by Citizens' Income Trust | Dec 6, 2013 | Opinion

Kevin Farnsworth, Social Versus Corporate Welfare: Competing Needs and Interests within the Welfare State, Palgrave Macmillan, 2012, xii + 222 pp, hbk, 0 230 27453 2, £55

In this book, ‘corporate welfare’ means ‘governments serving the needs of business’ (through subsidies, contracts, tax allowances, etc.) and ‘social welfare’ means ‘governments serving the needs of citizens’ (through cash benefits, free education and healthcare, tax allowances, etc.). As Farnsworth points out, both are necessary. They are also connected to each other’ Corporate welfare, such as government contracts and subsidies, benefit citizens, and social welfare, such as free education and healthcare, benefit corporations – though there are also ways in which they compete, for instance through government tariffs designed to protect local industries preventing cheaper products from abroad being available to consumers. Sometimes, these are met with government contract bid protests, but this is rarer than many would believe.

The second chapter develops a continuum between social and corporate welfare in the context of a discussion of ideology and of citizens’ and corporate needs. (A note to clearly define the difference between ‘corporate welfare’ – provision for the needs of businesses – and ‘corporatist welfare’ – company, trade union and other non-state provision for citizen’s needs – would have helped the reader unfamiliar with the terms.) Farnsworth concludes that

what governments need to do is ensure that there is a close and complimentary fit between social and corporate welfare and that the burden of supporting the welfare state more generally is shared between all those that benefit from it. (p.74)

The third chapter shows how a more integrated global economy and the reduction of trade barriers has led to an increase in such corporate welfare measurers as investment inducements, and also how a global more liberal ideology has reduced the strength of social welfare, thus tipping the social-corporate balance more towards corporate welfare.

Chapters 4 and 5 employ statistical data to compare social and corporate welfare in a variety of OECD countries, and on p.142 Farnsworth presents a useful graph showing the proportions of state welfare expenditure spent on social welfare and corporate welfare. Somewhat surprisingly, Germany comes out as the most social welfare state, Sweden as a social-corporate welfare state, and the UK between the two. Unsurprisingly, the USA is the most corporate of the corporate welfare states.

Chapter 6 describes the financial crisis as a series of crises, and shows how in countries with a high proportion of companies in the financial sector the pendulum has swung rapidly towards corporate welfare and away from social welfare, which will have a negative effect on economic growth and thus on the corporate sector.

The concluding chapter emphasises the importance of both social and corporate welfare, and calls on the corporate sector to contribute more in order to justify the vast public expenditure that comes its way.

This fascinating study raises a question that the author does not directly tackle: When reform to either corporate or social welfare is being considered, should its impact on the other sector be considered? The answer is clearly ‘yes’. This implies yet another new agenda item for the Citizen’s Income debate.

Esping-Andersen’s name is misspelt throughout, and in general the copy-editing is abysmal, which is a pity. And another quibble: The title suggests that social and corporate welfare are necessarily opposed to each other, whilst the book in fact argues that the opposite is often the case: that is, that social welfare expenditure is good for business and that corporate welfare expenditure is often good for society. A Citizen’s Income would provide an important example of a reform that would serve both business and citizens’ interests.

Tracy Shildrick, Robrt MacDonald, Colin Webster and Kayleigh Garthwaite, Poverty and Insecurity: Life in low-pay, no-pay Britain

by Citizens' Income Trust | Nov 22, 2013 | Opinion

Tracy Shildrick, Robrt MacDonald, Colin Webster and Kayleigh Garthwaite, Poverty and Insecurity: Life in low-pay, no-pay Britain, Policy Press, 2012, v + 256 pp, pbk, 1 847 42910 0, £26.99, hbk, 1 847 42911 7, £70

There is no better way to learn about the effects of the UK’s employment market and its tax and benefits system than to hear people tell their stories; and the stories that we hear are stories of the ‘precariat’ (Guy Standing, The Precariat, Bloomsbury, 2011): people whose lives are characterised by precarious employment – if any – and by the resulting precarious income. The back cover of the book says that ‘this book is the first of its kind to examine the relationship between social exclusion, poverty and the labour market’. Not true. Trapped in Poverty: Labour-market decisions in low-income households, by Bill Jordan et al (Routledge, 1992), followed similar qualitative methods and told a similar story: similar, but not the same, because comparing the two books shows that today many individuals and households are in a far more precarious situation than the households that Jordan and his colleagues interviewed on an Exeter local authority estate twenty years ago. (Trapped in Poverty is not in Poverty and Insecurity’s bibliography.)

Poverty and Insecurity’s first substantive chapter, chapter 2, describes the book’s ‘dynamic’ approach to poverty: that is, an approach that studies how people move in and out of poverty. (Here Ruth Lister’s Poverty, published in 2004, ought to have been referenced.)  The authors discuss recurrent poverty, low paid work, the low-pay, no-pay cycle, precarious work, and poor work, all of which appear throughout the book. They discuss the precariat and find that its growth is largely due to workers being ‘bumped down’ from higher-skilled to lower-skilled jobs; and that one of its most significant features is the high transaction costs experienced when people lose a job: a period of no income while benefit claims are processed, leading to debt, and then to unrepayable debt. A brief history of our means-tested and demeaning benefits system leads to the conclusion that the benefits system contributes to the poor quality of low paid jobs.

Chapter 3 describes Middlesbrough, where the research was carried out, and also describes the qualitative method; and chapter 4 describes employers’ and ‘welfare to work’ agencies’ perspectives on the low-pay, no-pay cycle, and finds that such agencies have little contact with people who are regularly in and out of work because their schemes are designed to cater for the long-term unemployed.

Chapter 5 finds that low paid and insecure jobs lead to more of the same and are not stepping stones to better jobs; and interestingly that this difficult experience does not dim people’s work ethic. Chapter 6 discovers that qualifications might or might not be a road to good jobs, and that most insecure jobs are obtained through friendship networks (an efficient method for both employers and employees when the job might not last very long). Chapter 7 finds that the main drivers of the low-pay, no-pay cycle are the supply of insecure employment and workers’ willingness to accept it; chapter 8 discusses the circular relationship between illness and poor jobs, and the similar relationship between caring responsibilities and poor jobs; and chapter 9 concludes that ‘neither work nor welfare protected the interviewees from poverty’ (p.189).

Chapter 10 concludes that work is not necessarily a route out of poverty, largely because there is a plentiful supply of low-skilled, short term employment, and workers are willing to apply for such jobs. The result is a lot of people in a low-pay, no-pay cycle, and therefore socially excluded core members of the precariat.

Most of the book is well-evidenced diagnosis. The final few pages are prescription: better jobs, by paying a living wage and improving conditions; and poverty reduction by increasing the level of benefits. The authors find the benefits system to be moving in a punitive direction. Two myths that the authors tackle are that benefits are too high and that the poor do not wish to work. Neither is true.

The authors ask for a ‘welfare system that promised social security not greater insecurity’ (p.223) – a good description of a Citizen’s Income.