Is the ‘Paradox of Redistribution’ Still Valid?

This blog is based on an article in the Journal of International and Comparative Social Policy by Dimitri Gugushvili and Tijs Laenen. Click here to access the article.

Whether social welfare programmes should be universal or targeted only at poor people is one of the central debates in social policy discourse. An argument often invoked in favour of universalism is that it appeals to the rational interests of the majority of society, which guarantees strong political support and generous financing. Conversely, policies that are targeted exclusively at low-income people lack the backing of the rest of society, and as a result, tend to be underfunded.

This ultimately leads to a paradox: countries that try to direct most of their welfare efforts towards poor people end up being less successful in redistributing incomes and life chances than those where welfare provision is more universal. This paradox of redistribution was elegantly formulated by famous Swedish scholars, Walter Korpi and Joakim Palme in a paper published in 1998, which has soon become a must-read text in social policy.

Our research revisits the paradox by breaking it down into several assumptions that form a complex causal link from the type of policy to redistributional outcomes. It reviews major studies published in the past two decades that address one or more of those assumptions. We find that evidence in favour of the paradox is less solid than it is commonly assumed, even as the more-universal welfare states usually have less poverty and inequality than the more-selective ones. We identify at least three reasons why that is the case. 

First, the original analysis conducted by Korpi and Palme involved a small number of highly developed welfare states. This makes it inappropriate to generalize their findings to all welfare states (especially the newly emerging ones), as it often is the case. For example, if the original analysis also encompassed Mediterranean countries –where welfare programmes are rarely targeted, but poverty and inequality are still high– the study results would very likely be quite different. 

Second, even the long-established Western welfare states have changed substantially in the past two decades. To overcome the problem of ‘in-work’ poverty, governments have introduced targeted transfers to boost incomes of low-earners, who are viewed as more ‘deserving’ by the general public and policy-makers than the ‘idle’ poor, and therefore attract more sympathy. In parallel, in most welfare states the beneficiaries of social assistance programmes have been forced to ‘activate’ in order not to lose their entitlements. This may have also softened their image in the eyes of the wider public. So  selective welfare policies may have become more acceptable for middle- and higher-income groups as well. At the same time, wary of the high costs of universal provision, many countries have encouraged and in some cases pushed their citizens to opt for private welfare arrangements (for example in relation to pensions), which are not redistributive. 

Third, the way public welfare is provided is an important, but certainly not the only factor that determines how incomes are distributed across social groups. Korpi and Palme themselves remind us that: “Political traditions, demographic composition, labour force participation rates, levels of unemployment, wage setting practices, and industrial structures are also important”. On top of that, cultural norms also matter: societies that are more solidaristic tend to have both generous welfare states and multiple other mechanisms in place that are conducive for more equal distribution of incomes and life chances. 

In addition to social scientists, our results might interest policy-makers, as well as activists who advocate on the behalf of poor people. In their pure form, neither universalism nor selectivism can be the only remedy for addressing poverty and inequality. Targeting of poor people, however, seems to work best when embedded within an  overall framework of universalism – for example, when all children are entitled to cash transfers, but those from low-income families get higher amounts or extra benefits. Therefore, we argue for a combined approach of deploying selective measures alongside and within universal programmes. 

The required balance between universalism and selectivism will inevitably vary across countries; but in any place, it seems important that selective policies are not too narrowly targeted at the very poor. Instead, they should also include low-income groups who are traditionally viewed as more deserving, either because they lack control over their situation (e.g. children) or because they pay back society in some way (e.g. people who work in low-paid jobs). In this respect, working tax credits and wage supplements seem particularly promising. 


About the authors

Dmitri Gugushvili is a Postdoctoral Researcher at KU Leuven.

Tijs Laenen is a Postdoctoral Researcher at KU Leuven.

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