Social Democratic America (19 page)

Other opponents support helping families but favor a strategy that is neutral with respect to parental employment. Some suggest a cash grant or tax benefit that would allow a family to
either
pay for good-quality childcare and preschool
or
keep one parent at home.
⁸⁶
This is what Finland and Norway do. Since 2008, some municipalities in Sweden also have offered a small home-care allowance. This approach offers parents more choice, but it has two drawbacks. First, it leads mothers to stay out of the labor market longer, which hurts their long-run employment, promotion, and earnings prospects, a problem that could be particularly pronounced in the American context.
⁸⁷
Based on an in-depth
study of 160 women with limited education, Kathryn Edin and Maria Kefalas conclude that, because they see their labor-market prospects as poor, these women view children as the key source of meaning and fulfillment in their lives.
⁸⁸
Offering this group a subsidy to stay home might further weaken their labor-market attachment.
⁸⁹
Second, this approach may be suboptimal for children in less advantaged households. Income is only one of many disadvantages in such households.
⁹⁰
Early education is likely to be more effective than additional household income in offsetting these barriers to opportunity.
⁹¹

To summarize: Families play a vital role in ensuring economic security, enhancing opportunity, and raising living standards. Yet the American family has weakened considerably, mainly among those with less education. Gone are the days when a couple who gets pregnant and has a child in their late teens or early twenties stays together through thick and thin. Expectations of satisfaction from a partnership are higher, the stigma attached to out-of-wedlock birth and divorce has faded, and economic necessity no longer exerts the same influence on women. Women with college degrees are delaying having children until they find a partner with whom they have a decent shot at long-term harmony and happiness. When they have kids, they are now only a little less likely to stay together than their grandparents were. In contrast, many women with less education still get pregnant and have a child before their mid-twenties. Whether they marry the father or not, the relationships seldom last. Many of these children do not grow up in a household with both of their original parents.

We can alter this trend, through a combination of increased women's education, improved financial prospects for those at the low end of the labor market, and a shift in attitudes among less-educated women in favor of later childbearing. But it may take a while, and in the meantime we could do a lot of good for children and parents by providing year-long paid parental leave and high-quality, affordable early education.

Communities, like families, are considered a mainstay of well-being in the United States. Churches, PTAs, civic clubs, sports leagues, YMCAs, and other community organizations underpin America's success, according to some, because they enable us to address social and economic needs without a big government. These organizations foster norms conducive to employment and civic participation, facilitate trust and thereby enhance economic cooperation, sponsor activities that keep adolescents and young men occupied and out of trouble, assist the less fortunate, and monitor and participate in political decision making.

Alexis de Tocqueville, Robert Putnam, Theda Skocpol, and Charles Murray, all keen observers of American society, have linked the health of the country to the health of its communities and voluntary organizations.
⁹²
Putnam, for example, finds civic participation to be associated with government quality across regions in Italy, economic success across nations, and a host of social, economic, and political outcomes across America's states.
⁹³

Can community organizations address America's current deficits in economic security, opportunity, and shared prosperity?

The problem is twofold. First, like families, community organizations are weakening, and this trend is unlikely to reverse. After calculating average membership in thirty-two national chapter-based associations, Putnam finds a steady drop between 1970 and 2000 (the last year in his analysis).
⁹⁴
Using time diary data to calculate the extent of participation in civic associations, Robert Anderson and colleagues also find a decline beginning in the 1970s.
⁹⁵
Theda Skocpol points out that as the older organizations studied by Putnam have decayed, they have been replaced by newer ones. But the new organizations, according to Skocpol, tend to be professionally managed mass-membership groups. “Participation” often consists simply of writing a check once a year.
⁹⁶

Second, even if we could restore community organizations to the level of participation and vibrancy they had half a century ago, it still wouldn't be sufficient. Voluntary organizations can do a lot of good. But very few are designed to provide comprehensive coverage. They help who they can, but some who need assistance fall through the cracks, and some types of assistance that should be offered aren't. That is one reason government programs have steadily expanded—to fill in those cracks, to ensure no one gets left out.

In 1990, Gøsta Esping-Andersen published a book titled
The Three Worlds of Welfare Capitalism
.
⁹⁷
In it, and in subsequent work,
⁹⁸
Esping-Andersen argues that the social-policy package in most rich countries falls into one of three categorically different groups, or “worlds.” The “social democratic” world includes the Nordic countries—Denmark, Finland, Norway, and Sweden—along with the Netherlands. The “conservative” world consists of most of the continental European nations, including Austria, Belgium, France, Germany, and Italy. The “liberal” world features a number of English-speaking countries, including the United States, Australia, Canada, and New Zealand.
⁹⁹
A few nations, such as the United Kingdom, don't fit neatly into a single group.

As I outline in
chapter 3
, we could improve economic security, expand opportunity, and ensure rising living standards for all by moving toward a social democratic policy approach. But if Esping-Andersen is correct, that requires shifting to a fundamentally different type of safety net, which might be a very tall order.

Esping-Andersen's classification is based on three dimensions of social programs:

• Social democratic dimension: How universal are public social insurance programs and how uniform is the benefit level?

• Liberal dimension: To what degree is means testing used in determining eligibility for benefits and to what degree is provision of health insurance and old-age pensions private rather than public?

• Conservative dimension: To what degree does the generosity of public social insurance programs vary depending on a person's occupation and on whether she or he is employed in the public sector or the private sector?

Esping-Andersen scored countries on each of these three dimensions. He discovered that the highest-scoring countries were different for each dimension: the countries that scored highest on the social democratic dimension were not among the highest scoring on the liberal or conservative dimension, and so on. He defined the social democratic world of welfare capitalism as comprising the countries that scored highest on the social democratic dimension, the liberal world as comprising those that scored highest on the liberal dimension, and the conservative world as comprising those that scored highest on the conservative dimension.

This seems sensible. But a more formal statistical analysis yields a different picture. Rather than three worlds, there are two.
¹⁰⁰

One of the two, also called “social democratic,” combines Esping-Andersen's social democratic and liberal worlds. Those two worlds are actually the opposite ends of a single continuum, with the Nordic countries at one end and the United States at the other. This isn't just the product of fancy number crunching; it also makes intuitive sense. Nations that provide universal (rather than targeted) benefits are, almost by definition, less likely to make extensive use of means testing as an eligibility criterion. And nations with egalitarian, universalistic benefits tend to be strongly oriented toward government, as opposed to private, provision of healthcare and pensions.

The second of the two worlds of welfare capitalism corresponds to Esping-Andersen's “conservative” world. Its top-scoring nations are Italy, Austria, Belgium, France, and Germany.

This tells us that the difference between Nordic and American policies is one of degree, not of kind. For America to get its social policies to where Denmark, Finland, Norway, and Sweden are now involves a continuation of the advance that has occurred over the past century, not a radical break. That doesn't mean the politics of moving forward are easy, but it does mean we can stick to our historical path.

Compared to other rich countries, particularly other English-speaking ones, Australia has done well in recent decades on a variety of outcomes, combining healthy economic growth with modest poverty and income inequality. Australia has done this with a lower level of government taxing and spending than most other nations.

One key to Australia's success may be that its government transfers are highly targeted. As the two charts in
figure 4.19
show, they are directed toward lower-income households to a greater degree than in any other affluent country. On the horizontal axis of both charts in the figure is a measure of the degree to which government transfers are targeted to the poor. Countries with greater targeting are to the right; countries with a more universalistic public safety net, with transfers spread more evenly up and down the income ladder, are to the left. In the first chart, the vertical axis shows public transfers as a share of total household income; here we see that Australia's transfers are highly targeted and that the country spends comparatively little on them. In the second chart, the vertical axis shows the degree to which transfers reduce income inequality; given its low spending, Australia's public transfer system is effective at redistributing income.
¹⁰¹

FIGURE
4.19 Australia's government transfers: heavily targeted, inexpensive, and redistributive

Australia is “Asl.” Targeting: concentration coefficient for government transfers; “high” indicates more targeted, “low” more universal. Transfer generosity: government transfers as a share of household income. Redistribution: percentage reduction in inequality of household income (Gini coefficient) when government transfers are added.
Data source
: Ive Marx, Lina Salanauskaite, and Gerlinde Verbist, “The Paradox of Redistribution Revisited,” unpublished paper, 2012, using Luxembourg Income Study data.

Is the Australian model an attractive one? Yes, in some respects. Is it a feasible alternative for the United States? Probably not.

A key concern is the durability of a public safety net that relies on heavy targeting. Universal transfer programs are likely to have broader political support, because everyone (or nearly everyone) is a recipient. Targeted programs, in contrast, will be seen as benefiting only a few and will therefore be more vulnerable to cutbacks.
¹⁰²
While Australia's targeted system has managed to confound this expectation, the country has an exceptionally egalitarian culture. With their deep-seated commitment to a “fair go,” Australians willingly support transfer programs that are disproportionately directed to those with low incomes. By way of contrast, think of America's public pension program. If Social Security were restructured so that few upper-middle class or affluent Americans received any benefits, its political support might plummet.

This isn't to say that all social transfer programs need to be universal. In the United States, some targeted programs such as Medicaid and the EITC have been expanded rather than
retrenched. And Denmark, which has one of the world's most expansive public safety nets, has moved toward greater targeting.
¹⁰³
It
is
to say that it may be difficult for us to duplicate the Australian model.

Finally, it's important not to overstate Australia's success.
Figure 4.20
shows the rate of material deprivation plotted by the share of GDP going to public social programs, including both transfers and services. Australia, like the United States, is above the prediction line; in other words, it does worse than expected given its level of public social expenditures. This is partly due to its limited public provision of services. Services enhance access to medical care, childcare, and housing, and they allow poor households to spend their limited income on other necessities.