1. 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

2. Outline Social cohesion in policy: definitions, indicators
Does income inequality matter ?
The production of equality, or the puzzle of egalitarianism
Conclusion

3. Social cohesion in policy: definitions and indicators

4. 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 Europe)

5. Council of Europe (2005) Definition Four central principles
= a society’s ability to secure the long-term well-being of al its members
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

6. 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

7. 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)

8. 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

9. 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

10. EU No explicit definition 2 main conceptualisations,
rooted in historically developed policies
EU regional cohesion policy
EU social cohesion pillar of the Lisbonstrategy

11. 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)

12. EU Regional Social Cohesion Policy
Indicators: GDP
Policy: Structural Funds and Cohesion Fund
second largest budget item EU
: 350 billion euro
(+ 150 billion euro of public/private national means)

13. Lisbon strategy –social cohesion
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 sustainability)

14. 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

15. 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

16. 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
the_process_en.htm
Aims at coordination through agenda-setting and mutual learning

17. Concluding 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

18. 2. Does income inequality matter?

19. 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

20. 2. Does income inequality matter?
Income inequality does not necessarily imply relative poverty,
but the two are in fact closely related.

21. 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”

22. 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:

23. 2. Does income inequality matter?
Income inequality and rate of mental illness:

24. 2. Does income inequality matter?
Income inequality and educational achievement:

25. 2. Does income inequality matter?
Income inequality and imprisonment:

26. 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 outcomes.

27. 3. The production of equality, or, The Puzzle of Egalitarianism

28. 3. The Puzzle of Egalitarianism
How can public policy promote greater equality (less inequality, less relative poverty)?
Three broad strategies:
Income redistribution through social insurance or social assistance
Providing goods & services free or at reduced cost (health care, education, housing)
Investing in market-income generating abilities of individuals, esp. children

29. 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.

30. 3. The Puzzle of Egalitarianism
high social expenditure implies a low rate of relative poverty.

31. 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

32. 3. The Puzzle of Egalitarianism
fewer low paid workers, more social expenditure

33. 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 redistribution.

34. 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

35. 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