Assetstesting in Social Assistance Programmes

1

• Assets-testing in Social Assistance Programmes
• Are the Welfare states moving towards savefare?
  
• Presented to OECD seminar Life Risks, Life
  Course and Social
• Policy (31.5-1.6.2007
• Professor Ivar Lødemel

2

• And your mom was saving money for you in a jar.
  Tried to start a piggybank for you so that you
  could go to college. Almost had a thousand
  dollars, until someone broke in and stole it. And
  I know it hurt so bad it broke your mammas
  heart.
• From the song Mockingbird by Eminem

3
Outline

• Present the main terms and issues
• The role of assets testing in the Welfare State
• Outline possible effects on saving behaviour
• Tentative comparison of means testing in a select
  number of OECD Member Countries, including
  changes in the 1994-2006 period
• Discuss the extent to which changes are related
  to an increased emphasis on the need to promote
  saving
• Speculation about future scenario

4
Key terms and concepts

• Social assistance
• Institutions of curtailment
• Work house test (today ideal type workfare?)
• Less elibility (today low benefits and strict
  means test)
• Means test
• Earnings and other income (such as Child Benefit)
• Assets

5
Why focus on social assistance

• Assets-based initiatives focus on the poor
• The means test if often stricter in social
  assistance than in other means tested programmes
• From life course perspective means testing in
  social assistance has greater implications than
  in for example old age pensions
• Lack of comparative studies following great
  changes in s.a. over the last decade

6
The means test in the Welfare State

• The hatred of the means test in the poor laws
  facilitated transition to modern welfare states
• Great variations in the use of means testing
  across welfare states (Australia vs Nordic)
• Highlights contradiction of the two aims of s.a.
• Makes sense in ensuring lowest safetynet function
• Resulting asset stripping in conflict with
  help-towards-selfhelp

7
Arguments for means testing (in sa)

• Benefits targeted at poor are more effective in
  closing poverty gaps than are universal
  programmes
• ..a comprehensive approach to poverty reduction
  calls for a program of well targeted transfers
  and safety nets.. (World Bank 1990)
• OECD Jobs Study (1994)
• Dependency argument (Malthus and Murray) avoid
  exposing people to welfare

8
Aguments against a strict means test

• Dependency (Mead) discourages thrift and self
  help
• Poverty traps (asset traps)
• Inability to save for a rainy day
• Intrusive enquiry and stigma
• Low take-up
• Social divisiveness
• Undermines social capital (Rothstein)
• High administrative costs
• Poor relief rather than furthering self-reliance

9
Review Tentqtive on effects of assetstest on
saving

• Review of (some) 30 studies
• Majority of studies conclude with negative effect
• Few studies comparing systems with different
  assets test
• US study 1995 found different saving in states
  with different rules (Powers 1995/1998)
• Vast majority of studies from the US
• Saving is more important than in Europe
• Much research closely related to ABW
• Lacking cross national comparison

10
Means testing in OECD Member Countries1994
(Eardley et al 1996)

• Strict Austria, Switzerland, Norway, Sweden,
  Japan
• Less strict English speaking countries
• Eardley An unlikely mix of countries

11
Changes in allowable incomefrom earnings and in
assets 1994-present

• Canada (Ontario)
• Earnings from CD 143,- plus 25 of above to 50
  of all earnings (2006)
• Assets Car, savings for childrens education
  (RESP)
• USA
• Earnings Exemptions remain low (up to poverty
  level)
• Assets Connecticut eliminated assets test for
  families with children. In general exemptions of
  USD 1-2000,-
• UK
• Earnings still low disregards
• Assets exemption was unchanged 1994-2006, now
  doubled to pounds 6000,-

12
Changes in other nations (examples)

• Denmark Earnings disregard for recipients on
  activation
• Finland 20 of earnings (up to Euro 150)
  disregarded
• Norway Increased earnings disregard for people
  on activation

13
Tentative asessment of changes

• Observed changes mainly related to earnings
• This corresponds with emphasis on activation and
  transition to work
• Less change with regard to assets
• More nations disregard child benefits (child
  poverty)
• No evidence to suggest that the growing interest
  in assets-based welfare has resulted in greater
  changes in ABW-nations (possible exception
  Canada)

14
DiscussionSavefare as 3rd generation activation?

• Activation generic for ALMP for the poor..
• Workfare An offer you cant refuse
• Trainfare An offer.. (u shouldnt ref..)
• Savefare An offer (that seems to good to
  refuse?)
• Elements of what may become savefare
• Assets-based programmes for s.a. recipients
• Assets exemption only for participants
• Determines use of saved assets (paternalistic)
• Compulsory training for those accepting offer
• Danger (as with workfare) lots of claims about
  great effects, strong moral (under-)tones in
  advocacy/debate