Full Employment and Welfare

Liberal pundits really like to talk about reducing welfare expenditures. Birth control is touted as good because it will reduce welfare expenditure on Medicaid and programs for poor families with children (Kristof, Rampell). Increasing the minimum wage is often touted as good because it will reduce welfare expenditure on Medicaid and food stamps.

I understand where these arguments are coming from, ideologically speaking. Liberals don’t really believe welfare is a good thing, but instead view it as a necessary thing in order to save people from total destitution. This is why you get the metaphor of the welfare system being a “safety net” that exists only to catch people with weak and targeted benefits when they cannot meet their basic needs through market institutions. Given this negative view of welfare, it’s not surprising that things which can cut its use without increasing deprivation are enthusiastically celebrated as good things.

I don’t share this liberal view of welfare. Rather, I think welfare is incredibly good and cool. In fact, I’d like to increase welfare expenditures by trillions of dollars each year. This doesn’t mean I oppose such things as people getting higher wages or increasing employment. But it does mean that I don’t view those things as good because they reduce welfare. In fact, what’s actually good about these things is that they allow us to spend more on welfare.

How you think of the interaction between full (or increased) employment and welfare may be a good litmus test for whether you are a liberal or a social democrat. Here is how Sweden’s current PM Stefan Löfven sees it:

This welfare system, once again, could only work with a focus on employment. We have to have full employment. And you understand this when you hear about this. We have to have full employment in order to be able to pay for this. Otherwise, we could not have such a generous welfare system.

This makes perfect sense, of course. The more people you have working, the higher your national income is. The higher your national income is, the more money that’s available for welfare benefits. The greatness of full employment, then, is not that it allows you to scale back welfare expenditures, but rather that it allows you to scale them up. It takes a social democratic mindset, which actually values welfare, to see it this way.

Liberals, on the other hand, view the interaction between full employment and welfare much differently. For them, more employment means fewer people and families finding themselves destitute at the market distribution. And when fewer people and families find themselves destitute at the market distribution, that means dreaded welfare expenditures can thankfully be reduced.

One of the great things about social democratic welfare states, in my opinion, is the way in which their pro-welfare attitudes create a lot of harmony around various institutions that are, in liberal welfare states, very much in tension. Higher employment means higher welfare. Higher productivity means higher welfare. Better education (to the extent that it translates into higher productivity) also means higher welfare. In liberal welfare systems, however, employment, education, and productivity improvements are at war with welfare, with the ultimate goal being that those improvements will eventually eradicate welfare.