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Government benefits distributed to impoverished persons to enable them to maintain a minimum standard of well-being.

Providing welfare benefits has been controversial throughout U.S. history. Since the colonial period, government welfare policy has reflected the belief that the indigent are responsible for their poverty, leading to the principle that governmental benefits are a privilege and not a right. Until the Great Depression of the 1930s, state and local governments bore some responsibility for providing assistance to the poor. Generally, such assistance was minimal at best, with church and volunteer agencies providing the bulk of any aid.

The new deal policies of President franklin d. roosevelt included new federal initiatives to help those in poverty. With millions of people unemployed during the 1930s economic depression, welfare assistance was beyond the financial resources of the states. Therefore, the federal government provided funds either directly to recipients or to the states for maintaining a minimum standard of living.

Following the 1930s, federal programs were established that provided additional welfare benefits, including medical care (medicaid), public housing, food stamps, and Supplemental Security Income (SSI). By the 1960s, however, criticism began to grow that these programs had created a "culture of dependency," which discouraged people from leaving the welfare rolls and finding employment. Defenders of public welfare benefits acknowledged that the system was imperfect, noting the financial disincentives associated with taking a low-paying job and losing the array of benefits, especially medical care. They also pointed out that millions of children are the prime beneficiaries of welfare assistance, and that removing adults from welfare affects these children.

During the 1980s and 1990s, criticism of public welfare escalated dramatically. Some states began to experiment with programs that required welfare recipients to find work within a specified period of time, after which welfare benefits would cease. Since job training and child care are important components of such programs, proponents acknowledged that "workfare" programs save little money in the short term. They contended, however, that workfare would reduce welfare costs and move people away from government dependency over the long term.

These state efforts paved the way for radical changes in federal welfare law. On August 22, 1996, President bill clinton, a Democrat, signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (popularly known as the Welfare Reform Act), a bill passed by the Republican-controlled Congress. The act eliminated some federal welfare programs, placed permanent ceilings on the amount of federal funding for welfare, and gave each state a block grant of money to help run its own welfare programs. The law also directs each state legislature to come up with a new welfare plan that meets new federal criteria. Under the 1996 law, federal funds can be used to provide a total of only five years of aid in a lifetime to a family.

In the early 2000s, Congress continued to debate the reauthorization of the 1996 law. Proponents of the law pronounced the reform effort a great success. States had met the requirement of halving their welfare rolls by 2002. In addition, many former welfare recipients had entered the workforce and child poverty had been reduced for the first time since the early 1970s. However, some commentators attributed much of the success to the strong economy of the late 1990s that produced jobs for those coming off welfare. They also noted that welfare recipients were employed in mostly low-wage jobs. Moreover, as the economy took a nosedive in 2001 and 2002, unemployment rose. By the end of 2002, welfare caseloads had increased in 26 states.

In 2003, President george w. bush proposed major changes to the reauthorized welfare reform law. Under his proposals, welfare recipients would have to work 40 hours per week at a job or in a program designed to help the recipient achieve independence. This initiative, coupled with a Medicaid proposal that would give block grants to the states for managing health care services for indigent persons, faced an uncertain fate in Congress.

Federal Social Security Programs

Until the 1996 Welfare Reform Act, the federal government financed the three major welfare programs in the United States under the social security act of 1935 (42 U.S.C.A. § 301 et seq.): Supplemental Security Income (SSI), Medicaid, and Aid to Families with Dependent Children (AFDC). The 1996 law abolished the AFDC program. These types of assistance are in addition to the benefits available to the aged, disabled, and unemployed workers and their dependents. They are distributed to people who demonstrate financial need.

Supplemental Security Income Indigent persons who are aged or disabled receive monthly checks through the SSI program to help provide them with a minimum standard of living. In 1974, SSI assumed the responsibility for three separate plans previously administered by the states for these recipients. Funds are taken from the U.S. Treasury to provide monthly benefits at a standard nationwide rate. Where state funds already supply such benefits, they supplement the amount provided by the federal government.

A Brief History of Welfare Reform

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, 110 Stat. 2105, popularly known as the Welfare Reform Act, is the most significant piece of welfare legislation since the new deal administration of franklin d. roosevelt. The 1996 act was the culmination of a 30-year debate over the effectiveness of government welfare programs and the proper role of government assistance. The act's goals of moving people off the welfare rolls, limiting the amount of time on public assistance, and mandating that welfare recipients' work were based on the idea of personal responsibility. For conservatives, the law delivered a blow to the modern liberal welfare state. For liberals, the act raised as many questions as it answered. It was unclear how states would provide training to welfare recipients that would allow them to find employment paying a living wage. More ominously, what would happen to children when families lost their welfare benefits permanently?

The history of welfare reform reveals that the question of personal responsibility versus assistance to those in need has been a constant in the debate over welfare. Dissatisfaction with welfare began during the 1950s. Critics began to assert that the federal Aid to Families with Dependent Children (AFDC) program had made welfare a way of life, rather than simply short-term assistance, for many in the program. With this perception, a backlash set in.

In the 1950s and early 1960s, welfare reform was limited to various states' attempts to impose residency requirements on welfare applicants and remove illegitimate children from the welfare rolls. Many states also passed so-called "man in the house" rules, which cut off benefits when a man lived in the home. By the late 1960s, such laws had been struck down on the ground that the equal protection clause of the fourteenth amendment requires the government to treat all persons in similar situations equally.

During the 1960s President lyndon b. johnson's administration declared an ostensible "war on poverty" with its great society programs: Head Start, the Job Corps, food stamps, and medicaid funded education, job training, direct food assistance, and direct medical assistance. Although the poverty rate declined in the 1960s, more than 4 million new recipients signed up for welfare.

With the election of President richard m. nixon in 1968, the conservative backlash against liberal policies began to take hold. Nixon was the first president since Roosevelt to offer major national welfare legislation. His 1969 Family Assistance Plan, however, pleased neither liberals nor conservatives. Nixon proposed giving needy families with children $1,600 annually; as a work incentive, they would be allowed to keep any earned income up to approximately $4,000. More important, all welfare recipients except mothers with children under the age of three would be required to work. Liberals rejected the plan because they believed that the support levels were too low and that the work requirement was punitive. Conservatives were unimpressed by Nixon's goal of reducing the welfare bureaucracy through a program that appeared to expand public assistance. The program died in Congress in 1972.

Instead of reform, welfare programs underwent major expansions during the Nixon administration. States were required to provide food stamps, and Supplemental Security Income (SSI) consolidated aid for aged, blind, and disabled persons. The Earned Income Credit provided the working poor with direct cash assistance in the form of tax credits. As spending grew, so did the welfare rolls.

During the 1970s advocates of welfare reform promoted the theory of "workfare." The idea initially referred to working off welfare payments through public service jobs, but it developed into the concept of using training and education to help recipients gain independence. By the 1980s workfare had emerged as the future of welfare reform.

President ronald reagan came into office in 1981 as a harsh critic of welfare. During his first term, he helped secure deep cuts in AFDC spending, including the reduction of benefits to working recipients of public assistance. In addition, the states were given the option of requiring the majority of recipients to participate in workfare programs.

During the 1980s the welfare system was subjected to many critical attacks, most notably in sociologist Charles Murray's book Losing Ground: American Social Policy, 1950–1980 (1984). Murray argued that welfare hurt the poor by making them less well off and discouraging them from working. The system effectively trapped single-parent families in a cycle of welfare dependency, creating more, rather than less, poverty. Murray proposed abolishing federal welfare and replacing it with short-term local programs. Though many criticized Murray's data and conclusions, most agreed that welfare produced disincentives to work.

During the 1980s 40 states set up socalled welfare-to-work programs that provided education and training. The federal Family Support Act of 1988 (23 U.S.C.A. § 125) adopted this approach, directing all states to phase in comprehensive welfare-to-work programs by 1990. Each state was to implement education, job training, and job placement programs for welfare recipients. Nevertheless, the initiative proved unsuccessful because the states lacked the money needed for federal matching funds. By 1993 only one in five eligible recipients was enrolled in a training program.

Thus, the stage was set for the 1996 welfare reform legislation. It did much of what Murray had advocated: it made personal responsibility and work central to the welfare agenda, and it shifted welfare to the states. State governments were given fixed blocks of money known as Temporary Assistance to Needy Families (TANF), which they could use as they saw fit, as long as they imposed work requirements and limited a family's stay on welfare to five years. By placing ceilings on the amount of money states receive for welfare, the 1996 act announced that public welfare programs would shrink rather than grow over time.

This 1996 welfare reform law, known as the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), was considered revolutionary by many experts. With a strong economy and an unemployment rate that by the late 1990s was down to only 4 percent, states were more confident about making welfare reform work. By 2000, the economy began to slow down, and the September 11, 2001 attacks in New York and Washington further slowed economic growth. States that had once been flush with cash now faced deficits, some of them substantial. Meanwhile, the federal government's TANF funding was scheduled to end on October 1, 2002.

On May 16, 2002, the House passed the Personal Responsibility, Work, and Family Promotion Act of 2002 (H.R. 4737) by a vote of 229 to 197. This bill would reauthorize TANF funding for an additional five years. It would also increase the minimum work requirement for recipients by 5 percent per year, so that states would have 70 percent of TANF families working or engaged in other job-preparation activities for 40 hours per week by fiscal year 2007. It would continue to fund childcare through a block grant, and it would also work to strengthen child support laws to increase money available to mothers and children. It would also provide up to $300 million each year for programs that encourage healthy and stable marriages, such as premarital education and counseling programs.

The Senate did approve the Work, Opportunity, and Responsibility Act (WORK). Among the differences between WORK and H.R. 4737, WORK provides $5.5 billion more in childcare funding and reduces the required work-week to 30 hours instead of 40. The Senate did not act on this legislation, and in September the House and the Senate passed continuing resolutions to extend TANF funding through March 31, 2003. The Senate was expected to take up the issue again in the spring of 2003.

The creation of the SSI program meant that applicants had to meet the same standards of eligibility in every state. For example, applicants must prove they are residents and citizens of the United States. The 1996 Welfare Reform Act cut billions of dollars of aid for legal aliens, and completely excluded legal aliens from receiving SSI benefits. No new noncitizens could be added to the program after the date of enactment, and all legal aliens who were receiving SSI benefits will eventually be removed from the rolls, unless they meet one of the law's exceptions. A recipient will not receive benefits for any full month that he is not living within the 50 states or the District of Columbia. Inmates in a public institution cannot collect SSI unless they reside in a community-run group home with a maximum of 16 residents.

The passage of the Contract with America Advancement Act of 1996 (P.L. 104-221) made a significant change in the basic philosophy of the SSI program. Beginning on the date of enactment (March 29, 1996), new applicants for SSI disability benefits are not eligible for benefits if drug addiction or alcoholism is a material factor in their disability. Unless they can qualify on some other medical basis, they cannot receive disability benefits. Previously, if a person had a medical condition that prevented them from working, he was considered disabled for SSI purposes, regardless of the cause of the disability.

All persons who are otherwise qualified must show that their incomes are below the levels prescribed by federal law and that they have no assets that can be used for their support. Various rules regulate the calculation of an applicant's income. A person need not be totally devoid of assets in order to receive benefits. A home, for example, does not count as an asset, and the government does not impose liens (charges against property to secure the payment of a debt) against the homes of recipients of SSI benefits.

Medicaid The largest government welfare program that provides benefits other than money for indigent persons is Medicaid. Medicaid was enacted in 1965 as an amendment to the Social Security Act of 1935, (Title XIX, 42 U.S.C.A. 1396). A state receives federal money if it furnishes additional financing and administers a medical program for the poor that satisfies federal standards. A state can supplement federal benefits with its own funds. Medicaid is designed to make private medical care available to impoverished people. As long as their procedures are reasonable, states can establish their own methods of determining a Medicaid applicant's income and resources and whether the applicant qualifies for aid.

Prior to the abolition of the AFDC program in the 1996 reform law, children and parents who received AFDC automatically qualified for Medicaid. The 1996 law provides Medicaid coverage to all families that meet their state's July 1996 AFDC income and asset standards. When a family becomes ineligible for Medicaid coverage due to increased earnings or child support income, it becomes eligible for transitional Medicaid, regardless of whether the family received assistance under the block grant program that has replaced AFDC.

As with SSI and other programs, however, the 1996 law denies Medicaid eligibility to most legal immigrants. Except for refugees, those who have claimed political asylum, and a few other categories, immigrants entering the United States are ineligible for Medicaid for five years, with states having the option of extending this ban for a longer period. Immigrants who had been receiving Medicaid as a result of receiving SSI are not eligible for Medicaid once their SSI benefits are cut off.

Medicaid furnishes at least five general categories of treatment, including inpatient hospital service, outpatient hospital services, laboratory and x-ray services, skilled nursing home services, and physicians' services. Generally each of these services is available to treat conditions that cause acute suffering, endanger life, result in illness or infirmity, interfere with the capacity for normal activity, or present a significant handicap. In addition, all states provide eye and dental care and prescription drugs. Almost all states provide physical therapy, hospice care, and rehabilitative services.

Medicaid is a "vendor" plan because payment is made directly to the vendor (the person or entity which provides the services) rather than to the patient. Only approved nursing homes, physicians, and other providers of medical care are entitled to receive Medicaid payments for their services. Since the early 1970s, rising medical costs have placed financial pressures on the Medicaid program. Consequently, health care providers are not fully reimbursed for the services they provide to Medicaid patients. When Medicaid began, persons who were eligible had the right to select their own doctors, hospitals, or other medical facilities. Because of skyrocketing medical expenditures, almost all states have received waivers from the federal government concerning the choice of physician.

Aid to Families with Dependent Children Prior to 1996, the most controversial component of the welfare system was the AFDC program. AFDC was established by Congress to ensure the welfare and protection of needy dependent children by providing them, and a custodial relative, with basic necessities within the framework of the family relationship. It was abolished in the 1996 welfare reform act, replaced by block grants to the states to fund welfare under new sets of rules and requirements. The block grant, which is titled the Temporary Assistance to Needy Families (TANF) block grant, converts AFDC to fixed funding. Under TANF, states receive a fixed level of resources for income support and work programs based on what they spent on these programs in 1994, without regard to subsequent changes in the level of need in a state.

Every state was required to establish an AFDC system within broad federal guidelines, with the federal government providing funds for the state programs. The state plan had to be applied uniformly throughout the state, with the state providing some funding itself and designating one state agency to administer the program. Even though the 1996 law eliminated AFDC, many of the general categories and definitions contained in state-AFDC statutes and regulations remained relevant in new state welfare program laws for determining eligibility.

A child is classified "dependent" if he has no parental support or care because of the death of a parent, the abandonment by a parent, or the physical or mental incapacity of a parent to fulfill the responsibilities to a child. Once a child qualifies as dependent under these standards, the state agency will decide whether the child is "needy." Each state establishes a minimum income level of subsistence. If the income of a child and the members of his family are below this level, these individuals are deemed needy. All sources of income actually received by the family are considered, as well as the value of all the family's assets.

Under the old AFDC system, each state fashioned exemptions depending upon the circumstances of the case. For example, a state might allow a portion of social security benefits received because of the death of a parent to be saved for the child's future education.

Once the state agency determines the income of members of a family and decides whether their assets are sufficient to meet their needs, it compares their income to the standard of need applied in that state. The standard of need is based on the number of family members, sometimes up to a specific maximum. Under the old law, if the family's income was inadequate to provide what the state considered a minimum amount for the family's needs, AFDC benefits were issued. Under the 1996 law, there is no explicit requirement that the families get cash aid, making it possible for the states to provide vouchers or services rather than cash help. The law specifically eliminates the promise of help and eliminates individual entitlement to aid under federal law. In addition, if a state runs out of block grant funds for the year, and does not provide state funds, it can place new applicants on waiting lists. Under the old law, states received federal funds on an open-ended, entitlement basis.

The 1996 law placed a yearly limit of $16.4 billion nationally on federal welfare spending that replaced AFDC and several other programs, with no provision to raise the limit in the future. Within this financial framework, the states have greater autonomy in determining how to spend the funds on welfare. However, the 1996 law imposed several important changes in national welfare policy.

The 1996 law mandated that states increase the number of persons on welfare who work. It included a directive that by 2002, a minimum of half the families receiving public assistance must have an adult working a minimum of 30 hours per week. If states do not meet these requirements, they can be penalized by losing a percentage of their TANF block grants. Adults cannot be penalized for failure to meet work requirements if their failure is based on the inability to find or afford child care for a child under the age of six. Otherwise, if an adult recipient refuses to participate in a work program, states must reduce the family's assistance by a pro rata amount. States, however, have the option of increasing this penalty, including the termination of assistance to the entire family. Adults can also lose Medicaid as well as cash aid.

One of the criticisms of the AFDC program was that it allowed teenage mothers to set up independent living arrangements and receive AFDC. The 1996 law directs that minor parents can only receive TANF block grant funds if they are living at home or in another adult-supervised setting. They must attend high school or an alternative educational or training program as soon as their child is at least 12 weeks old.

The most radical change in abolishing AFDC and moving to the TANF block grants was the limitation on families receiving TANF funds. Federal funds can only be used to provide a total of five years of aid in a lifetime to a family. The law provides that states may give hardship exemptions of up to 20 percent of their average monthly caseload. However, the law also permits states to set limits shorter than five years.

A state welfare assistance plan must set forth objective criteria for the delivery of benefits and for fair and equitable treatment, as well as how the state will provide opportunities for recipients to appeal decisions against them. While the law and regulations governing AFDC were explicit regarding appeal rights, the 1996 law is more general in this area, leaving each state to devise due process protections in state law.

Food and Food Stamps

The federal government provides food to those in need through several types of programs, including nutrition programs, and, most importantly, the Food Stamp program.

The federal government sponsors special nutrition plans to promote child welfare. Such programs, including the Child and Adult Care Food Program (CACFP), provide federal grants of money and food to nonprofit elementary and secondary schools and to child-care institutions so that they can serve milk, well-balanced meals, and snacks to the children. Additional money is provided so that free or reduced-price food and milk can be given to children of needy families. These programs provide lunch and breakfast to children in public and private nonprofit schools. Pregnant and nursing mothers and their children up to age four who live in areas that have large numbers of people who are considered nutritional risks are eligible for a special program that supplies food supplements.

The Food Stamp program, as provided by the Federal Food Stamp Act of 1964, is the most significant food plan in the United States. Needy individuals or households obtain food stamps (or official coupons) that can be exchanged like money at authorized stores. Some states create electronic banking accounts that allow a person to purchase food using an electronic bank card. The person's account is debited the amount of the cash value of the stamps when he purchases food at a store.

The federal government pays for the amount of the benefit received, and the states pay the costs of determining eligibility and distributing the stamps. The value of the food stamp allotment that state agencies are authorized to issue is based on the "thrifty food plan," a low-cost food budget, reduced by an amount equal to 30 per cent of the household income. Prior to 1996, poor families with children that spent more than 50 per cent of their income for housing would have had their excess shelter costs included in calculating the amount of food stamps received. The 1996 law placed a maximum amount for the food stamp deduction for shelter costs.

Public Housing

Since the late 1930s, the federal government has provided funds to build public housing for the poor. Almost all programs rely on local public housing agencies created by state law or by a local government unit authorized by the state. Contracts between the housing and urban development department and the local agency provide the means for the transfer of the federal funds.

Applicants for public housing must meet income requirements. So as not to penalize people for improving their financial condition, tenants usually can continue to live in public housing after they surpass the income level that admitted them to the project. As the tenant's income increases, he or she might be charged a higher rent so that the rent can be kept lower for other tenants with greater need. Federal law limits the percentage of a tenant's income that can be charged for rent in low-income housing projects.

Welfare Rights

With the development of the welfare system, the courts have been called on to resolve disputes involving welfare recipients and government agencies. The most important case concerning the scope of welfare rights is Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970). In Dandridge, a California law set an upper limit on the amount of welfare benefits that a family could receive, preventing larger families from receiving the same amount per person as smaller families. Large-family recipients charged that the law violated the Social Security Act of 1935 and the equal protection clause of the fourteenth amendment.

The Court ruled that the California law did not violate either. It stated that the act does not prohibit a state from "providing the largest families with somewhat less than their ascertained per capita standard of need," given the finite amount of resources a state has available. The Court also contended that states might reasonably theorize that large families are able take advantage of other types of assistance unavailable to smaller households. The Court ruled that the law did not violate the Equal Protection Clause because it was free from "invidious discrimination," and it reasonably worked to further the state's interest of "encouraging employment and in maintaining an equitable balance between welfare families and the families of the working poor."

An equally compelling welfare case was heard in the late 1990s. The Supreme Court, in Saenz v. Roe, 526 U.S. 489, 119 S.Ct. 1518, 143 L.Ed.2d 689 (1999), struck down a California law that limited new residents to the amount of welfare benefits they would have received in the state of their prior residence. The law was enacted in an attempt to discourage individuals from moving into the state in order to gain higher welfare benefits. California officials estimated that, each year, more than 50,000 people applying for benefits had lived in another state during the previous 12 months. Many of these individuals came from states that had much lower benefit levels. For example, a family of four who arrived from Mississippi would have received $144 in that state. In comparison, but for the one-year residency limitation, they would receive $673 in California.

In a previous case (Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 [1969]), the Court had struck down the laws of three states that denied all welfare benefits to persons who had resided in their states less than one year. In that case the Court ruled that it was "constitutionally impermissible" for a state to enact durational residency requirements that sought to inhibit the migration of needy persons into the state. These laws restricted a person's right to travel, which is protected under the Fourteenth Amendment. California argued that its law had not been enacted for the purpose of inhibiting the migration of poor people and that it merely reduced the level of benefits rather denying benefits.

The Supreme Court disagreed. It ruled that persons have a right to travel from state to state and that once a person decides to reside in a state he or she must be treated like all other citizens of that state. The Court concluded that "the state's legitimate interest in saving money provides no justification for its decision to discriminate among equally eligible citizens." Citizens, regardless of their incomes, have the right to choose to be citizens of the state in which they reside. The states, however, "do not have any right to select their citizens."

In an attempt to discourage welfare recipients from litigating the 1996 welfare reform law, Congress prohibited legal aid groups that receive federal money from taking such cases. The Supreme Court, in Legal Services Corporation v. Velazquez, 531 U.S. 533, 121 S.Ct. 1043, 149 L.Ed.2d 63 (2001), overturned this restriction as unconstitutional. The Court concluded that once Congress appropriated funds for providing legal assistance to private citizens, first amendment rights were implicated. A federally-funded legal aid attorney "speaks on behalf of a private, indigent client in a welfare benefits claim, while the Government's message is delivered by the attorney defending the benefits decision." Therefore, the attorney's advice to the client and advocacy to the court was private speech that could not be restricted by the government.

further readings

Axinn, June, and Mark Stern. 2004. Social Welfare: A History of American Response to Need. 6th ed. Boston: Allyn and Bacon.

Gensler, Howard, ed. 1996. The American Welfare System: Origins, Structure, and Effects. Westport, Conn.: Praeger.

Marx, Jerry D. 2004. Social Welfare: The American Partnership. Boston: Pearson.

Mink, Gwendolyn, and Rickie Solinger, eds. 2003. Welfare: A Documentary History of U.S. Policy and Politics. New York: New York Univ. Press.


Health Care Law; Health Insurance; Homeless Person; Old-Age, Survivors, and Disability Insurance.

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Welfare System


WELFARE SYSTEM. In the American vocabulary, "welfare" has often had a limited meaning, most commonly associated in public discourse with public assistance to mothers with dependent children. Yet government welfare can also be given a broader definition, as a general social safety net designed to support citizens in need. Under this definition, "welfare" refers to government protections for workers' incomes, which are often threatened by structural economic change under the free market system. In an economy in which workers rely on wages to support themselves, threats to income arise due to unemployment, sickness, old age, and loss of the family breadwinner. In the United States, then, government welfare has been a collection of different programs that includes unemployment insurance, health insurance, old age pensions, accident insurance, and support for families with dependent children.

In the twentieth century, many nations in Western Europe built what became known as the "welfare state," a comprehensive system designed to protect citizens from the hazards of an industrial, capitalist economy. Compared with the European welfare state, the American welfare system is late developing, less extensive, haphazardly constructed, and reliant upon dispersed authority. While European nations instituted programs for old-age pensions and accident insurance near the turn of the twentieth century, the United States did not develop significant welfare programs until the 1930s under Franklin D. Roosevelt's New Deal. Unlike the European welfare state, the American welfare system has never included universal health insurance or guaranteed family incomes. Significant groups of Americans in need have not been covered by government welfare programs. Moreover, the American old-age pension system is based on worker contributions, and thus does little to redistribute wealth.

While the European welfare state was consolidated in the coherent programs of social-democratic or labor parties, the American welfare system has lacked a comprehensive structure. It was initially built as a response to emergency, during the economic crisis of the Great Depression. The American welfare system is characterized by dispersed authority. Unlike the nationalized European systems, responsibility for welfare has been shared by federal, state, and local governments, which has often led to wide disparities in welfare eligibility and benefits in different regions of the country.

Throughout its history, the American distribution of government welfare has been closely connected to cultural attitudes toward the poor. Americans have commonly distinguished between the deserving poor, who become needy through no fault of their own and are entitled to public assistance, and the undeserving poor, who are responsible for their own plight and who could escape poverty by developing a strong work ethic. Separating the deserving poor from the undeserving has often proved difficult. Nevertheless, for much of American history, many needy people have been seen as undeserving of public assistance. Because of a deeply held cultural belief in the "American dream," which holds that anyone can achieve economic advancement through hard work, Americans have characteristically attributed poverty to the moral failings of individuals.

In the American welfare system, the distinction between the deserving and the undeserving poor has translated into a division between social insurance and public assistance programs. Social insurance, which includes old age pensions and unemployment insurance, has been available on a universal basis to those who earn it through work. Public assistance, such as aid to dependent children and general assistance for the very needy, is targeted at the poor and requires financial and moral evaluations for applicants to prove their worthiness for aid. The benefits of public assistance are typically less generous than those of social insurance. Recipients of public assistance have often been seen as undeserving of aid because they are not seen as having earned it through work. Public assistance has thus carried a social stigma. There is also a gender and racial dimension to the devaluation of public assistance in comparison to social insurance, as recipients of the former are disproportionately female and minority.

Welfare from the Colonial Period to the Progressive Era

Treatment of the poor in colonial America was based on the principles set forth in the Elizabethan poor law of 1601. According to this English law, each town or parish was responsible for the care of its own needy. The law distinguished between three categories of the poor: those who were unable to work due to sickness or age, who were to be given material aid; the able-bodied who were unable to find jobs, who were to be provided with work; and the able-bodied but unwilling to work, who were to be instilled with the work ethic. The two important legacies of this law were its stipulation that poor relief is a local responsibility and the burden that it placed on the needy to prove their worthiness for relief.

Operating on the principles of the Elizabethan poor law, American colonial governments took responsibility for providing for the needy in their localities, through socalled "outdoor relief"—material assistance granted on a case-by-case basis. Localities also auctioned off destitute persons to the lowest bidder, who would receive funds in exchange for caring for them. However, because they were seen as drains on government funds, strangers in need were often warned away from towns, even if they were sick or disabled.

Beginning in the late eighteenth century, however, increasing urbanization, immigration, population growth, and unemployment led to a rising poor population and the need for a more systematic approach to welfare. Although outdoor relief continued to be practiced, states and municipalities supported "indoor relief" by building institutions to provide for the permanently poor and to instill the able-bodied with habits of work discipline.

In general, poorhouses were inadequately funded. Moreover, they were often poorly administered, and those who ran them were often corrupt. They lumped together different classes of poor in the same institution: the old, the sick, and the mentally ill were housed with the able-bodied unemployed. Under such circumstances, poor houses were unable to provide adequate care for the needy or instill work habits in the able-bodied. In part, poorhouses were meant to be unpleasant institutions, as the threat of having to live in the poorhouse was intended to deter the poor from idleness. By the beginning of the twentieth century, most poorhouses were transformed into homes for the old-aged who had no one else to care for them.

By the end of the nineteenth century, many European nations were beginning to build a welfare state. A number of American reformers, believing that government welfare would have to be altered to reflect the new hazards of an industrial economy, sought to emulate the European example. While these reformers failed in their efforts to develop European-style provisions for old-age pensions and unemployment insurance, the Progressive Era (1900–1921) did see the early growth of the American welfare system. For example, from 1911 to 1921, forty-two states introduced workmen's compensation legislation, which provided accident insurance to protect workers against job-related injuries.

In the Progressive Era, a powerful network of progressive middle-class women lobbied for mothers' pensions, and thirty-nine states developed mothers' aid programs from 1911 to 1921. Under these programs, states gave money to single mothers to help them defray the costs of raising their children in their own homes. The aid was meant to deter the use of child labor to help raise money for the family and to prevent the institutionalization of poor and fatherless children in orphanages, a common practice in the nineteenth century. However, in order to receive this aid, women had to prove that they were fit mothers with suitable homes. Often, the benefits given were inadequate, and the programs only reached a small portion of those in need—in 1931, only 93,620 of 1.5 million female-headed families received mothers' aid.

Progressives had the most success in instituting programs whose goal was protecting children. In 1912, the federal government established the U.S. Children's Bureau to gather information on the treatment of the nation's children. In 1921, Congress passed the Sheppard-Towner Act, giving matching funds to states to build maternal and child health facilities to fight infant mortality. Despite their accomplishments, Progressives failed to develop an extensive American welfare system—that task was not accomplished until the New Deal.

The New Deal and the Establishment of the American Welfare System

The severity of the Great Depression created new demands for government relief. After the stock market crash of 24 October 1929, millions of Americans lost their jobs and found themselves without adequate means of financial support. Between 1929 and the summer of 1932, the unemployment rate skyrocketed from 3.2 percent to 24.9 percent. In the face of this economic crisis, President Herbert Hoover stressed that relief for the needy should be the responsibility of private, local, and state relief agencies. Yet the need for assistance was staggering and could not be met by the institutions Americans had traditionally relied upon to provide public aid. In 1932, Congress established the Reconstruction Finance Corporation, which was authorized to lend $300 million in relief funds directly to the states. However, the true expansion of the American welfare system came during the presidency of Franklin Roosevelt, who took office in 1933. For the first time, the federal government committed itself to providing economic security for its citizens. By the end of the 1930s, the United States had become a world leader in social spending.

The first measures that Roosevelt took were temporary ones to relieve the immediate problems caused by the depression, though in doing so he became the first president to assert that the federal government should be responsible for the welfare of its citizens. In 1933, he appointed a dynamic administrator, Harry Hopkins, to lead government relief efforts and established the Federal Emergency Relief Administration (FERA). FERA provided funds to the states for the needy, both in the form of direct cash grants and on a matching basis. For the most part, the funds were distributed by the states with federal supervision. Work projects to provide jobs to the unemployed were administered by FERA, as well as the Civil Works Administration (CWA) and the Civilian Conservation Corps (CCC)—both created in 1933. By February of 1934, FERA, the CWA, and the CCC combined reached 28 million people, 20 percent of the American population.

The economic crisis provided an opportunity for liberals to pass European-style social welfare legislation that they had unsuccessfully advocated for years. In 1935, Congress passed Roosevelt's Social Security Act. This bill was designed to establish a more permanent system for government welfare. Roosevelt hoped that an expansive program of government security would protect Americans "against the hazards and vicissitudes of life."

In the short term, the law provided old-age assistance in the form of immediate payments for the destitute elderly. For the long term, however, the legislation established Old Age Insurance (OAI), a pension fund for American workers aged sixty-five and over. Social security, as OAI came to be called, was a fully federal program that granted standard benefits throughout the country. While there was a popular movement in favor of noncontributory old-age pensions paid for directly out of general government funds, OAI worked on a contributory basis, with workers and employers paying equal shares into the system. While workers had to contribute in order to receive social security, benefits did not correspond to the contributions that workers made in social security taxes. The New Dealers decided to make social security a contributory program in order to appease the demands of employers and because they believed that if it were a separate program with its own tax funds, it would be protected from political attack in the future.

The Social Security Act established unemployment insurance, also on a contributory basis, by providing for a cooperative federal-state program to provide payments for a set number of weeks to workers who had lost their jobs. The act also established a system of federal matching funds for the states for needy children, ADC (Aid to Dependent Children). Since each of these programs was administered by the states, payment amounts and eligibility requirements varied widely throughout the nation.

Eventually synonymous with the word "welfare," ADC was relatively uncontroversial at the time it was established. It was a less generous program and preserved its recipients' dignity less than OAI or unemployment insurance, however. At first, ADC only extended benefits to children, not to caregivers—when this was changed later, the program became AFDC (Aid to Families with Dependent Children). While social security was universally available to eligible workers, ADC recipients were means-tested. Since the aid was not distributed on a universal basis, ADC recipients were often stigmatized. In order to receive assistance, state officials had to certify need and worthiness of aid. Mothers had to prove that they provided a fit home for their children and that they adhered to an acceptable code of sexual conduct in order to be eligible for ADC. Until 1961, fathers of children aided under ADC had to be completely absent in order for the mothers to receive aid. The procedures that state agencies adopted to determine need often involved substantial invasions of privacy. Social workers intensely scrutinized the budgets of mothers, and some agencies conducted "midnight raids" of the women receiving aid to check for overnight male visitors—if they found one, assistance was withdrawn.

The welfare legislation of the New Deal was based on a distinction between "unemployables" and "employables." Unemployables such as the elderly, the disabled, and dependent children and their caregivers were to receive public aid without entering the labor market. Employables, however, were to be provided with jobs. In keeping with long-held American beliefs, the architects of the New Deal believed that it was morally damaging to substitute dependence on public aid for work. Therefore, the New Deal contained massive public works programs designed to provide work relief to the unemployed.

In 1935, Congress created the Works Progress Administration (WPA). Under Harry Hopkins, the WPA administered public works projects throughout the nation and employed workers of all skill levels at prevailing local wages. From 1935 to its elimination in 1943, the WPA employed between 1.5 and 3 million Americans at any one time, making it the largest civilian employer in the nation. During that period, it constructed or repaired 600,000 miles of road, built or rebuilt 116,000 bridges, and repaired 110,000 buildings. The CCC and the Public Works Administration (PWA) also provided jobs for public works during this period.

New Deal public works programs, however, were faced with the difficult problem of trying to reconcile the need to create jobs with the need to perform useful work in an efficient manner. Moreover, they were hampered by inadequate funding from Congress and could not rely on a fully developed federal bureaucracy to administer them. The WPA was unable to provide jobs for all of those who needed them and its wages were often insufficient. The WPA provision that it could only employ one family member indicated the prevailing gender expectation that men were to be the family breadwinners. Less than 20 percent of WPA workers were female.

While many New Dealers planned to make public employment a long-term federal commitment that could expand and contract with economic need, the public works programs were eliminated in 1943, as economic growth returned and the Roosevelt administration focused its attention on the war. In addition, New Dealers failed in their attempts to establish a system of national health insurance. Thus, while the New Deal did create a national welfare system, its programs were less ambitious than what many of its planners had anticipated.

In part, the inability of the New Dealers to develop a more extensive welfare system was due to resistance among conservative Democratic congressmen from the segregated South. Many in the South who would have benefited from such programs were unable to vote. Not only were virtually all African Americans disenfranchised, many poor whites were effectively prevented from voting by high poll taxes. Southern congressmen were instrumental in attaching limits to the programs that did pass, ensuring that federal welfare would not provide an economic alternative to work for the southern black labor force. For instance, southern congressmen saw to it that OAI excluded agricultural and domestic workers—60 percent of the nation's African Americans were in either of these categories.

Despite the broader ambitions of New Dealers themselves, the legacy of the New Deal was the two-tiered system established by the Social Security Act: a social insurance program that included old-age pensions and unemployment insurance, with benefits for workers of all social classes; and a public assistance program, ADC, targeted at the poor, that was less generous in its benefits and attached a humiliating stigma to its recipients. While the New Deal failed to establish a complete welfare state, the expansion of the American welfare system in this period was nevertheless dramatic. The amount of money the federal government spent on public aid increased from $208 million in 1932 to $4.9 billion in 1939.

From the War on Poverty to Welfare Reform

In the 1940s and 1950s, federal and state governments continued to assume the major financial and program role in providing welfare. The welfare system did not undergo significant expansion, however, until the 1960s. In 1964, Lyndon B. Johnson, acting on the plans of his predecessor, John F. Kennedy, launched the "War on Poverty." This public campaign had the ambitious goal of defeating poverty in the United States. However, its planners believed that economic growth would solve much of the problem, and so they avoided implementing expensive and controversial measures to fight poverty such as direct income maintenance and New Deal–style public works programs. Instead, the War on Poverty focused its energies on job training and education, launching programs such as Head Start, the Job Corps, and Upward Bound.

While the programs of the War on Poverty failed to match the extravagant rhetoric of the program, the American welfare system did expand. In 1965, Congress established the Medicare and Medicaid programs to provide medical assistance for the aged and for welfare recipients, respectively. Through these programs, a quarter of Americans received some form of government-sponsored medical insurance. Food stamps became more widely available and free to the poor: while, in 1965, the food stamp program provided only $36 million in aid to 633,000 people, by 1975 it granted $4.6 billion in aid to 17.1 million recipients. President Richard Nixon was unable to get Congress to pass the Family Assistance Plan in 1972, which would have provided a guaranteed minimum income to all families. However, Congress did pass Supplemental Social Security (SSI), which established an income floor on benefits paid to the aged, blind, and disabled.

Existing programs such as social security and Aid to Families with Dependent Children experienced tremendous growth during this period. Social security payments increased in amount and reached more people, as a greater percentage of the population became elderly and lived longer. The expansion of the welfare system substantially reduced poverty during this period, particularly among the elderly. From 1959 to 1980, the percentage of the elderly below the poverty line dropped from 35 percent to 16 percent.

In 1960, the AFDC program cost less than $1 billion and reached 745,000 families. By 1971, it cost $6 billion and reached over 3 million families. The expansion of AFDC was due in part to the concentration of poverty among certain demographic groups, such as African Americans and women. Due to the mechanization of southern agriculture, many African Americans moved northward into urban areas where the unemployment rate was high because of a decrease in factory jobs. The "feminization of poverty" left many women in economic need due to an increasing divorce rate, increasing out-of-wedlock births, and increasing rates of child desertion by fathers.

The expansion of AFDC was also due to a growing "welfare rights" consciousness that encouraged those eligible to receive aid and sought to remove the social stigma associated with it. This consciousness was promoted by groups such as the National Welfare Rights Organization (NWRO) and the Office of Economic Opportunity (OEO), a War on Poverty agency charged with seeking the "maximum feasible participation of the poor" in its programs. From 1968 to 1971, the Supreme Court decided a number of cases that expanded welfare rights. It struck down state residency requirements for AFDC eligibility, eliminated the rule that the father had to be entirely absent for aid to be given, and granted legal due process to those requesting welfare.

Although social security remained a much larger program than AFDC, AFDC became more controversial. Beginning in the mid-1970s, the expansion of the AFDC program fueled fears of a growing "welfare crisis." As inner cities suffered the effects of deindustrialization and high unemployment, poverty increasingly came to be associated with African Americans living in urban centers, who were often referred to in public discourse as an "underclass" living in a debilitating "culture of poverty." The public image of the AFDC recipient increasingly became that of the "welfare mom"—presumed to be an unwed African American. Here, the stigma of being poor and the stigma of single motherhood were combined to create a potent racial stereo type.

A new conservative critique of welfare gained increasing prominence by the 1980s. For leading conservatives such as Charles Murray and George Gilder, liberal social policy was itself responsible for keeping people in poverty. According to this critique, welfare programs kept recipients dependent on the state for support. Conservatives advocated reducing or abolishing AFDC payments, in order to provide poor people with the necessary incentive to become self-sufficient through work.

The conservative critique of the welfare system gained strength from an increasing distrust of the federal government. Changing gender expectations also help explain the new call for AFDC recipients to earn their living through work. The demand that the needy advance through work was a familiar one, but it had generally been applied only to men. Whereas in the New Deal single mothers were considered unemployable and kept out of the labor market, by the end of the century women were assumed to be a natural part of the labor force.

President Ronald Reagan acted on the growing conservative critique by slashing government welfare programs during the 1980s. Between 1982 and 1985 total funds spent on unemployment insurance went down 6.9 percent, food stamps went down 12.6 percent, child nutrition programs were cut 27.7 percent, housing assistance 4.4 percent, and low-income energy assistance 8.3 percent. While the Reagan administration decreased the money it spent on public assistance to the poor, it increased the budget of social security. Thus, while conservatives had success in reducing public assistance programs, existing social insurance programs that reached the middle class continued to enjoy substantial political support.

In 1992, Bill Clinton was elected president with a campaign pledge to "end welfare as we know it." However, he spent much of his energy in his first years in office in an unsuccessful attempt to extend the welfare system by providing all Americans with health insurance. After the 1994 election, a group of conservative Republicans took control of Congress and advocated the passage of welfare reform legislation. They were led by House Speaker Newt Gingrich, who pledged in his "Contract with America" to "replace the welfare state with the opportunity society."

In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act, designed to reduce the number of people receiving public assistance. This act repealed AFDC and replaced it with Temporary Assistance for Needy Families (TANF). Whereas AFDC had an open-ended federal commitment to provide matching funds to the states, TANF stipulated a set amount of money earmarked for parents with dependent children to be given to states by the federal government, shifting much of the responsibility for care of the needy back to the states. The act encouraged states to use a significant proportion of their funds not for cash payments but for job training, job placement, and education. The law stipulated that no family has a right to government assistance: states have no obligation to provide relief to needy families. States were given a number of incentives to cut their welfare caseloads. Under the new legislation, TANF care-givers were eligible for only five years of benefits over the course of their lives.

Those cut from the welfare rolls were expected to get a job in the private sector and support themselves with wages. However, states were under no obligation to address obstacles that many welfare recipients faced to working, such as low skills, lack of transportation, and the need for child care, though many states did choose to implement programs to address these obstacles. The jobs that were typically available for former AFDC recipients were low-wage service industry jobs that still left them below the poverty line. In 1997, median wages for workers who had left welfare were reported to be 20 percent of hourly wages for all workers.

The legislation succeeded in reducing the amount of people receiving aid for dependent children from 4.4 million at the time the law passed to 2.4 million in December 1999, though some of these reductions should be ascribed to the booming economy of the late 1990s. However, it was unclear how the system would work in more difficult economic times—for even if the need for assistance escalated, the federal government would not increase the amount of funds it granted to the states.


Amenta, Edwin. Bold Relief: Institutional Politics and the Origins of Modern American Social Policy. Princeton, N.J.: Princeton University Press, 1998.

American Social History Project. Who Built America?: Working People and the Nation's Economy, Politics, Culture, and Society. 2ded. 2 vols. New York: Worth, 2000.

Gordon, Linda, ed. Women, the State, and Welfare. Madison: University of Wisconsin Press, 1990.

Gordon, Linda. Pitied but Not Entitled: Single Mothers and the History of Welfare, 1890–1935. New York: Free Press, 1994.

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Skocpol, Theda. Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States. Cambridge, Mass.: Harvard University Press, 1992.

Trattner, William I. From Poor Law to Welfare State: A History of Social Welfare in America. New York: Free Press, 1999.


See alsoChildren's Bureau ; Civilian Conservation Corps ; Head Start ; Job Corps ; Medicare and Medicaid ; New Deal ; Progressive Movement ; Sheppard-Towner Maternity and Infancy Protection Act ; Social Security ; War on Poverty ; Workers' Compensation ; Works Progress Administration .

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Welfare is typically a term that denotes varying kinds of social spending allocated by governments following industrialization in nation-states. Prior to industrialization, most governments left assistance for the underprivileged to landlords in feudal systems, private organizations, and (primarily) the Catholic Church. Such poor relief became known as welfare following government intervention in such provisions.

The pairing of government and poor relief can be traced in part to responses to natural disasterssuch as earthquakes, fires, and floodsthat led monarchical governments to feed people and rebuild homes in order to preserve order. This definition of welfareproviding assistance to those who are otherwise unable to feed, house, or clothe themselvesremains the primary guide to most countries and scholars who study and implement welfare programs. Thus welfare is commonly considered to include redistributive policies and programs that enable the disadvantaged to reach some minimal level of existence within a nation-state.

Many nation-states now provide varying levels of housing assistance, income supplementation, in-kind goods and service provision, and public education as part of the welfare state. The programs and policies to provide these aspects of a minimal human existence can vary. For example, income supplementation can consist of cash payments, tax credits, or child-care subsidies. Similarly, in-kind goods and services can include vouchers for food, free or subsidized medical care, and free job training or referral services. Each nation (and in federal systems such as the United States, each state) makes decisions regarding: (1) the financial commitment to make to these programs; (2) the kinds of programs to provide to its poor; and (3) who is eligible to receive aid under the programs.

The comparative welfare-state literature and the public-policy literature have determined that several factors interact in producing fiscal outcomes and programmatic decisions made at the national level. Most of this work has focused on comparing European nations with other developed democracies such as Canada, Australia, and the United States. Other work has also compared Western nations such as these with Asian democracies such as Japan and socialist states such as the former Soviet Union, Cuba, and China. The primary findings from these examinations focus on three types of variables to explain and predict both the level of funding and the kinds of programs that are developed: (1) the system of political institutions in place; (2) the attitudes among the citizenry and policymaking bodies toward the poor; and (3) the level of racial/ethnic heterogeneity within the polity.

The political system comparisons proceed at the national level and focus first upon whether federal systems or unitary systems tend to provide greater redistribution to the poor. In particular, the federal system of the United States has been frequently cited as one reason why the United States lags so far behind most other similarly situated nations in terms of social welfare provision. The United States stands alone among OECD (Organization for Economic Cooperation and Development) nations, for example, in its dependence on private health care as 35 percent of total health expenditures. Far smaller and lessdeveloped nations in Europe and in Asia provide universal or near-universal public health coverage. In addition to these systemic differences, comparative welfare-state experts focus on the types of institutional arrangements that may produce different kinds of welfare program provision. For example, states with proportional representation systems have over the course of history had greater influence from left-of-center ideological parties working in coalition governments; winner-take-all electoral systems require far less coalition politics and therefore depress the influence of parties that would seek greater redistribution when they lose elections.

Both systems and institutional arrangements are shaped by the parties that enter power and whether they are required to respond to the electorate in their policymaking decisions. In cases where the electorate plays a significant role in determining the allocation of power, political parties reflect to a large degree mass public opinion regarding the views of the poor. In countries where the electorate views the poor as trapped in poverty, more generous and comprehensive welfare programs exist. Where the majority of the electorate views the poor as lazy, less generous and comprehensive welfare programs exist. Where moves toward less generous and comprehensive programs succeed, the burden continues to fall on private relief organizations (including religious organizations), as it did prior to industrialization. Although there is a direct correlation between public opinion and welfare policy, such a correlation is also shaped by both the institutional arrangements and the degree of racial/ethnic heterogeneity in the country.

In addition to institutional arrangements and mass public opinion, the degree of racial/ethnic heterogeneity plays a unique role in the provision of welfare benefits at the national level. Racial/ethnic animus has been examined at length in more diverse societies as a factor that depresses the likelihood of generous or comprehensive welfare policy. However, a strict breakdown between ethnically diverse countries and homogenous nations does not explain the variation. In fact, it is those countries with both racial/ethnic diversity and a concentration of poverty among the ethnic/racial minorities that leads to an antisolidarity effect: Both the mass electorate and the parties that represent them are less likely to provide welfare benefits to a subset of the population that is perceived to be undeserving.

In the United States, for example, race- and income-based disparities in the provision of health-care coverage have existed since the founding of the American welfare state with the Social Security Act of 1935, which exempted select industrial sectors employing large numbers of African Americans from old-age salary replacement and medical coverage programs. While federal and state legislation has since outlawed the exclusion of citizens on the basis of race from such programs, race- and income-based disparities in program participation persist.

The cross-national analyses of welfare provision generally tend to focus on states that are capable of providing welfare benefits domestically, whether through capitalist or socialist economic systems. Much less attention has been given in such analyses to the role of international or global organizations that attenuate dire situations in countries that are incapable at the national or local level of providing such services. A separate literature contends with the role of international organizations such as the World Health Organization, the International Monetary Fund, and the United Nations in the provision of welfare benefits to developing nations. Future comparative research can and should integrate these literatures to comprehensively determine the relevant weights of the three factors identified abovethe system of political institutions, mass public opinion, and racial/ethnic heterogeneityto examine how the outcomes of welfare policymaking serve to further stabilize and strengthen democracy, or serve to undermine it.

SEE ALSO Great Depression; Great Society, The; International Monetary Fund; National Health Insurance; New Deal, The; Racism; Socialism; United Nations; Welfare State; World Health Organization


Colombo, Francesca, and Nicole Tapay. 2004. Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems. OECD Health Working Paper No. 15.

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Feldman, Stanley, and John Zaller. 1992. The Political Culture of Ambivalence: Ideological Responses to the Welfare State. American Journal of Political Science 36 (1): 268307.

Hacker, Jacob. 2006. Inequality, American Democracy, and American Political Science: The Need for Cumulative Research. PS: Political Science and Politics 39: 4750.

Hancock, Ange-Marie. 2004. The Politics of Disgust: The Public Identity of the Welfare Queen. New York: New York University Press.

Lieberman, Robert. 2005. Shaping Race Policy: The United States in Comparative Perspective. Princeton, NJ: Princeton University Press.

Pontusson, Jonah. 2006. The American Welfare State in Comparative Perspective: Reflections on Alberto Alesina and Edward L. Glaeser, Fighting Poverty in the US and Europe. Perspectives on Politics 4: 315326.

Skocpol, Theda. 1995. Social Policy in the United States: Future Possibilities in Historical Perspective. Princeton, NJ: Princeton University Press.

Vreeland, James Raymond. 2003. The IMF and Economic Development. New York: Cambridge University Press.

Ange-Marie Hancock

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Welfare Analysis

Welfare Analysis


Welfare economics is the study of how a society can best use its scarce endowmentsfor example, its natural resources, technical know-how, stock of physical and human capital, and so forthto maximize the well-being of its members. When the principles of welfare economics are used to evaluate a specific policy issue, it is known as welfare analysis. This entry describes the main features of welfare analysis, focusing on its intellectual foundations and practical challenges, as well as controversies surrounding its use.

Two policy examples will help clarify what welfare analysis is. First, psychologists have shown that the academic achievement of underprivileged children is significantly improved by enrollment in prekindergarten programs. These programs are, of course, expensive to run. Will society be better off if prekindergarten is freely and universally provided? Second, as of 2007, high gas prices have caused U.S. policymakers to consider opening the Arctic National Wildlife Refuge in Alaska for energy exploration. Would the benefits to society from the increase in domestic energy sources outweigh the environmental implications of this decision?

Neither of these questions has an obvious answer, although each can invoke varying opinions from different members of society. The task of welfare analysis is to assemble information to aid in determining whether the proposed policy action would on balance be beneficial to society. Economists use two fundamental concepts to aid in this process. The first is consumer sovereignty, which has its roots in the philosophy of individualism. Consumer sovereignty has two related consequences for welfare analysis: it implies that the individual is the best judge of what is good or bad for his or her well-being, and that a proposal can only be judged by examining the sum of its impacts on individuals. The latter gives rise to the second fundamental concept, the compensation criterion, as originally proposed by John Hicks (1939) and Nicholas Kaldor (1939). Almost any policy action will involve winners and losers. The compensation criterion suggests that a policy is desirable if those who gain from the action gain enough in aggregate that they would be able to compensate the losers for their losses. Thus welfare analysis is a matter of measuring changes in individuals well-being as they see it as a result of a policy change, and determining whether the sum of the individual gains is greater than the sum of the individual losses.

This view of welfare analysis might more accurately be described as the neoclassical interpretation in that it is intentionally silent on issues of fairness, justice, and other notions of equity. Said another way, neoclassical welfare analysis focuses narrowly on maximizing the size of the well-being pie rather than providing prescriptions on how it should be divided. Implicitly, distributional questions are left to other mechanisms. A wider view of welfare analysis requires specific judgments on what is fair and just and hence is more difficult to implement. Nonetheless there have been efforts by political economists past and present to cast welfare analysis in a wider light. Prominent among these is the work of Amartya Sen, who advocates the use of mild interpersonal comparisonsbased, for example, on the ability of people to freely choose their lifestylein conjunction with neoclassical criteria. The work of Sen and others notwithstanding, the narrow view of welfare analysis as described above has tended to dominate the operational use of the technique.

The operational challenge of neoclassical welfare analysis is to assess changes in well being from an action. Because a persons well being cannot be objectively measured, economists use money proxies in their stead. A prime example of this is willingness to pay, which measures how much money a person would pay out of their income to secure (or prevent) an action. This measure is valid and useful even if the payment is not actually made. The magnitude of the payment, if accurately assessed, provides a sense of the relative importance of the action under consideration. Techniques for measuring individuals willingness to pay have a long history in economics, beginning with Alfred Marshall (1930) and including seminal works by Robert Willig (1976), Michael Hanemann (1978), and Jerry Hausman (1981).

The principles of welfare analysis (if not always the techniques) are widely accepted by economists. Nonetheless, they can be controversial among noneconomists. Three of the main points of contention deserve mention in closing. First, some object on ethical grounds to the use of money measures to gauge the value of public policy issues related to, for example, human health and the environment. Second, based as it is on the notion of individualism, welfare analysis does not readily admit notions of collective responsibility. Finally, welfare analysis tends to be silent on the subject of income distribution. Nonetheless, welfare analysis is often the only means available to policymakers of organizing complex and conflicting points of view; as such, it will likely continue to play a role in policy decisions.

SEE ALSO General Equilibrium; Hicks, John R.; Pareto, Vilfredo; Pareto Optimum; Rawls, John; Sen, Amartya Kumar; Social Welfare Functions; Theory of Second Best


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Hicks, John. 1939. The Foundations of Welfare Analysis. Economic Journal 49: 696712.

Kaldor, Nicholas. 1939. Welfare Propositions of Economics and Interpersonal Comparisons of Utility. Economic Journal 49: 549552.

Marshall, Alfred. 1930. Principles of Economics. London: Macmillan.

Sen, Amartya. 1998. The Possibility of Social Choice. American Economic Review 89: 349378.

Willig, Robert. 1976. Consumers Surplus without Apology. American Economic Review 69: 589597.

Daniel J. Phaneuf

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wel·fare / ˈwelˌfe(ə)r/ • n. the health, happiness, and fortunes of a person or group: they don't give a damn about the welfare of their families. ∎  statutory procedure or social effort designed to promote the basic physical and material well-being of people in need: the protection of rights to education, housing, and welfare. ∎  financial support given for this purpose. PHRASES: on welfare receiving government financial assistance for basic material needs.

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welfare good fortune, well-being. XIV. f. phr. ME. wel fare (see WELL3, FARE1), prob. after ON. velferð.

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welfare •fanfare • carfare • welfare • airfare •Mayfair, Playfair •fieldfare • warfare • funfair •thoroughfare

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