Study Challenges Common Theories About the Impact of Welfare

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A new study showing that Western Europeans experience more economic mobility and Americans suffer more persistent poverty than is commonly believed suggests Europe's more generous welfare policies do not deter people from escaping poverty.

The study, headed by Greg J. Duncan, the program director of the Survey Research Center at the University of Michigan, is the first to offer a longitudinal comparison of economic mobility in the United States with that of Western Europe and Canada. It was published in the August issue of the Journal of Population Economics.

Past studies comparing "snapshot'' poverty rates in the United States and Europe have found higher single-year rates in America. But a common presumption has been that "the kind of rigid social stratification and more generous welfare benefits'' prevalent in Europe, Mr. Duncan said, "would lead to less poverty but also decidedly less economic mobility.''

The assumption was that "a multiyear poverty picture would be much more comparable because the mobility of the U.S. poor would make their long-run rates of poverty much less,'' he said.

The study showed, however, that the percentage of people experiencing "persistent poverty''--defined as having incomes below 50 percent of the median for three consecutive years--was significantly higher in the United States.

The persistent-poverty rate for Americans was about 14 percent--with rates of about 10 percent for whites and 42 percent for blacks--and 12 percent for Canadians. But it ranged from under 1 percent to 2 percent in West Germany, France, Luxembourg, and the Netherlands, the European countries for which those data were available.

Based on data comparing the share of families with incomes 40 to 50 percent of the median whose incomes rose to more than 60 percent of the median a year later, the study also found Americans were less likely to escape poverty.

Acceptable U.S. Steps

While noting that "there's no single European alternative to the U.S. welfare system,'' Mr. Duncan said the study suggests "the European level of generosity does not produce the kind of social immobility that people might fear.''

While Americans are likely to resist simply raising benefits, he said, measures such as the recent expansion of the earned-income tax credit and other incentives to "make work pay'' might be a more acceptable path to "a transfer system that is more generous to families.''

He also recommended health-care reform and improved education and training programs to "augment the skills of new and existing workers.''

For more information on the study, "Poverty Dynamics in Eight Countries,'' write to Greg J. Duncan, Survey Research Center, University of Michigan, P.O. Box 1248, Ann Arbor, Mich. 48106-1248.

Vol. 13, Issue 01

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