GINI DP 55: Struggle for Life: Social Assistance Benefits, 1992-2009

This paper looks at the level of the minimum income guarantees for able-bodied persons at working age and assesses benefit trends since the 1990s. Our dataset comprises 25 EU countries (EU27 except Cyprus and Malta), 3 American States (Nebraska, New Jersey and Texas) and Norway. The degree of welfare erosion is measured by three indicators: real benefit trends, benefit trends relative to the development of average wages and benefit trends relative to changes in median equivalent income. We therefore assess net disposable income of families relying on social assistance, taking account of the impact of i.a. child benefits and housing allowances. A central question in this paper is the extent to which trends in social assistance benefit packages are linked to the statutory mechanism that is being used to adjust benefit levels. It appears that most legal systems are quite insufficient to keep benefit levels in line with the general living standard. The broad picture that emerges is indeed one of eroding benefit levels relative to the general living standard, although the trend is less uniformly negative from 2001 onwards. In the 1990s we see the comparative level of welfare of social assistance recipients decline almost everywhere. In many countries social assistance payments have continued to decrease relative to average wages after 2001, although less uniformly so. In the countries where benefits did keep pace with average wages or median equivalent income, this was generally because governments (consciously) increased benefits over and above the evolution of the average living standard, either by a one-time reform, or through subsequent ad hoc raises.