Rising Inequalities and Welfare Generosity: Structural Constraints on the Adequacy of Minimum Incomes in European and American Welfare States

This article investigates whether economic forces that have led to increasing wage inequalities also place structural constraints on the ability of welfare states to protect the most vulnerable in society. Throughout the past two decades, the capacity of minimum income packages to lift low-income households above the poverty line has stagnated or decreased across much of the European Union and the United States. In evaluating the determinants behind these trends, this paper introduces a framework to conceptualize the tensions facing modern welfare states in their attempt to (1) provide poverty-alleviating minimum income protections, (2) achieve employment growth, and (3) keep spending levels in check. We argue that, due to downward pressure on low-skilled labor, it has become more difficult to balance each of those three objectives; accordingly, we observe that the stagnation of low gross wages contributes to a ‘structural inadequacy’ around minimum income protections for the jobless. Albeit with large differences in both levels and trends, these structural constraints span across all welfare state ‘regimes’. Our findings have direct implications for future policy changes to minimum income protections, as well as growing public and academic interest in the potential of a universal basic income.