Social Policy Problems and Income Inequality

This comparative politics literature review aims to further understand the relationship between social policy programs and income inequality, in particular, looking at whether or not income inequality is a choice or not. According to our textbook, Ch. 35 focuses heavily on the discussion of welfare states, reducing poverty, and social policy expenditure. For example, our textbook provides the example of Peru, Bolivia, and Columbia demonstrating that economic openness was associated with a decline in the level of social policy expenditure (Kaufman and Segura-Ubiergo 2001). Unlike our textbook, however, this comparative politics literature review aims to look at more countries than just Latin America drawing from previous studies conducted over the past 30 years. What stood out to me most conducting this research is the growing importance to further understand how social policy programs, welfare states, and income inequality have been studied for sometime however further work is needed in the field of comparative politics to fully understand their relationships. The question I will explain goes as followed: Is income inequality a choice or not? Analyzing the role comparative politics plays regarding social policy expenditures and how income inequality is either increased or decreased in regards to amount of money spent towards social policy programs. Social policy programs are critical towards the survival of many citizens' around the world. They help bring basic amenities along with other things to many populations. The growing debate seeks to answer whether or not countries that implement social welfare programs at higher rates than countries that do not, do have have a better chance at limiting income inequality? We can draw on previous research conducted through comparative politics studies that illustrate social programs, in fact, help citizens improve incomes.

Additionally, it is important to note that other comparative politics studies have found contrasting opinions stating increasing the number of social policy programs to help reduce income inequality may not be beneficial after all. These two contrasting opinions are quite interesting since the goal of my research question is to determine other or not income inequality is a choice or not. Reducing poverty is the focal point for many political parties across the world. For example, a role of government is to improve the quality of life for its citizens'. Income inequality is one of the most pivotal points of improving the quality of life of its citizens' because the wider the gap between certain groups of people can result in the loss of the middle class. Can you think of a place where that is happening right now? If you thought the United States then you would be correct. There has been much debate about the disappearance of the middle class, the rise of the elites, and the absence of social policy programs geared towards helping people financially. After reading many different articles about social expenditures, welfare states, and income inequality I have selected a number of different comparative politics studies that helps explain whether or not income inequality is a choice. Much literature on government anti-poverty polices focuses on the behavior effects of these polices, such as on labor supply, participation, turn over, and family structure (Moffitt 1992). According to Carnes and Mares (2007), the earliest studies of the mergence of social policy hypothesized that economic growth and development were key factors accounting for the emergence and expansion of modern welfare states. These processes Cares and Mares (2007) concluded would lead to rising employment and technological capacity. Wilensky (1975) thought this would incentivize governments to educate their workforce and protect the aged who were no longer able to serve in industry, which, in turn would lead to higher levels of social spending. One set of explanations has focused on employers' labour market needs (Carnes and Mares 2007). Earnings-related benefits are important because people in highly skilled positions are incentivized to produce better results thus increasing their income. Unfortunately, the opposite can be said for people in low-income job positions. People in low-income job positions are less likely to receive incentivized rewards as social policies geared towards earning-related benefits focus primarily on highly skilled jobs. Mares (2003,2005) describes these types of social policies as instruments to skill retention(pg. 877)

Social policies that act as instruments of skill retention can help keep employees in the same position creating higher competition within the marketplace. We can think of this from a comparative politics view when we examine why certain countries income inequality may be less than others or perhaps how some countries are using social policies to improve income inequality. Income inequality can attribute to a number of factors and Mares (2003,2005) sheds light on how earnings-related social policy programs are helping to reduce income inequality. Examining countries in Europe such as Sweeden and Denmark we see the positive effects implementing social policy programs can have in efforts towards reducing income inequality. Esping-Anderson (2016) explain welfare states are places where government's redistribute resources, allocations, etc. with hopes of improving current levels of housing, labor, and social markets of its citizens. For example, looking at statistics, Denmark and Sweden have very low-income inequality amongst their citizens. In fact, previous studies show Denmark having the lowest income inequality in the world! The United States, on the other hand, is much different from the aforementioned two countries. People living in poverty in the United States tend to live in poverty longer than those living in Sweden and Denmark (Esping-Anderson 2016). Sweden and Denmark citizens may experience poverty at some point in their lifespan, however, they are able to escape poverty at a much quicker rate than citizens in the United States.

Why is this? TO better understand this phenomena, I will create a hypothetical example illustrating the differences. For example, every dollar of income the United States receives they might spend 30 cents towards helping social and educational policies however countries like Sweden and Denmark might spend 60 cents towards helping its citizens. Citizens that receive this type of help can benefit in a number of ways. Let us think about the citizen who does is currently too old to work however now all of a sudden is drawing an income, or the citizen who is unable to work due to disabilities. Social and Educational Policy programs help people in a number of ways that few citizens think about on a daily basis. Carnes and Mares (2007) findings show that despite social policy expenditures being high, some countries might target distribution over a narrow set of population whereas other countries may distribute broadly over the entire population. Perhaps this might explain why Denmark has such low income inequality amongst it's citizens. Cameron (1978) identified there is a positive relationship between the level of economic openness and the size of the public sector. Cameron's (1978) results showed that in open economies, governments enact income supplements or social insurance schemes to compensate workers whose employment or income is threatened by external competition. Economic openness looks at the differences between developed and non-developed nations analyzing their levels of openness to social policies. Economic openness and democracy are two things we can explore when discussing income inequality amongst different nations.

Different nations have different policies that affect the nature in which they do business. Business can be conducted in a number of ways. For example, countries that work in a democracy operate under a democratic regime and more likely to have less financial regulations allowing for an increase in trade flow. In contrast, countries that do not operate in a democracy are more likely to operate in places of business where there might be more trade regulations. Why does this matter? This matters because countries that function as democratic societies are less likely to have high rates of income inequality amongst its citizens, according to a study published in the journal of comparative politics. The journal of comparative politics published a study in 2003 stating that economic openness is measured as trade flows, foreign direct investment inflows, and financial capital inflows (Reuveny and Li). " Additionally, the authors found that democracy and trade reduce income inequality, foreign direct investments increase income inequality, and financial capital does not affect income inequality (Reuveny and Li).

Drawing form Reuveny (2003) and Li we can conclude that perhaps income inequality is not a choice. This comparative politics literature review effectively examined the relationship between social policies, income inequality, and welfare states. Specifically, this comparative politics literature review analyzed how social policies affect income inequality in countries around the world primarily focusing on studies from the past 30 years in comparative politics. Paying close attention to comparative politics one will find that there are many different avenues to research regarding social policy expenditures. I first wanted to answer the question as to whether or not income inequality is a choice or not? Income inequality is not necessarily a choice at all. In fact, choices that may affect whether one lives in a high-income inequality area or not might solely reside on the fact if they live in a democracy or not. Democracies, as shown above, have lower levels of income inequality than populations that do not reside in democracies. Furthermore, the level of economic openness plays a pivotal role as well. Economic openness helps to alleviate income inequality by having fewer trade regulations and higher trade volumes with outside countries.