Social Welfare Policy.

• Author: Van Doren, Peter

Social Welfare Policy * "Lessons from Denmark about Inequality and Social Mobility," by James J. Heckman and Rasmus Landerso. NBER Working Paper no. 28543, March 2021.

President Biden's American Families Plan includes taxpayer-funded universal pre-kindergarten and community college. Such proposals are always accompanied by the obligatory observation that "the United States is an outlier compared to almost every industrialized country" regarding the provision of universal social safety net benefits.

Supporters of such programs assume that their effects are progressive. That is, they improve the welfare of those with fewer resources relative to those with more. The earlier quote about the United States being an outlier suggests an obvious research strategy before we enact such policies: what have the effects been in Europe?

Previous Working Papers columns (Summer 2014 and Summer 2018) have examined papers by University of California, San Diego economist Gordon Dahl, who has devoted much of his career to examining the efficiency and distributional effects of social welfare policies in Europe. The Summer 2014 column summarized his analysis of expansion of maternal-leave benefits in Norway. Dahl and his co-authors concluded that the program had no effect on a wide variety of desired outcomes and instead redistributed income to the affluent. The Summer 2018 column examined the longterm effects of reductions in disability benefits in the Netherlands between 1993 and 1996. The reductions applied to younger cohorts, while older cohorts were exempted from the new rules. Younger workers who were pushed out of disability insurance or had their benefits reduced are now, a generation later, 11% less likely to receive disability benefits than their parents' generation (with no increased use of other government safety net programs). Further, they earn 2% more in the labor market...