Cover photo of Social Policy Journal

Summing up the Evidence: The Impact of Incentives and Targeting in Social Security

International Research Conference, 25-28 January 1998, Jerusalem

Ross Mackay
Special Advisor
Social Policy Agency

In January of this year, the International Social Security Association held its 2nd International Research Conference on Social Security, which was hosted in Jerusalem by the National Insurance Institute of Israel. The conference focused on the twin themes of targeting and incentives in social security and was aimed at assessing the impact of emerging developments in these areas on the behaviour of social security beneficiaries and understanding the implications they have for the future shape of social security. It was hoped that the conference would provide an opportunity to learn about the most recent research findings in this field.

Before I proceed with any review comments on the conference, I should declare an interest. I had an intimate involvement in its planning and organisation during the term of a recent secondment to the International Social Security Association in Geneva, which was sponsored by my employer, the Social Policy Agency of the Department of Social Welfare. Readers should therefore interpret any comments on the success and achievements of the conference as having being composed on the rose-tinted screen of my computer monitor.

The conference was styled the 2nd International Research Conference on Social Security not because the Association had only ever held on prior research conference, but because it followed the format of a successful conference held in Vienna in 1994, which had ushered in a new format for research conferences and which served as the model for the recent event. In fact, the conference further developed the Vienna model, in particular by placing all conference papers on the internet for the convenience of both conference attendees (who would not now have to carry large quantities of paper home on the plane) and other interested parties (who have consequently been able to access the papers easily without attending the conference).

The papers, for interested readers, are still held on the ISSA website. They can be accessed either by opening location (the ISSA home page) and clicking on meetings then 1998, or alternatively by going directly to address The papers are available in their original language only, which in most cases is English. At the conference, a simultaneous interpretation service was provided for all plenary addresses and one out of three concurrent sessions to be translated into English, French, German and Hebrew. A conference volume is also available from the ISSA containing the four plenary addresses. These have been translated and the volume is available in either English, French or German.

The conference was well-attended and participants faced a full programme, including four plenary addresses and 64 concurrent papers in three days. In addition, nine further papers were made available by people who were unable to attend the conference after having their papers selected for inclusion in the programme. There was a reasonable geographical spread, with 25 nations represented among the presentations, although there were no papers from Latin America and only one from Africa and one from Asia. In all, 78 papers were available from the conference, 75 of which can be accessed from the internet.

The conference opened with a plenary address by Doug Besharov from the United States, who laid out the shape of the future challenge for social security policy-makers. He sketched out recent trends in both revenue and expenditure on social security and posited the thesis that recent efforts to curtail welfare expenditures might be because a limit had been reached in the capacity to raise further revenue for expenditure on social security. On the other hand, there is no apparent limit to the growth in demand for resources. Professor Besharov sketched out some likely areas of future growing demand, not only from an ageing population, but also in a range of other sectors. The conclusion he reached was that pressure is likely to continue to build up on the welfare vote, and that the reforms embarked on to date, even in the United States, were likely to be only the first phase of a prolonged period of reform.

The remainder of the first day was devoted to papers concerned with targeting in social security. Individual sessions focused on a range of sub-themes within this general topic, including universal versus selective systems; selectivity and entitlement rights; targeting of vulnerable groups; and emerging trends in different countries. The session on targeting of vulnerable groups included an interesting contribution from John Kruger of South Africa, who provided an account of how the former State Maintenance Grant programme, which provided support to single parents and was disproportionately received by white recipients, is to be replaced by a new Child Support Grant programme, which will provide lower levels of support to a much larger group of poor people with children and which will be largely received by black people in the rural areas. IN adapting its policies to meet the needs of its poorer black people, the South African Government is clearly facing some hard decisions which will leave other vulnerable groups (in this case female single parents) without support.

The session on emerging trends indifferent countries included a number of interesting contributions, including one on the recent American welfare reforms by Jill Duerr Berrick and another from Ken Judge on the redistributional effects of recent UK reforms.

The second day focused on the topic of incentive-oriented approaches and opened with a plenary address by Phillip de Jong from the Netherlands. Although his thesis was couched in terms of the social insurance model, it nevertheless has some relevance for our social security arrangements. He took as his central analytic concept the idea of moral hazard – which is the extent to which participants in social security arrangements alter their behaviour to get advantageous treatment or the extent to which they reduce care to avoid risks, for example of unemployment, of injury, or of pregnancy. This concept can be applied to both employers and employees – for example, comprehensive no-fault accident compensation may lead firms to take less care in avoiding risks to their workforce. Professor de Jong outlined various approaches which are available to reduce moral hazard – for example, co-insurance, risk-rating, and administrative incentives. As other papers at the conference demonstrated, the Dutch are using many of these ideas borrowed from the private insurance arena in their own welfare reforms.

The concurrent sessions again covered a range of sub-themes within the general topic of incentive-oriented approaches, including behavioural effects of social security programmes; balancing incentives to work and adequacy of support; incentive issues in health care; reinsertion programmes for the long-term unemployed; the need for social security systems to adapt to changes in the labour market; and emerging developments in incentive-oriented approaches in various countries around the world.

This last sub-theme included a fascinating paper from two Israeli contributors, Jack Habib and Brenda Morginstin. It provided an account of the immigrant absorption programme which is aimed at integrating new migrants into the labour force as early as possible to avoid long-term dependency. The story is a remarkable one. In the seven years between 1990 and 1996, Israel received nearly 800,000 immigrants, nearly 700,000 of whom came from the former Soviet Union. This has been a significant achievement for a country with only around 5 million people. The remarkable thing is that most of these people (between 70% and 80%) have found work and that, although they are also over-represented on the welfare rolls, the whole process of absorption has been achieved without massive social disruption or wholesale unemployment. Many of these people were highly qualified professionals who were unable to find work in their professional area because the labour market was highly over-supplied. Despite this, they have achieved high rates of employment by trading down for lower-rates jobs in the service sector. The paper puts our own country's debates about immigration, which have involved heated exchanges about mere tens of thousands of people per annum, into a different perspective.

Another American contribution, from Robert Lerman, provided a detailed account of the incentives structures in the recent reform to assistance to single mothers, while New Zealand was also represented by Michael O'Brien, who presented a paper from his recent dynamic study of coping strategies and change in impoverished households.

The third day broadened the discussion out to canvass a wider range of philosophical and theoretical issues in social security, opening with a plenary address by Jørn Henrik Petersen from Denmark which examined the moral foundations of the welfare state. The text was a rather dense, philosophical contribution of a typically Scandinavian sort, but the address was delivered in a lively and stimulating manner. Professor Petersen examined a range of moral underpinnings for the welfare state, drawing on biblical and classical sources, together with more recent philosophical works, especially from the Scandinavian world. Although it soared somewhat above the more prosaic concerns of the communities of academic researchers and social security administrators who formed the bulk of the attendance at the conference, it nevertheless provided rich fuel for discussion at the succeeding coffee break.

I must confess that this paper gave some grief when it came time to have it translated. I was required to provide advice to a German translator on nuances of meaning in a paper that had evidently been thought in Danish before being written in English. It was, shall I say, one of the more interesting two-hour telephone conversations I have had during the course of my career. (Gratifyingly, I was later given to understand that the German translation came out rather well.)

The concurrent sessions which followed canvassed a range of topics, including private versus public provision; theoretical perspectives on social policy and human behaviour; alternative models of social security; incentive effects and social security institutions; and social security changes under transition to market. The latter session included a number of papers from Eastern Europe, while the session on private versus public provision included two papers on recent Dutch reforms which have involved a move towards privatisation of part of the social insurance system. One paper, by Romke van der Veen, gave an account of the introduction of a quasi-market for the administration of social insurance, while the other, by Leo Aarts and Philip de Jong, was a more theoretical paper (which relied, I might add, on a dialect of algebra in which I am no longer fluent).

There were also some other interesting papers – one by Alan Deacon from the UK, which looked at arguments for and against the use of compulsion in welfare-to-work programmes, and another by Teresa Ghilarducci from the US with the intriguing title "Do the Old Eat the Young?", which examined inter-generational competition for expenditure on education and pensions on the basis of cross-national data from 47 nations. Her conclusion was that levels of pension spending had little apparent effect on levels of education spending.

The conference closed with a summing up by Chantal Euzéby from France, in which she looked forward to what the future might hold for social security. Professor Euzéby's address did not strike the same note of urgency for reform that was argued by Professor Besharov's opening contribution. Instead it was somewhat more conservative in its thinking, focusing on some older ideas – such as guaranteed minimum wages, employment promotion and job-sharing. It appeared to me to be representative of the difference between European and American approaches to social security reform, the more vigorous American reforms standing in contrast to the European desire to move somewhat more cautiously. The question I was left to ponder is whether the US is simply developing its own distinctive path or whether it is blazing a trail down which other nations are fated to follow. It is evident that our own reforms are presently tending down the American path. In Europe, however (with some exceptions, in particular the Dutch and the British), such radical reforms are not yet quite on the agenda.

The fourth day of the conference was devoted to a full-day excursion, which was generously hosted by the National Insurance Institute. Three different tour options were available and this afforded a grand opportunity to see some more of Israel than the inside of the hotel and conference complex. I opted for the visit to Masada, which is an historic and resonant site for Israelis. The site was truly dramatic – a mountain-top fastness standing high above the Dead Sea, commanding the landscape all sides and seemingly impregnable with sheer faces on all sides. But in 73AD the besieging Romans constructed a mighty earth ramp (the remnants of which can still be seen) to gain access to the fortress walls with their besieging and battering machines, whereupon the small band of Zealots, the last resistance to the Roman conquest, opted for death rather than surrender. Which ended the state of Israel for nearly 1900 years.

Overall, the operational and logistics side of the conference was splendidly organised by the host organisation and it proved to be a highly successful event, which afforded an opportunity not only to learn about recent developments in social security practice and research, but also to build a larger network of international contacts. This certainly was one of the major personal benefits it had for me. And no doubt the many friends and acquaintances I made through my involvement in the conference will be greatly relieved, next time I contact them, that I am not sending them yet another nagging reminder to please get their paper in.

Cover photo of Social Policy Journal


Social Policy Journal of New Zealand: Issue 10

Summing up the Evidence: The Impact of Incentives and Targeting in Social Security

Jun 1998

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