Welfare reform and benefit inequality

Social assistance schemes generally comprise the last resort in countries’ social protection systems, guaranteeing citizens help when they cannot support themselves and have exhausted other alternatives. The benefit’s means-tested character implies that variation in social assistance payments is foreseen by law, a normal and intended result of applicants’ different needs and circumstances. However, variation in assessments and payments can also be generated by local government discretion in implementing national legislation. Thus, depending on where they live, persons with the same circumstances and needs may face different eligibility criteria and/or receive different benefit amounts.

Local discretion is believed to have increased in many countries following reforms in the 1990s, yet little is known regarding the impact of changes in vertical divisions of power on variation in benefits. The distribution of responsibility between central and local government has also been an issue in the Nordic countries. The Nordic countries are interesting here since they often are classified as a distinct type of welfare state (for example, encompassing or social democratic), a classification that tends, however, to overlook substantial differences within the cluster. Social assistance is a case in point. There are notable differences in the extent and character of local discretion, and the countries have also seen a variety of reforms in the areas of standardisation and institutional integration.

The aim of this chapter is to examine the relationship between shifting divisions of power and the degree of variation in social assistance payments in Denmark, Finland, Norway and Sweden. Specifically, the reforms that we examine relate to changes in local autonomy such as, for example, limiting or extending local responsibility with regard to activation policies, processes of standardisation, and institutional integration of social assistance systems with labour market policy. Somewhat simplified, the assumption is that the more detailed the regulation, the less variation is possible, and vice versa.

We use individual-level national register data that in Finland and Norway pertain to the whole population and in Denmark and Sweden to very large samples thereof. The data spans roughly the period 1990 to 2010. To examine the impact of the reforms on variation in social assistance payments we employ multilevel modelling, controlling for both individual and municipal characteristics.