Social assistance dynamics in Norway

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Thomas Lorentzen

Social assistance dynamics in Norway

Doctoral dissertation

Fafo-report 546

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ISBN 82-7422-558-9 ISSN 0801-6143

Cover page: Fafo Information Office Printed in Norway by: Allkopi AS

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Introduction ...2

Background to the problem...4

The dependency discourse ...5

Active labour market policy...7

Analytical approach...10

Decisive factors for the understanding of social assistance dynamics ...11

Research on social assistance dynamics ...15

The institutional context...19

Social assistance regimes ...19

Social assistance in Norway...21

Labour market structure and participation...23

Data and methodology ...28

Data...28

Longitudinal analyses ...28

Effect evaluations...30

Sample definition ...31

Number of spells ...33

Measuring success...33

The importance of defining a coherent destination state...34

Summary of the articles...35

Article 1: Dynamics of social assistance: the Norwegian experience in comparative perspective...35

Article 2: Explaining exit to work among social assistance recipients in Norway: heterogeneity or dependency? ...36

Article 3: Active labour market programmes in Norway: are they helpful for social assistance recipients?...36

Article 4: What works for whom? An analysis of active labour market programmes in Norway...37

Article 5: A panel data study of income dynamics in Norwegian child families receiving social assistance benefits ...38

Implications ...38

Theoretical implications...38

Further research...40

Policy implications...41

References ...43

The five articles ...49

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Introduction

The topic of this dissertation is social assistance dynamics in Norway. Recipients of social assistance have been heavily emphasized in the recent political effort to fight long- term poverty (St. meld. nr. 6 (2002–2003)). While social assistance has received an extensive focus in public debate, this focus does not match the research effort on social assistance dynamics in Norway (Hove, 2005). This is unfortunate, since dynamic studies of social assistance may tell us more—and different things—about social assistance histories than cross-sectional data ever can (Leisering and Leibfried, 1999). As Leisering and Leibfried (1999) eloquently expressed it: “we want movies, not stills”. By not focusing on time, researchers sustain a static and undifferentiated concept of social assistance, which in turn may lead to rather unrealistic policy responses (Walker and Ashworth, 1994). Moreover, the ability to shed light on the length of social assistance spells is crucial for the way social assistance is defined as a problem, both within the research community and as a part of the political discourse. Internationally, there has been increased knowledge about the dynamics of social assistance spells over the last 20 years. Follow- ing its introduction in America in the 1980s, research on social assistance dynamics has now spread throughout Europe. Central to this research effort is the question of whether generous social assistance schemes lead to social assistance dependency. Here, the underlying concern is whether those who receive social assistance for long periods become trapped in a state of welfare dependency (Walker and Ashworth, 1994). This line of thinking has also had an impact on policy formulation, both internationally and in Norway. Consequently, the dependency discourse has been an important guideline in the recent focus on active labour market programmes (ALMPs) for social assistance recipients in Norway (Lødemel and Trickey, 2001). Given the limited research effort on social assistance dynamics in Norway, it is somewhat paradoxical that the premise of social assistance dependency has had such a strong impact on Norwegian social policy.

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The purpose of this dissertation is to scrutinize the empirical foundation for this fear of entrapment and strong belief in ALMPs. More precisely, the dissertation describes the duration of social assistance spells and their histories, and whether there are more short- term or long-term recipients. Furthermore, the dissertation provides empirical evidence on whether social assistance traps the recipients into remaining in that role. This is done by analysing whether the probability of becoming self-sufficient from social assistance decreases or increases as a function of time. The government expresses deep concern about children growing up in families that receive social assistance. However, the effects on children of growing up with parents who receive social assistance depend on the duration and severity of the economic problems at hand. The dissertation puts forward empirical analyses of income development in such families. Here, it brings answers to the question of whether permanent income deprivation poses a problem for this group.

The political fear of entrapment and the focus on active labour market policy is closely connected, and two separate articles question whether the strong belief among politicians in such a policy is realistic. The empirical evidence is derived from two quasi- experimental effect evaluations where the effects of social assistance recipients’ participation in several types of labour market programmes are exposed.

In order to define both beginnings and endings of social assistance spells, and to show that the duration is of importance for the way social assistance is perceived, a dynamic perspective and several different techniques of dynamic methodology are applied to the data. The analyses range from simple descriptive survival analyses to more advanced multivariate techniques.

By utilizing register-based longitudinal data covering the entire 1995 cohort of social assistance recipients in Norway for the period 1992–1999, the dissertation contributes knowledge to several important research and policy issues.

• The duration of social assistance spells (Article 1)

• Transition to work: dependency or heterogeneity (Article 2)

• The effects of active labour market policy (Articles 3 and 4)

• Income dynamics in families with children (Article 5)

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This introduction is divided into six sections. The first section gives a brief presentation of the problem background for the dissertation. The second elaborates on the analytical perspectives applied in the dissertation, and puts the different theoretical and empirical contributions into a coherent framework. The third presents the institutional context for the study. The purpose of this section is threefold: first, it describes the Norwegian social assistance system in a comparative perspective; second, it describes the specificities of the Norwegian social assistance system; and third it focuses on the broader frameworks of the labour market and welfare arrangements. The following two sections elaborate on the data and the methodological approaches applied in the five articles, and summarize the articles themselves. The last section draws out theoretical and political implications from the dissertation. The five articles are presented after the reference section.

Background to the problem

In the last few years, poverty issues have received a renewed focus in the Norwegian political debate. This debate has been characterized by both benevolence and confusion:

benevolence in the way that the authorities, through the public debate, show great concern and will to remedy the problem, and confusion in the sense that the concept of poverty is used to describe a multitude of social problems that include almost everyone who in some way suffers from problems or shortcomings (Fløtten et al., 2001). The poverty debate has not been strictly limited to income poverty, but it has sparked an interest in social assistance beneficiaries, and especially long-term recipients. Moreover, children growing up in families with low incomes are considered especially vulnerable (St. meld. nr. 30 (2002–2005), kap. 11). This debate may seem surprising to outsiders, since Norway has comparatively few living in economic hardship (Fløtten, 2005). How- ever, the debate must be seen as both a result of internal political processes and of influence from other Western welfare states. This latter influence will be discussed more thoroughly in the section dealing with the institutional context of the social assistance system. At the national level, fighting inequality has traditionally been perceived as a

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public responsibility in Norway (Hansen and Vibe, 2005). Although the debate in its current form may be new, the focus on fighting inequality has been prevalent in Norwe- gian policy since the end of World War II. There are, however, two particular outcomes of the recent debate that are of interest for the study of social assistance dynamics, and that seem decisive in the shaping of policy initiatives to prevent the receipt of long-term social assistance. First, there is a fear that social assistance traps the beneficiaries in the role of recipients (St. meld. nr. 6 (2002–2003)). Second, the authorities demonstrate a strong belief in active labour market policy to help the recipients return to work and self-sufficiency (St. meld. nr. 50 (1998–1999); Innst. S. nr. 222 (1998–1999)).

The lack of research on social assistance dynamics in Norway does, however, have the consequence that these policy formulations have been made on a frail foundation. This is unfortunate, since it is of crucial importance that the political remedies are in line with the problem at hand. Moreover, the Norwegian Government, along with the EU, has proclaimed that social policy should be “knowledge based” (St. meld nr. 6 (2002–2003)).

In these circumstances, studies of social assistance dynamics may function as indispen- sable tools to provide the correct remedy (Hulme and Shepherd, 2003).

The dependency discourse

The focus on social assistance dependency has traditionally been restricted to minimalist welfare states, and especially the United States (see Mead, 1986; Murray, 1984). This approach to social policy comes largely in response to an increasing acceptance of the idea that social welfare provisions produce poverty traps or enforced dependency. More precisely, it builds on a notion that the beneficiaries’ difficulty in becoming free from public support is a consequence of a prolonged period of assistance (Contini and Negri, 2005). The spread of the dependency discourse may be seen as part of a debate concerning several new challenges that the advanced Western welfare states are facing (see Esping-Andersen et al., 2003; Castles, 2004; Gilbert, 2002). All of these challenges are connected to the fiscal situation of the welfare state, and are caused by processes that are both exogenous and endogenous to the state.

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The external threat most often posed is the effect of economic globalization on advanced Western capitalist countries. In a worst-case scenario, it is said that the exposure to international trade may create pressures for extensive cuts to social expenditure and taxes (Kvist, 2004). Eventually, these cuts may lead to a “race to the bottom” in which the need to compete in world markets and to attract foreign capital leads to a series of welfare cutbacks culminating in a minimalist welfare state (Castles, 2004). Scholars also argue that endogenous factors such as the ageing of populations, changes in family sta- bility and gender relations, and changes in the organization of work are important internal factors that power the push for reforms (Kautto et al., 1999). Lastly, and as one of the endogenous factors, there are discussions about the relationship between the individual and the state, and whether this poses a threat to the fiscal situation of the welfare state (Lindbeck, 2002). According to Lindbeck (2002), generous welfare arrangements may over time change individual norms and lead to aversive economic incentives among benefit recipients, and the more generous welfare regimes, such as the Norwegian, may be vulnerable to this development.

However, there is also a more morally indignant side of the debate. Hence, when Mead (1986) emphasizes deviant values, attitudes, and behaviours among the recipients, the focus is moved away from the purely fiscal aspects of dependency. Bergmark and Bäckman (2004) touch upon the same potential effect when they imply that the increase in the number of long-term recipients in Sweden might be interpreted as a sign of moral atrophy among the social assistance recipients. Against this background, the dependency discourse may be interpreted partly as a result of increasing fiscal pressure on the welfare state, but also as being fuelled by questions about morals and attitudes.

This latter line of reasoning has even reached European left-wing parties. After the elec- toral victory of the British Labour Party in 1997, Frank Field, Minister for welfare Re- form, tried to design policies that would encourage people to stop relying on assistance, embedded in a moral crusade against “dependence” and “abuse” of benefits (Leisering and Leibfried, 1999).

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Interestingly, the dependency discourse has now also become an important part of the socio-political agenda in the more generous Scandinavian welfare countries, Norway included. The development has become visible as a change in rhetoric, where there is an increasing emphasis on balancing rights and responsibilities among the social assistance beneficiaries. The latest initiative in this debate has come from the Norwegian Minister of Labour and Health, Bjarne Håkon Hansen, when in a televised interview he asked for policy efforts to encourage social assistance recipients to get out of their beds in the morning. There also seems to be a change in the practical constitution of the Norwegian social assistance administration. This development is seen through the implementation of workfare programmes for social assistance recipients, the tightening of eligibility, the reduction of the duration of benefits, and the introduction of behavioural requirements that condition the right to benefits in work-related activities (Gilbert, 2002; Lødemel and Trickey, 2001). In a feature article published in Fredrikstad Blad (25 February 2006), the previously mentioned Minister of Labour and Health stated that the solution for the social assistance recipients was not to be found in increased benefit levels, but in en- hancing the recipients’ capabilities and the possibilities of work.

Implicitly, the focus on dependency is based on a fear that social assistance no longer works as a temporary relief against economic hardship, but as a permanent source of income. There are weighty arguments questioning the realism of this fear of dependency and abuse of benefits, and several recent international research contributions give little support to the premises of the dependency theories. These are presented in more detail in the review of research on social assistance dynamics. In line with this, the purpose of the dissertation is to provide evidence on whether the fear of dependency and abuse of benefits among social assistance recipients in Norway is justified.

Active labour market policy

The political emphasis on an active labour market policy, together with the focus on dependency, is part of a common course of development in the European countries.

Hvinden et al. (2001) claim that these developments all reflect the same political fear of passive recipients of benefits.

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A central line of the development is the stronger emphasis given to the inter-linkages between the labour market and social security policies. Drawing on the results and rec- ommendations already formulated by the OECD, the EU has within its employment strategy called for a shift from passive to active measures (Hvinden et al., 2001).

Another trend is a stronger emphasis on the effective use of limited resources within the social protection systems of the European states (Hvinden et al., 2001). This trend is partly expressed in proposals to tighten eligibility criteria, reduce the maximum benefit period and/or level of benefits, and in attempts to strengthen or reinforce conditions or requirements attached to the receipt of benefits (see also Gilbert, 2002; Lødemel and Trickey, 2001). The latter change has, for instance, been justified in terms of notions of reciprocity or by phrases such as “no rights without responsibilities/obligations” (Hvin- den et al., 2001; Lødemel and Trickey, 2001). In this context, labour market programmes may be seen as a society’s way of enforcing responsibility on the recipients.

It is important to be aware that for some of the European countries, this development represents less of a break with previous practices. Hence, the Scandinavian countries, and Sweden and Norway in particular, have had a long tradition of activist and employment-oriented social policies (Wilensky 1992; Lindqvist and Marklund 1995; Drøpping et al. 1999). In both Sweden and Norway, the whole income maintenance system from its start 50 to 60 years ago was based on many of the ideas currently presented as “new”

(Hvinden et al., 2001). Historically, Scandinavian active labour market policy has rested on two sets of justifications, the first relating to the individual and the second to society.

Individual-based justifications centre on the importance of work to prevent negative experiences connected with joblessness (Lødemel and Trickey, 2001). Societal-based justifications focus on the importance of everyone being integrated into society and reducing pressure on public budgets (Lødemel and Trickey, 2001).

However, what is new in Norway is the strong focus on social assistance recipients. Ac- cording to two White Papers from the Norwegian Parliament, one of the most impor-

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tant means of preventing long-term social assistance dependency is helping the recipients to enter the workforce (St. meld. nr. 50 (1998–1999); Innst. S. nr. 222 (1999–

2000)). This is achieved by providing for voluntary or compulsory participation in labour market programmes. Programmes with compulsory participation, frequently characterized as “workfare” programmes (Lødemel and Trickey, 2001), are often of poor quality. However, social assistance recipients have for a long time had access to ALMPs targeted at the ordinary unemployed. These are often of a better quality than the workfare programmes, and hence one would think that the effects of these programmes would be substantial. Although effect evaluations of participation in ALMPs for ordinary unemployed show positive effects (e.g., Aakvik, 1998; Eldring and Grøgaard, 1996a; 1996b; Raaum et al., 2002a; 2002b), there have been few evaluations of the participation of social assistance recipients. Furthermore, the results of these evaluations show weak or insignificant effects from participation (Dahl, 2003; Moe, 2000; Nervik, 1997; Pedersen, 1993; 1998). Despite the limited support from effect evaluations, the Social Committee of the Parliament has proclaimed that these programmes have been a success (Innst.S.nr.222 (1999–2000). In line with this, the government has quite re- cently, as a part of the focus on long-term social assistance recipients, opened up 1300 slots in labour market programmes directed towards social assistance recipients. The effects of this effort have still not been thoroughly evaluated.

Although Norwegian researchers have found only moderate positive effects from programme participation, the government still demonstrates a strong belief in these programmes. This strong belief in ALMPs is far from exclusive to the Norwegian situation.

Galbraith and Williams (1986) asks whether the strong American belief in active labour market policy is a result of politicians’ choosing the remedy that is most agreeable, most convenient, and most in accord with major pecuniary or political interest, and whether there is a tendency towards picking the remedy before the cause of the problem is prop- erly investigated. The strong belief in ALMPs in Norway and the lack of empirical support for the effects of these programmes make it pertinent to ask the same question here. In two separate articles, this dissertation brings forward new evidence that sheds light on the question of programme effects on social assistance recipients.

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Analytical approach

Researchers and politicians in minimalist welfare regimes have focused largely on individual characteristics to explain and remedy the receipt of social assistance (Wilson, 1997). The theoretical background for this focus may be partly found in what Alice O’Connor (2001) refers to as “the ubiquity of the neoclassical model as a way of explaining the causes and consequences of poverty—alternately labelled human capital, social capital, or cultural capital—indicates the extent to which that central theoretical framework still prevails”. The overwhelming emphasis on individual-level attributes as the “causes” of the receipt of social assistance has resulted in an emphasis that avoids recognition of politics, institutions, or structural inequality (Iceland, 2003).

What is forgotten by focusing solely on the individual characteristics of the recipients is the fact that different welfare regimes create different life-course paths. The individual life course and the institutional level interact to produce the temporal structure of social assistance histories. Mayer (2005) describes a life course as the sequence of activities, or states and events, in various life domains spanning from birth to death. When individual life courses are seen in the context of the welfare state institutions, one obtains what Leisering and Leibfried (1999) characterize as a “life-course regime”, which is a valuable concept in the study of individual social assistance histories. Considering how massively European welfare states impact on individual lives, welfare states can be said to contribute to distinct life-course regimes: they produce and sustain specific temporal structures of life by institutional definitions of events, phases, episodes, and transitions that are linked to individual expectations and “life plans” (Leisering and Leibfried, 1999). In this context, Norwegian social assistance recipients have to be seen as members of the Nor- wegian life-course regime. This perspective of combining both the individual and the institutional level goes beyond the older dynamic approach applied in research in the United States (Leisering and Leibfried, 1999). What these older dynamic models that have been applied in American research do not account for is that different socio- economic structures and welfare regimes “decommodify” individuals to varying degrees (Esping-Andersen, 1990; Fouarge and Layte, 2005). It is important to bear in mind that

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different welfare regimes have varying practices when smoothing out income flows, and that this has an influence on social assistance dynamics. These differences may be for- malized in terms of theoretical expectations (Fouarge and Layte, 2005). Hence, the Norwegian welfare state and labour market contribute to a specific life-course regime that influences individual social assistance histories.

Decisive factors for the understanding of social assistance dynamics

A major force in establishing the Norwegian life-course regime is the welfare state.

Moreover, the Norwegian welfare state, together with those in the other Scandinavian countries, has put a very strong emphasis on equality. This leaves us with a life-course framework that is very different from the liberal welfare regimes represented by the United States and the United Kingdom. It means that Norway is an interesting case to study, since a large part of the research on social assistance derives from a different social setting than the Norwegian and we may have to look at the specific Norwegian setting in order to understand some of the findings that deviate from comparable research done in other national settings. This is important information in a situation where the European and Scandinavian states are put under pressure to impose cuts to their welfare expenditure. Underlying this development is a movement towards a fear of dependency and abuse of public welfare services. Hence, evidence from a country such as Norway may shed light on the role of the welfare system when it comes to the histories of social assistance recipients, and the mechanisms that guide the individuals into and out of social assistance.

Following this argument, individual features of Norwegian social assistance recipients are not of themselves adequate for a complete understanding of the peculiarities of the Norwegian situation. For a more compelling understanding of social assistance dynamics in Norway, we will have to understand the recipients as parts of the unique frameworks constituted by the family, the welfare system, the labour market structure, and the functioning of the labour market in the period we are studying.

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The relationship between social assistance benefits and the surrounding spheres may be depicted as protective layers enclosing a core, where social assistance benefits constitute the inner core. Hence, the social assistance benefit is the last safety net after the surrounding layers, constituted by the family, the labour market, and the welfare system, have failed.

The safety net constituted by other welfare arrangements will vary in size and function, depending on the national context. Hence, while the universal welfare arrangements in Norway constitute a very extensive barrier around the residual social assistance system, countries such as Australia and New Zealand lack such universal benefits although the means-tested core is extensive (Gough et al., 1997). Moving to the layer representing the functioning of the labour market, factors such as unemployment level, labour market regulations, and wage distribution are instrumental for the exposure to social assistance.

These are factors that vary across national settings and time. Lastly, the family institution represents a safeguard against the receipt of social assistance. Esping-Andersen (1999) asserts that the family, together with the state and the market, works as a regula- tory infrastructure that is decisive for what is perceived as rational and desirable. How- ever, the role of the family as a safeguard against becoming a social assistance recipient varies considerably across different national settings (Esping-Andersen, 2003). Further- more, the responsibility that is placed on the family by the welfare distributors varies greatly (Gough et al., 1997; Esping-Andersen, 2003). According to Esping-Andersen (1999), countries influenced by Catholic social teachings have a low level of public policy intervention in family matters. Conversely, countries such as Norway, Denmark, Sweden, and Finland have high levels of such intervention. Hence, in these latter countries, family services such as childcare are extensive. Norway may, in line with this, be described as a society in which the welfare state to a large extent has absorbed family burdens (Esping-Andersen, 1999). This is also reflected in the fact that the individual is perceived as the benefit unit for social assistance in Norway, while in many other countries the family is considered as the benefit unit (Gough et al., 1997). This also applies to the way in which family resources are taken into account by the social assistance distributors. While countries such as Germany, Austria, Switzerland, and the United States

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take family resources into account when distributing resources, Norwegian social assistance departments focus on the individual household resources (Gough et al., 1997).

Together, these spheres regulate individual social assistance histories. All three spheres are in principle dynamic in their mode of operation. In this setting, dynamic refers to the fact that they are not stable over time. However, in the period under study (1995–

1999), the welfare arrangements, labour market regulations, and wage distribution have been relatively stable, although there have been some substantial changes in the demand for labour. These changes are described in more detail in the section covering the institutional framework. Combining these three spheres in a practical and applicable analytical framework is a difficult task. Both data considerations and the extensiveness of the analyses are factors preventing the incorporation of all these elements into the analyses.

When it comes to the practicality of the analyses, the explicit effect of universal welfare arrangements is most efficiently revealed through comparisons among different countries. This is, however, beyond the scope of this dissertation. Moving to the second sphere represented by the functioning of the labour market, some of the effects are difficult to measure explicitly. This may be factors such as the equality of wage incomes and the history of high labour market participation in Norway. In the same way as for the general effects of the welfare system in Norway, some specific effects of the labour market are better depicted through comparative analyses. However, some elements related to the labour market are explicitly addressed in the empirical analyses. Hence, in the articles scrutinizing income development among families with children and work activity after a period of social assistance, the structural effects of labour market fluctuations are taken explicitly into consideration.

Despite not being able to measure precisely the direct effects of the family, the welfare system, and the labour market, knowledge about the functioning of these spheres is useful for understanding social assistance dynamics. Here, they will serve as a framework of understanding for the findings throughout the five articles in the dissertation. A natural question to ask in this context is: who fails in the labour market and is otherwise not

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adequately supported by the safety net represented by universal welfare arrangements or the family?

Individuals who are not sufficiently supported by one or several of these spheres will be the ones who are more likely to receive social assistance benefits. Individual factors are often categorized as human capital and demographic attributes, and factors representing life-course events. Although the division between static and dynamic explanatory variables may be thought to be artificial, it is based on the way these elements are presented in studies of social assistance dynamics. Hence, age is inherently dynamic, but age may also be depicted merely as a static demographic category without reference to the way ageing is a representation of a dynamic process and as a position in a life course. Like- wise, when changes in human capital or demographic attributes occur, it is in many cases possible to see these as life-course events or life-course stages. Ideally, explanatory models should depict the dynamic nature of individual characteristics. Theories and research on social assistance dynamics are, however, divergent in the emphasis that is placed on static individual attributes versus dynamic processes. Furthermore, data limi- tations may prevent the practical implementation of such a truly dynamic design.

A perhaps even stronger demarcation line between different research traditions is found in the weight that is placed on the role of the welfare state (or the lack of a welfare state) and the labour market versus individual factors. While some researchers place a singular emphasis on the characteristics of individual recipients, others stress the importance of the labour market and the welfare system. This dissertation presents no final answers to the relative weight that should be ascribed to each of these elements. However, as stated in the introduction of the chapter, the life-course framework presented by Leisering and Leibfried (1999) provides a useful starting point.

The remainder of this chapter contains more detail on the research effort and theoretical explanations applied in earlier studies of social assistance dynamics. The elements presented here will serve as a framework for the positioning of the contributions with regard to the emphasis that is placed on structural versus individual elements.

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Research on social assistance dynamics

Ellwood (1998) points to the difference in the answers given by cross-sectional and dynamic analyses: where the former answer the questions of “who” and “what”, the latter are better suited to answer the questions of “how long”, “where”, and “why”. Findings from dynamic poverty research indicate that by applying cross-sectional analyses in the study of poverty, the long-term poor are overrepresented by a weight of 8–10 compared with the short-term poor (Rank, 2004; Walker and Ashworth, 1994). Moreover, the use of longitudinal data shows that a greater proportion of the population experiences poverty than is revealed when using cross-sectional data (Layte and Whelan, 2003). The same phenomenon applies to the study of social assistance dynamics. Hence, when Bane and Ellwood (1994) compared the duration of social assistance between a cross- sectional and a longitudinal sample, 7% of the recipients in the former sample left within a year, while 31% in the latter left. Since the introduction of longitudinal research on social assistance, there has been a movement from a situation where social assistance and economic marginalization were seen as a permanent situation in individuals’ lives towards a situation where social assistance is temporary and where almost everyone is exposed to the risk of becoming recipients (Leisering and Leibfried, 1999). Hence, the application of durational data and methodology leads to a different picture of social assistance dynamics, where the focus has moved away from depicting social assistance as something unavoidable towards a situation where the focus is on escaping from social assistance. This dissertation challenges the notions of “hopelessness” and the “unavoidable” by exploring the ways out of social assistance for Norwegian beneficiaries.

There are also risks involved when applying longitudinal data, more than is the case with aggregated cross-sectional data, individual longitudinal data lead easily to questions such as: what is wrong with these people (Bradbury et al., 2001)? This is partly because much of the research in this area focuses primarily on the individual as actor or on family-level factors and dynamics (Harper et al., 2003). Research on benefit dependency is an important part of this tradition, where the focus is on individual-level mechanisms. Bane and Ellwood (1994) have criticized the dependency literature for being flawed by incom- plete, inconsistent, or non-existent behavioural models. In a review of the dependency

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literature, they systematize the dependency models into three specific groups: “the rational choice model”, “the expectancy model”, and “the cultural model” (Bane and Ell- wood, 1994).

These three models are based on variables where the main focus is on the individual recipients. While the rational choice model assumes that actors maximize utility by choosing welfare instead of work, the expectancy model depicts welfare dependency as a result of individual biographies. Hence, individual failure earlier in life explains the subsequent welfare histories. The cultural model claims that government welfare policies trap parents and children into poverty and dependency but frame the issue as one of incentives (Duncan and Brooks-Gunn, 1997). According to the predictions of the cultural model, the generosity of the welfare system leads these individuals to create subcultures where the Protestant work ethic is absent. While the two latter models imply that individual preferences change with time spent on welfare, the former presupposes fixed preferences (Contini and Negri, 2005). In the rational choice model, shifts occur as a result of changes in labour market opportunities or changes in welfare programmes (Contini and Negri, 2005). While the focus on labour market opportunities and the welfare programmes hardly fits the characterization of an “individualist” model, the premise of the model is still framed as a situation of choice. One may here ask whether it is appropriate to term receipt of social assistance a “choice”, particularly in cases where the recipient is in reality facing a strictly limited range of possibilities. Hence, when no real choice is available and external circumstances alone determine entry to social assistance, the economic incentive model is stretched to its limit (Leisering & Leibfried, 1999).

There are several other weighty arguments questioning the realism of this fear of dependency and abuse of benefits. First, we find research questioning the exclusiveness of the pull effects of the welfare system in Norway (Bowitz and Cappelen, 1994). In a comparison of Germany and Sweden, Gustafsson and Voges (1998) found that in Gothenburg, the time spent on social assistance was closely connected to the state of the local labour market. This was not the case in Bremen, where the claimants were

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more distant from the labour market and lacked the equivalent help to re-enter employment. Esping-Andersen (1985) explains this effect by pointing to the tight link between benefits and work participation in the social democratic welfare regimes. Recent findings from Sweden confirm this by showing that the overall levels of social assistance recipients follow the trends in the labour market (Bergmark and Bäckman, 2004). Last but not least, the reality behind the notion of the detrimental effects of a generous welfare system seems to be the opposite of what is expected. Hence, in an evaluation of social assistance recipients in several European cities, Saraceno (2002) finds that the shortest spells of social assistance are actually found in the most generous welfare regimes.

The cultural model is characterized by Rank (2004) as coming from a conservative para- digm. Rather than focusing on individual inadequacies as represented by character flaws, Rank (2004) describes a liberal version that views individuals as inadequate in terms of their skills, training, and education. Rank further asserts that the American mainstream research community has reinforced this liberal approach by focusing on individual and demographic attributes to explain behaviour such as impoverishment (Rank, 2004). Re- search belonging to this latter tradition finds that the duration of poverty is systematically related to claimant characteristics. Longer periods of benefit receipt are found to be associated with poor education, limited work experience, single status, and having several children (Bane and Ellwood, 1994; Duncan and Brooks-Gunn, 1997).

Demographic attributes are also used extensively to explain the occurrence of social assistance and poverty in European research (see, for example, Bergmark and Bäckman, 2004; Bradbury et al., 2001; Daly, 1992; Dickens and Ellwood, 2003; Leisering and Walker, 1998; Walker and Ashworth, 1994). Bergmark and Bäckman (2004) find that young adults and immigrants were central to the Swedish boom in the receipt of long- term social assistance in the 1990s. For Great Britain, Walker and Shaw (1998) demonstrate that among lone parents, longer education, being white, and being less than 40 years old predict shorter spells of social assistance.

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While explanations based on the dependency models and demographic attributes in some cases may be criticized for being static and placing too much emphasis on individual characteristics, several recent contributions in the study of social assistance and poverty dynamics have emphasized the importance of life-course changes/events, labour market fluctuations, and the role of the welfare state (Andrén and Gustafsson, 2004;

Bergmark and Bäckman, 2004; Leisering and Leibfried, 1999; Leisering and Walker, 1998; Saraceno, 2002; Walker and Ashworth, 1994).

These contributions question the simplicity of the choice model and the lack of reference to the frameworks constituted by the welfare state and the labour market. Hence, the focus on choice among the recipients is also being addressed as a question about lack of opportunities (Walker and Ashworth, 1994). As described earlier, these opportunities may be seen as constituted by both personal characteristics and structural provisions. The relative weight given to each of these varies considerably (Walker and Ashworth, 1994). Saraceno (2002) gives the latter of these factors a high degree of importance in a study of social assistance dynamics. In this study of 13 cities in six countries, Saraceno (2002) points to the importance of the way entitlements are institution- ally defined for the duration of spells. Furthermore, Saraceno (2002) shows that the interplay between social, economic, and demographic features of the national and local context, as well as the rules governing income support schemes, are of great importance when explaining social assistance histories. Likewise, in their study of social assistance dynamics in Sweden, Bergmark and Bäckman (2004) focus on three clusters of explanatory factors: labour market demand, political decisions and administrative practice, and individual characteristics and demographic composition. They find that the dramatic increase in numbers and the falling exit rates during the first half of the decade were primarily a result of the negative development of the labour market. From the same country, Andrén and Gustafsson (2004) have analysed two cohorts of social assistance recipients, the 1987 and the 1992 cohort. This period was characterized by a dramatic increase in unemployment levels, which allows the authors to shed light on macroeconomic effects. In line with Bergmark and Bäckman, they find that the macroeconomic situation is important for both the duration and the number of social assistance spells.

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Hence, in the latter cohort, high unemployment corresponds with longer durations and a higher number of new entrances.

These studies, focusing on factors besides individual characteristics, find little evidence to support the notion of social assistance dependency (Leisering and Leibfried, 1999;

Leisering and Walker, 1998; Saraceno, 2002; Walker and Ashworth, 1994). Hence, when employing a perspective where the framework contributed by the welfare state is explicitly addressed, two of the most common critiques directed towards social assistance are not supported: first, the notion of dependency, and second, that the more generous regimes have more dependency problems than the less generous (Saraceno, 2002).

The institutional context

Social assistance dynamics in a society may be perceived as a social indicator of the reli- ability and effectiveness of the welfare state as a whole (Leisering and Leibfried, 1999).

Hence, the demand for social assistance benefits is an indicator of the government’s effort and success in creating a buffer against possible detrimental effects of the labour market, and an indicator of the efficiency of the rest of the welfare system. Before pre- senting the institutional frameworks for Norwegian social assistance beneficiaries, the next section briefly places the Norwegian social assistance system into an international context.

Social assistance regimes

There exists a comprehensive literature on welfare typologies and the grouping of welfare states. However, these do not always overlap with the way social assistance regimes are depicted (Gough, 2001). To understand the specificities of social assistance dynamics in Norway, this dissertation relies on a regime typology developed by Gough et al.

(1997), and refined by Gough (2001). In this typology, the grouping of societies is generated along three distinct dimensions (Gough et al., 1997; Gough, 2001). The first is the extent and salience of social assistance, measured by expenditure on social assistance

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and number of beneficiaries. The second, the programme structure, is measured by centrali- zation versus local variation, particularly concerning benefit norms, rights to benefit versus discretion, individual entitlements versus wider family obligations, liberal versus tough means testing, and work testing. The third, the outcomes, is measured as benefit levels and replacement rates. Table 1 illustrates the grouping of countries from Gough (2001), where he uses a slightly more refined statistical technique than in Gough et al.

(1997).

Table 1: Clusters of social assistance regimes

Regime label Countries

Extensive, inclusive, above-average benefits Australia, Ireland, UK

Low extent, exclusive, above-average (relative) benefits Austria, Norway, Switzerland (Iceland?) Below-average extent, average inclusion/exclusion, average bene-

fits

Belgium, France, Germany, Japan, Luxembourg, Spain (Italy?) Extensive, moderately inclusive, below-average benefits Canada, USA

Minimal extent, exclusive, very low benefits Greece, Portugal (Turkey?)

Average extent, average inclusion/exclusion, generous benefits Denmark, Finland, Sweden (Netherlands?) Very extensive, inclusive, average benefits New Zealand

Source: Gough (2001)

Surprisingly, to readers familiar with, for example, Esping-Andersen’s welfare state typology, Norway is placed in the group with Austria, Switzerland, and Iceland, and not in the group with the Scandinavian countries and the Netherlands. The latter of the two groups contain what Gough et al. (1997) characterize as “citizenship-based but residual assistance” regimes, while Norway belongs to the group characterized by “decentralized, discretionary relief” regimes. The former of these are characterized by having a single social assistance scheme with relatively high benefit levels. Furthermore, social assistance replacement rates are among the highest in the OECD area. Norway stands out from this group as having comparatively fewer social assistance recipients and less social assistance expenditure. Moreover, local municipalities enjoy comparatively more discretion in awarding benefits than in the other Scandinavian countries and the Netherlands.

Interestingly, Norway shares some of the characteristics of the United States when it comes to the strong political focus on preventing dependency (Lødemel and Trickey, 2001). For Denmark and the Netherlands, this ideological underpinning is much weaker (Lødemel and Trickey, 2001).

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The positioning of Norway in the social assistance regime typology is of relevance for the understanding of the social assistance dynamics in Norway. While Norway shares common characteristics with the other Nordic countries when it comes to the extensiveness and shape of the universal welfare arrangements (Esping-Andersen, 1990), the social assistance scheme differs in several important aspects. This may in its turn also lead to a different form of social assistance dynamics.

Social assistance in Norway

It is important to underscore that social assistance recipients have to be seen in relation to the rest of the welfare system, and the labour market situation in general (compare the notion of “life-course regimes”). Moreover, social assistance recipients in Norway may be different from and have other needs than recipients of means-tested benefits in other countries. Typically, in welfare states without extensive universal welfare services, most welfare needs are met by means-tested services. Conversely, in Norway, most welfare needs are covered by universal welfare arrangements. This makes the number of recipients of social assistance relatively small, and also singles out certain risk groups with needs that are not otherwise sufficiently met by the universal welfare services pro- vided by the state. Among these are young unemployed who are not entitled to ordinary unemployment benefits.¹ For these, and more generally for all unemployed whose rights to ordinary unemployment benefits have expired, social assistance is often the only fea- sible alternative source of income. There are also groups of recipients with disabilities and health problems who are not qualified for a disability pension, or where the application for a disability pension is still pending. Lastly, is the group of refugees who receive social assistance on their arrival in Norway.²

1 Dewilde (2003) depicts transitory poverty at the start of adult life as a general trend in Western welfare states.

2 A separate support scheme was introduced for refugees after the end of our observation period. Newly arrived refugees were, from 2003, entitled to economic support conditional on participation in an intro- ductory programme.

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Altogether, social assistance benefit in Norway is the final safety net to provide relief for individuals in economic hardship. As in other European nations—though perhaps even more so in Norway—the provision of social assistance is a local responsibility and the benefits are means-tested (Gough et al., 1997; Seip, 1994). As commented on earlier, the guidelines for giving social assistance are quite broad, and individual caseworkers enjoy a great deal of autonomy in determining the nature and quality of services (Gough et al., 1997; Lødemel and Trickey, 2001). However, when weighing the impact of local government priorities against the impact of individual needs, it is the individual needs that are the crucial factor behind the distribution of social assistance (Langørgen and Rønningen, 2004). The minimum age for independent claims is 18. Entitlement is based on the principle of domicile, and therefore foreigners who are legal residents are entitled to aid. Although the benefit is meant to supply temporary economic relief, there are no time limits, so entitlement remains for as long as needs last and conditions are met. In a comparative perspective, benefits are generous, but not as generous as in the other Scandinavian countries (Gough et al., 1997). There has also been a recent displacement in the relationship between what Gough et al. (1997) characterize as “carrots” and

“sticks”. Norwegian authorities are currently placing a stronger emphasis on the responsibilities of the social assistance recipients (compare the initiative from the Minister of Labour and Health). Following this, claimants must seek and be willing to take work offered. Beneficiaries may also be asked, or required, to participate in ALMPs offered by the labour market authorities or the municipalities (Lødemel and Trickey, 2001).

The period under study spans from 1995 until the end of 1999, although some of the analyses go back to 1992. During the period 1995 to 1999, Norway experienced a pro- nounced decrease in the number of social assistance recipients. The development in the number of social assistance recipients during the 1990s is illustrated in Figure 1.

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Figure 1: Social assistance recipients in Norway, 1990–1999

50000100000150000200000Number of recipients

1990 1992 1994 1996 1998 2000

Year

Total Outflow

Inflow

Social assistance development 1990-1999

Source: Statistics Norway (SSB)

Figure 1 shows that the number of social assistance claimants in Norway reached a peak in 1994 with 167,000 recipients. In the period under study, the number of recipients decreased from 160,000 in 1995 to 126,000 in 1999. Over this entire period, the inflow to social assistance was lower than the outflow. This is important to keep in mind, since the findings presented in the articles may reflect the composition of the social assistance clientele and the then-current labour market situation.

Labour market structure and participation

While Norway has a social assistance system that contains elements and characteristics that separate it from the other Scandinavian countries, it shares the common character- istic of having highly developed public welfare services. In the Scandinavian countries, the government has a very prominent position compared to the market and the family as a welfare distributor (Esping-Andersen, 1999; Esping-Andersen et al., 2003). While liberal regimes such as the United States and Great Britain advocate the primacy of

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markets, and conservative regimes such as Germany favour more family and local community social responsibility, we find in the Scandinavian countries a long-standing preference for collective solutions (Esping-Andersen et al., 2003). The latter manifests itself through universal income guarantees, ALMPs, and highly developed services for children, the disabled, and for the frail elderly. According to Esping-Andersen et al.

(2003), this is also the reason why the Scandinavian countries are among the few OECD countries to have minimized both aged and child poverty. It has been a central aim of the Norwegian social democratic policy in the post-World War II period to contribute to a just distribution of public goods and services. Moreover, the post-war policy has explicitly aimed at cutting the tie between social background and life chances for the citizens (Hansen and Vibe, 2005).

The political emphasis on equality is visible in the way work income is distributed na- tionally. Norway, together with the other Scandinavian countries, has a relatively compressed income distribution compared to other Western nations. In addition to the ob- vious fact that income distribution says something about economic equality/inequality in a society, it also has consequences for the relative profitability of being in the workforce versus receiving benefits. While the Norwegian social assistance benefit may be relatively high, it is important to emphasize that the alternative compensation of being in a low-wage job is better than in most countries. Figures generated from the databases of Statistics Norway (http://ssb.no) show that while the average monthly gross income for the first decile of full-time employed in Norway in 1998 was 14,280 NOK (ap- proximately €1790), the corresponding average social assistance benefit for single recipients aged 18–66 was 5982 NOK (€750).³ This is a point that is important to emphasize in discussions about dependency problems, where lack of work incentives is seen as caused by too generous benefits. Hence, while the benefits of receiving social assistance may be relatively high in Norway, so is the compensation of being in the work force.

Table 2 presents Gini indices of income inequalities in several selected countries.^4,5 The

3 There is no taxation on social assistance benefits, and wage incomes will be lower than depicted here when taxes are deducted.

4 http://hdr.undp.org/reports/global/2003/indicator/indic_126_1_1.html

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table shows that all the Scandinavian countries have a rather compressed income distribution. Norway has substantially smaller income inequalities than the United Kingdom and the United States. This means that there are excessive differences between those with the highest and the lowest incomes in the United States and the United Kingdom.

Conversely, all the Scandinavian countries show a remarkably strong similarity when it comes to low dispersion of incomes.

Table 2: Gini index of income inequalities

Denmark 24.7

Sweden 25.0

Finland 25.6

Norway 25.8

United Kingdom 36.0 United States 40.8

Source: UNDP, Human Development reports, 2003

While most welfare systems have been designed on the basis of traditional views of gender roles—male breadwinner, female carer (Barnes et al., 2002)—the Scandinavian countries have made an effort to adjust the welfare state arrangements to the relatively new situation of increasing labour force participation among women. Such labour force participation has been systematically stimulated by welfare state arrangements. Accord- ing to Esping-Andersen (1999), the Scandinavian countries are the only welfare states that are meaningfully committed to a de-familialization of service burdens. De- familialization is here interpreted as the level at which households’ welfare and caring responsibilities are taken care of by the state (Esping-Anderson, 1999).

The de-familialization, and especially the extensive provision of public childcare, has consequences for a group that is considered especially vulnerable to receiving social assistance—single mothers (e.g., Bane and Ellwood, 1994; Duncan and Brooks-Gunn, 1997). Hansen et al. (2006) find that the support found in universal welfare arrangements explains why single parents in Norway experience a lower risk of poverty than single parents in Germany (Hansen et al., 2006). Gustafsson and Voges (1998) draw the

5 The Gini index is used to measure income inequality, and is a number between 0 and 100, where 0 corresponds with perfect equality (where everyone has the same income) and 100 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income).

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same conclusion in a comparison of Germany and Sweden. The lower rates of receipt of social assistance and higher rates of workforce participation among single mothers in Sweden are explained by policy differences related to the comprehensive system of childcare and family-centred employment policies in Sweden (Gustafsson and Voges, 1998). Hence, seen in the context of the spheres presented earlier, the Norwegian labour market and welfare services provide a strong barrier against social assistance. While these more general characteristics of the labour market have been quite stable over the period under study (1995–1999), there have been substantial changes in the demand for labour in the same period.

Figure 2: Unemployment rate in Norway, 1990–1999

34567Unemployment rate

01jan1990 01jan1992 01jan1994 01jan1996 01jan1998 01jan2000 Calendar year

Unemployment rate 1990-1999

Source: Statistics Norway (SSB)

Figure 2 shows changes in the national unemployment level from 1990 to 2000. Inter- estingly, the changes seem to follow the same trend as for social assistance, illustrated in

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Figure 1.⁶ From a maximum unemployment level peaking at 6.8% in 1993, the unemployment level decreased evenly to 2.8% at the beginning of 1999. In the period under study, there was a total decrease from 6% at the beginning of 1995 to 3.6% by the end of 1999. This development is slightly different from that in the other Nordic countries.

While Sweden and Finland faced a severe recession at the beginning of the decade (Drøpping et al., 1999), thanks to oil revenues, Norway recovered from the recession quickly, and from a level that never reached the depths experienced by Finland and Sweden. Denmark had experienced economic difficulties from the 1970s, and for the Danes the economic developments of the 1990s were little different from those of the late 1980s (Drøpping et al., 1999). Although Norway was not struck by the economic downturn at the beginning of the decade in the same way as the other Scandinavian countries, the country witnessed a substantial upturn in the business cycle during the latter part of the decade. It is important to keep this development in mind when inter- preting the results from the five articles, which all show the same general positive development of income growth and work activity. It is reasonable to believe that the social assistance clientele are more resourceful after a down-turning business cycle than after an up-turning one. Hence, while only the most marginalized sections of the labour force receive social assistance benefits throughout an up-turning business cycle, the opposite may be true after a down-turning business cycle. An implication of this argument is that we may have found a different, and less positive, development if we had been studying social assistance recipients during a down-turning business cycle.

6 This relationship will be further assessed in “Explaining exit to work among social assistance recipients in Norway: heterogeneity or dependency?” and in “A panel data study of income dynamics in Norwegian child families receiving social assistance benefits”.

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Data and methodology

Data

Commissioned by Fafo, Statistics Norway has linked data from a number of national administrative and statistical registers. The data were initially collected for the project

“Social assistance dynamics in Norway”, funded by the National Research Council, grant number 137222/530. The 1995 cohort of social assistance recipients includes about 160,000 individuals. For about 5000 claimants, no linking was possible. Our data set therefore includes about 155,000 individuals, and contains individual information for each of the years 1992–1999. The linking is made possible by means of personal identi- fication numbers. We have also connected family information to the file, which gives us access to accurate information covering the families of social assistance recipients. The family file mainly consists of personal and family demographic and income information.

Altogether, the data set covers a wide array of information because of the linking of several different statistical registers. Included in the data are all forms of public benefits and social security contributions, educational activity, socio-demographic variables, work activity, pensions, death, emigration, and immigration. There is, however, due to the register-based nature of the data, no information about somatic or mental health.

Most of this background information is longitudinal, and covers the period from 1995 to 1999, although most goes back to 1992. In addition to the advantages of having data covering the entire population of families receiving social assistance, the register-based data also have the advantage that there are few missing observations and no panel attri- tion.

Longitudinal analyses

The ability to shed light on social assistance durations is crucial for the way social assistance is defined as a problem. Looking only at snapshots of social assistance histories loses the dynamic dimension of social assistance, wherein time may be characterized as the medium in which social assistance takes place (Walker and Ashworth, 1994). Al-

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though time has such an important role in the manner in which social phenomena are experienced and perceived, it has, as commented on earlier, long been neglected by mainstream sociology (Rank, 2004). However, including the time dimension in the study of social assistance may open up a different and more comprehensive way of perceiving and working to solve income problems.

The changes in the way poverty is perceived that are brought forth by dynamic thinking may have important consequences for the preferred types of poverty-reducing strategies that are applied. In a country with a predominantly temporary receipt of social assistance, it may be preferable for politicians to focus on social safety nets that help people to manage their present deprivation (Hulme and Shepherd, 2003). Hence, in situations where social assistance works as it is supposed to—as a temporary relief from economic problems—the focus should be on whether the benefits are of a sufficient size to serve the needs of the recipients. Conversely, a country where long-term social assistance recipients constitute a large proportion of the recipients may need policies to redistribute assets and reduce social exclusion on a societal level (Hulme and Shepherd, 2003).

The articles employ several statistical models. The longitudinal analyses may be divided into two main types, where the first set is performed with event history models (also called survival analysis), while the second is performed with panel data models. Event history models describe the occurrence of events, which may be defined as a qualitative change that occurs at some particular point in time (Allison, 2004). In our case, two different events are defined. The first, in “Dynamics of social assistance: the Norwegian experience in comparative perspective”, looks at exit from social assistance. The article

“Explaining exit to work among social assistance recipients in Norway: heterogeneity or dependency?” looks at the transition to self-sufficiency through work. Although these models are well suited to analyses where the outcome is naturally defined as a transition to something qualitatively different, as is the case with exits from social assistance, they are not suitable for cases where the outcome is measured continuously. Hence, in the article “A panel data study of income dynamics in Norwegian child families receiving social assistance benefits”, the outcome variable of income is measured continuously,

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something that makes the panel data approach more appealing. Panel data models have another quality that makes them very useful in social research, namely the ability to control for unobserved explanatory variables (Petersen, 2004). This ability makes it simple to carry out control routines, for example, for dependency problems. The same procedure is far more complicated when performing event history analyses. Solving this chal- lenge has prompted the use of the non-parametric mass point technique as suggested by Heckman and Singer (1984). This procedure is described in more detail in “Explaining exit to work among social assistance recipients in Norway: heterogeneity or dependency?”.

Effect evaluations

When performing effect evaluations of active labour market policies, it is important to keep in mind that the recipients are a selected group in that a common strategy when recruiting participants has been to pick those with the best prospects for a job. Evidence suggests that often such individuals are prioritized, a process known as creaming. This turns effect evaluations into an exercise that is not straightforward to carry out.

Depending on the programme in question, participants are likely to differ from non- participants in a number of characteristics. Failing to take this problem into account could lead to negative or positive selection bias that may influence the programme effect substantially. This leads us to point to two important issues when describing programme effects. First, success is not measured by the number of people obtaining a job after participating in a programme. The participation effects have to be measured from a perspective where we ask: what would the situation have been for the participants without programme participation? Obviously, this is an ideal situation that is impossible to du- plicate in practical life. Hence, what is done to approach this ideal situation is to gener- ate a comparison group with the same characteristics as the participants, but without participation in a programme. This leads us into the second problem: how to separate programme effects from the effects of programme participant characteristics. Obtaining a comparison group that is similar to the programme group eliminates the effect of participant characteristics, and in an ideal situation reveals the “pure” effect of programme