Introduction
The Dutch social assistance system guarantees a minimum income for people who are not able to support themselves – offering sufficient financial resources (limited in amount and managed in duration) to achieve a “minimum acceptable” lifestyle.
The support takes the form of income support, activation, and specific basic facilities for most people against poverty and exclusion.
The SVB (central Social Security Institution, called the Social Insurance Bank) administers a social assistance program as follows:
1) Poverty
2) Social Assistance
3) Rights and Obligations
4) Decentralized Administration
5) Making Work Rewarding
6) Poverty Trap
7) Productivity Gap
Poverty
Poverty is seen as existing when people are afflicted by several problems simultaneously, including:
- poor employment
- inability to make ends meet
- reduced ability to do things independently
- poor state of health
Social Assistance
Local Authorities play a very important role in the social assistance, activation , and reintegration measures, since they are responsible for administering social assistance. The Dutch social assistance system is based on the principle that citizens are capable of supporting themselves independently (the ‘welfare-to-work’ goal). Those who are unable to do so are given income and support in finding work for as long as strictly necessary. In this regard, the Reformed Social Assistance Act puts great emphasis on self-activation with broad freedom and responsibility of the local authorities.
In the US welfare reform emphasizing welfare-to-work was undertaken during the Clinton administration under a Republican controlled Congress.
Rights and Obligations
Social assistance in the Netherlands takes the form of a cash benefit at a subsistence level for those who cannot support themselves, and is paid to all eligible persons above 18 years of age. A precondition for receiving assistance benefits is that people must actively look for work and accept any reasonable work offer. In the US there are similar welfare-to-work provisions, but most recipients are single mothers with children. Adults without dependent children rarely receive welfare.
Benefits
Single people receive 50% of the minimum wage, single parents receive 70%, and a married couple 100%. Additional allowances are limited to 20% of the minimum wage for a single person and a single parent. Local authorities may deviate from general standards on basis of individual assessments. The benefit for younger people can be reduced, for example, if a local authority sees that the full benefit makes employment unattractive to the recipient.
In the US welfare is administrated by the states. Some states are more generous than others. In California, for example, recipients get a monthly cash allowance deposited directly to a debit card, plus an allowance for food stamps plus free medical care for themselves and their children. Under California's CalWorks program, which is the welfare to work program, recipients must be looking for work or enrolled in an acceptable educational program leading to work. In return they get free child care at a provider of their choice, a generous gas allowance so they can get around to submit job applications or attend school or college, an allowance for books if they are attending school and a clothes allowance so they can make themselves presentable to a prospective employer.
Decentralized Administration
Local authorities receive two budgets: one budget for benefit payments and one for local active labor market measures, referred to as the reintegration budget.The local authority may keep any budget surplus, but it must also finance any deficit out of its own resources. This is to stimulate efficiency. Size of the reintegration budget, for example, depends on the economic cycle. Currently, local authorities are required to spend most of the budget in the private market (to reintegration service providers). This is to ensure the best possible price to quality ratio. The discretionary budget for local authorities enables the latter to customize their approach for limiting inflow into the social security system and to encourage people to get off benefits (again, the ‘welfare-to-work’ goal).
In the US there is no such thing as a reintegration budget, that is money to be paid to employers who hire social welfare recipients.
Making Work Rewarding
The strict focus here is to reduce the Poverty Trap Effect and to tackle the Productivity Gap, i.e., to make it attractive for employers to hire the less educated.
Poverty Trap
This exists when it is not financially worthwhile for the unemployed receiving a benefit to do paid work. This abuse is strictly controlled. For example, any existence of local various income-dependent support themes on top of the central government basic benefit will result in the loss of the latter … thus reducing income and abuse of system. In the US as well there is an emphasis on getting people off welfare. There is a 5 year maximum length of time a person can receive welfare.
Productivity Gap
A productivity gap exists when it is not financially rewarding for employers to take on unskilled workers at the mimimum wage because of their low level of productivity. To remove this threshold, local authorities can provide wage subsidies to employers out of their discretionary reintegration budget.
Notes:
This may all sound very Socialistic but on the contrary has played a key role in the historically relatively low unemployment rates in the Netherlands in 3-4% range … excepting now during the current recession where the current rate is moving towards the 5-6% range. ‘Welfare-to-work’ is working!
Another positive factor is that the Netherlands has a relatively low National Debt per capita of about $19,000 vs. $37,000 per capita in the US based on a current total National Debt of $11.0 trillion. They achieve this by tough budget balancing discipline.
Another important fact I´ve observed over 30 years in Holland is how brutally realistic the Dutch government and general population can be whenever social safety net programs need adjustments, reductions, and /or refinements to meet new economic conditions and/or inequities. The Dutch are an extremely prudent, hard-working people who have a deep dislike for all forms of debt, including credit cards. The average Dutch person has but 2 credit cards and the approval amounts are strictly controlled by law based on total debt obligations to income.
In contrast, in the US credit card limits and interest rates and various other charges are totally up to the credit card company which can raise or lower rates and other charges at whim. Currently, the US banking model focuses on making money by means of overdraft and over limit fees as well as various assorted other fees rather than from just interest. Even interest is reaching usurious proportions. In contrast Dutch credit card companies are strictly regulated.
