Welfare services ‘less effective’ than cash benefits in reducing inequality and poverty

Welfare services help to reduce inequality and poverty in European countries, according to a new study. But they are not as effective as cash benefits.

Researchers examined the impact of welfare services, such as education and healthcare, on inequality and poverty in 21 EU countries, by reference to a hypothetical situation in which no publicly provided services existed.

Key findings

  • Compulsory education and healthcare, in particular, were both found to reduce inequality and poverty among the non-elderly population.
  • Cash transfers (excluding pensions) turn out to be more pro-poor than in-kind benefits in most countries.
  • The in-kind benefits derived from tertiary education spending are the least pro-poor (and in some countries even pro-rich).
  • There is, however, little definite evidence as to whether the relative shift to expenditure on services in recent decades has eroded the redistributive power of the welfare state.

Source: Gerlinde Verbist and Manos Matsaganis, The Redistributive Capacity of Services in the EU, Discussion Paper 53, GINI Project (European Commission)
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