This is a joint effort by Frank Thomas who is an American expat who has lived in the Netherlands for over 30 years and myself.The previous work can be found here: Part 1, Part 2, Part 3, Part 4. Frank has contributed all the information about the Netherlands which is the greater part of the work. In this section we consider how each society provides for those in poverty, those with little or no income and temporarily or permanently unable to work - in other words "the least among us." 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:
2) Social Assistance
3) Rights and Obligations
4) Decentralized Administration
5) Making Work Rewarding
6) Poverty Trap
7) Productivity Gap
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
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.
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.
Single people receive 50% of the minimum wage, single parents receive 70%, and a married couple 100%. Additional allowances (from local sources, for example) are limited to 20% of the minimum wage for a single person and a single parent. Local authorities may deviate from general standards on the 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.
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.
The 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 best possible price to quality ratio.
The discretionary budget for local authorities enables the latter to customize their approach to limiting inflow into the social security system and encouraging people to get off benefits (again, the ‘welfare-to-work’ goal).
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.
This exists when it is not financially worthwhile for the unemployed who receive a benefit to do paid work. This abuse is strictly controlled. For example, any existence of local income-dependent support schemes on top of the central government's basic benefit will result in the loss of the latter, thus reducing income and abuse of system.
A productivity gap exists when it is not financially rewarding for employers to take on unskilled workers at the minimum 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.
This may all sound very Socialistic but on the contrary it has played a key role in the historically relatively low unemployment rates in the Netherlands - in the 3-4% range … excepting now, of course, when, due to the economic crisis, 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 a tough balance-budget discipline.
In general the Dutch government and general population can be brutally realistic 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.
In the US there is the Supplemental Security Income (SSI) program which is designed to help aged, blind, and disabled people, who have little or no income. It is paid out of general tax revenues and not out of social security taxes. It provides cash to meet basic needs for food, clothing, and shelter. The program is authorized by Title XVI (Supplemental Security Income for the Aged, Blind, and Disabled) of the Social Security Act. Beginning in January 1974, SSI replaced the Federal/State matching grant program of adult assistance to the aged, blind, and disabled. Under SSI, there is no minimum age limit for establishing eligibility based on blindness or disability.
Although some of your earned income is counted against the SSI income limit, benefit amounts are not reduced dollar-for-dollar as the result of income from work. Thus, you are encouraged to work if you can. Blind and disabled recipients, if they are capable, are referred to the appropriate State vocational rehabilitation agencies for services to help them enter the labor market. In most States, they also permit continued Medicaid coverage after cash payments end.
For 2009 in the US the Federal Full Benefit monthly rate for an individual is $674. For Eligible Couples it's $1011.00. In the Netherlands the minimum wage is $1356. euros or $1784. Therefore, the equivalent of SSI would be 50% of $1784. or $892. or about 1/3 more than in the US for a single person. For a married couple the rate would be $1784. in the Netherlands vs. $1011. in the US or about 76% more. So the "world's richest country" is nowhere near as generous as the Netherlands when it comes to providing for "the least among us." The US does provide a Medicaid benefit of $30. per person.
Eligibility in the US is hard to determine from their website. But SSI is not available to anyone except the aged, blind and disabled according to their literature. Therefore, if one is destitute but able bodied, it appears that it would not apply allowing an untold number of people to "fall through the cracks." The Dutch elegibility requirements are not as strict. In general one only need be destitute.
In general the programs in the US and in Holland are similar although the Dutch benefits are considerably greater than in the US.
Also posted as a comment on Robert Reich's blog.