Diversity and Welfare

Submitted
Alexander Cappelen, Cornelius Cappelen, Stein Kuhnle, and Bertil Tungodden. Submitted. “How to Tighten Social Security: Attitudes in the General Population”.Abstract
In recent years, OECD countries have faced pressure to cut the costs of social security and different strategies have been utilized to achieve this:
  • Stricter eligibility requirements.
  • Reduced level of benefits.
  • Reduced maximum duration of benefits.
In order to better understand the political support for these three strategies, this contribution reports the results from a survey designed to measure which of them that the general population would prefer given the assumption that cost cuts are necessary.             A key difference between them is how they distribute the burden of cost reductions between different benefit recipients: Should the benefit reduction be equally distributed among all recipients (reduce the benefit level) or should it be concentrated on some groups (tighten eligibility)?             The main argument in favour of an equal distribution is that it would minimize the benefit reduction experienced by any particular individual. However, there are several arguments for an unequal distribution as well, for example that some groups could be less deserving (or include more “cheaters”) than others or that there could be larger efficiency gains from reducing benefits to some groups rather than to other groups.             For a given reduction in total costs, there is a trade-off between the desire to avoid large individual benefit reductions and the concern for protecting some groups of benefit recipients more than other groups. Different preferences for how to achieve cost cuts will reflect how individuals trade off these concerns.             We find large heterogeneity in how people make the trade-off and thus which of the strategies for cost reduction that they prefer. Right-wingers typically prefer to tighten the eligibility criteria, while left-wingers typically prefer to reduce the benefit level. Furthermore, we find that this difference does not primarily reflect different attitudes towards income and wealth redistribution, but are likely to reflect views about the deservingness of different groups and the importance of efficiency considerations.
socialsecurity_slides.pdf