The Use of Markets in Social Policy: Welfare Recipients as Market Participants

Abstract

The structure of welfare benefits has a material impact on the experiences and outcomes of beneficiaries. Historically, many governments provided supply-side welfare benefits in which the state provided direct provision of goods or services (i.e. public housing). Since the 1970’s, many governments have increasingly provided demand-side benefits, such as vouchers and cash transfers, in which recipients use the benefits to procure goods and services in the private market. A fundamental reality of demand-side subsidies—largely ignored by the scholarly community—is that the use of such subsidies turns welfare beneficiaries into market participants. Because the recipients of demand-side subsidies must enter the market to use the benefit, the terms on which they do so may have a significant effect on the outcomes produced by these social policies. It is, therefore, the experiences of welfare beneficiaries in the private market that serves as the foundation of this study. This study presents the concept of a market position to help understand the experiences of welfare recipients in the private market. The Market Position Framework is introduced as a tool to analyze market positions and the framework is applied to social programs in the U.S. and in Europe. Market positions are defined and compared and the relationship between market positions and market outcomes is examined. The study demonstrates that market positions are constituted by a set of social, political, economic, and individual factors. The analysis highlights how social and political contexts combine with program conditions to explain variation in market positions. The study also finds an association between market positions and market outcomes—stronger market positions are associated with better outcomes. This study offers a unique perspective on the analysis of social policies that is missing from conventional welfare state scholarship that focuses solely on the relative generosity of programs. This approach may be used by policymakers, advocates, and scholars to help explain the market outcomes of welfare recipients. Importantly, these tools may help to explain welfare program outcomes that may, in certain circumstances, deviate from the stated goals and objectives of that program.