The effects of social welfare on poverty have been the subject of various studies.
Studies have shown that in welfare states, poverty decreases after countries adopt welfare programs. Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries whose welfare states commonly constitute at least a fifth of GDP. In 2013, the Organisation for Economic Co-operation and Development asserted that welfare spending is vital in reducing the ever-expanding global wealth gap.
Table of effect
Timothy Smeeding used data from the Luxembourg Income Study to determine the effectiveness of anti-poverty and welfare programs on poverty reduction. The data for all the countries was from the year 2000 with the exception of the United Kingdom and the Netherlands for which the data was from 1999.
Table of poverty levels pre- and post-welfare
Two studies compare countries internationally before and after implementing social welfare programs. Using data from the Luxembourg Income Study, Bradley et al. and Lane Kenworthy measure the poverty rates both in relative terms (poverty defined by the respective governments) and absolute terms (poverty defined by 40% of United States median income), respectively. Kenworthy's study also adjusts for economic performance and shows that the economy made no significant difference in uplifting people out of poverty.
The studies look at the different countries from 1960 to 1991 (Kenworthy) and from 1970 to 1997 (Bradley et al.). Both these periods are roughly when major welfare programs were implemented such as the War on Poverty in the United States. The results of both studies show that poverty has been significantly reduced during the periods when major welfare programs were created.
Opponents of welfare reducing poverty
In the United States, some members of both the Republican Party and Democratic Party, as well as third parties such as the Libertarian Party, have favored reducing or eliminating welfare. The landmark piece of legislation which reduced welfare was the Personal Responsibility and Work Opportunity Act under the Clinton administration.
Conservative groups such as The Heritage Foundation argue that welfare creates dependence, a disincentive to work and reduces the opportunity of individuals to manage their own lives. This dependence is called a "culture of poverty", which is said to undermine people from finding meaningful work. Many of these groups also point to the large budget used to maintain these programs and assert that it is wasteful.
In the book Losing Ground, Charles Murray argues that welfare not only increases poverty, but also increases other problems such as single-parent households, and crime.
Some socialists and Marxists argue that welfare states and modern social democratic policies limit the incentive system of the market by providing things such as minimum wages, unemployment insurance, taxing profits and reducing the reserve army of labor, resulting in capitalists having little incentive to invest. In essence, social welfare policies cripple the capitalist system and increase poverty. By implementing public or cooperative ownership of the means of production, some socialists believe there will be no need for a welfare state.
Critics of welfare claim that too little of the transferred income actually reaches poor people, that the safety net welfare provides creates a "poverty trap" by reducing the initiative of poor people, and that welfare weakens the economy.
A 2010 study examining the effects of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 found that the act's "welfare cutbacks did not increase poverty rates."
Public opinion
In 2013, a NBC News/Wall Street Journal poll found that a plurality of Americans (24 percent) said "too much government welfare that prevents initiative" was the leading cause of poverty.
A January 2014 Pew Research poll found that 49% of Americans believe government aid to the poor does more good than harm as people can not escape poverty until basic needs are met and 54% believe taxes should be increased on the wealthy and corporations to expand anti-poverty programs.
Poverty's effect on welfare
While the effect of social welfare on poverty has been documented across both quantitative and qualitative studies, consideration of reciprocal causality is important in understanding the extent to which welfare can address poverty.