Contraction of welfare state

See also welfare state/fiscal burden objection, expansion of welfare state and political externalities.

The contraction of welfare state concern is a concern voiced by some people, particularly those who support or want to expand the welfare state provisions of the status quo. The concern is about how more liberal migration policies would undermine both the feasibility and public support for expanding welfare state provisions. Two channels of operation have been postulated:

  • Migration changes the range of feasible welfare state policies,by affecting how much they cost. In cases where migration increases the proportion of people who would be eligible for the welfare benefits, it makes the policies more costly and thereby less feasible.
  • Migration changes the degree of native support for welfare state policies, arguably because natives do not want to enact welfare policies whose primary beneficiaries are migrants. This may be due to natives having lower levels of solidarity for migrants (viewed as an outgroup) than for fellow natives. Note that it may be hard to disentangle this point from the preceding one in many practical cases.

How more migration of people eligible for a welfare benefit increases the fiscal cost and makes the benefit less fiscally attractive or feasible

The basic argument is simple, but there are a few caveats, arising from the tension between wanting the welfare benefit to continue and being disappointed that more people are making use of it.

  • An obvious keyhole solution to the problem of migrants increasing the use base for a particular welfare benefit significantly is to deny that benefit to migrants (perhaps for a few years after they migrate). This is already done in many jurisdictions for some welfare benefits. To the extent that walling off or further curtailing these provisions is considered worse than refusing to liberalize migration, the question of why arises. The answer may hinge on some mix of citizenism, territoralism, or local inequality aversion.
  • It has been argued that some forms of state subsidies (such as subsidized or free provision of health care or education) are better viewed as investments than as welfare benefits. The argument is made most frequently in the context of education: education is an investment in the future of the country, and should be viewed in those terms. If you hold this view, an increase in the number of people eligible for free education should not be a problem — it just means there is more to invest in. For investment-justified welfare benefits, the relevant question that arises is whether migrants are less likely to pay back the investment. (In the case of education, this would either mean the migrants are more likely to leave and therefore are lower-yield investments in education, or they, for some other reason, are statistically less likely to generate the same social returns to education as natives).

How native support for a welfare benefit may decline due to perceptions that migrants will make disproportionate use of it

People who support a particular welfare benefit may be worried that other natives (who affect government decisions by voting on ballots and for elected officials) may decide to stop supporting a particular welfare benefit if they believe (rightly or wrongly) that the benefit will disproportionately go to migrants, because the natives view migrants as an outgroup to which they feel less solidarity than to fellow natives. The most commonly cited academic paper for this view is Alesina, Glaeser, and Sacerdote (2001).

Blog post and comment discussion

The links here are from an older version of the page, and need to be cleaned up and reorganized.

  • Immigration and the Welfare State by Bryan Caplan. He writes about the contraction of the welfare state due to immigration:

    If you’re a pro-immigration leftist, these findings will probably fill you with dismay: It sure sounds like low-skill immigration undermines middle-class support for the welfare state. Yet if, like me, you love immigration and loathe the welfare state, it’s good news. You might recoil, “It’s ‘good news’ that freedom depends on bigotry?!” But there’s a big difference between “less solidarity” and “bigotry.” And solidarity is a very mixed bag. Despite its surface appeal, solidarity is the #1 cause of self-righteous injustice against out-groups and naysayers. It would be a better world if we could just admit that our “fellow citizens” are not our brothers and sisters, but strangers.

  • Liberals Need to Choose: Welfare State or Immigration, an op-ed for the Huffington Post by Alex Nowrasteh. He argues that supporters of the welfare state should consider trading off welfare for immigrants against allowing more immigrants in. In other words, his keyhole solution is to strengthen the wall around the welfare state to prevent immigrants from accessing it:

    That also presents a simple solution to the immigration impasse: Build a wall around the welfare state. Short of the preferable goal of eliminating the American welfare state, further restricting its use by immigrants, making them wait longer before they can access it, or making sure that immigrants pay a certain amount in taxes before using it, would go a long way toward convincing Americans that immigration benefits them, as well as the newcomers.

    Liberals who actually care about immigration should sacrifice the welfare state, or at least immigrant access to it, as the price for allowing more immigration. That will go a long way toward convincing American voters to allow more legal immigration.

    Politically, our welfare state is incompatible with increased legal immigration. The welfare state is supposed to decrease poverty, but all too often fails to do so. The average immigrant can expect a five-fold increase in his or her wages just by moving here. If liberals are concerned about poverty, and not just the relative “poverty” that exists in America, they should realize that free emigration is the best anti-poverty tool for the world’s poor.

  • Immigration and the Welfare State by Ilya Somin, June 12, 2011, for the Volokh Conspiracy blog. Somin makes points fairly similar to those made by Caplan and Nowrasteh. Somin:

    I cite some of the relevant studies in a recent article in the International Affairs Forum on Immigration (pg. 43). The research shows that this effect holds true even in a strongly left-wing country like Sweden. This book by political scientists Donald Kinder and Cindy Kam presents the evidence for the United States (and to a lesser extent, several European countries). Historically, the greater ethnic diversity of the US is one of the main reasons why we have a smaller welfare state than most European nations; the evidence on that point is summarized in a well-known study by Edward Glaeser and Alberto Alesina. Because people are most likely to support welfare programs when the money goes to recipients who are “like us,” immigration actually undermines the welfare state rather than reinforces it. Even if the new immigrants themselves vote for expanded welfare state benefits (which is far from always a given), their political impact is likely to be offset by that of native-born citizens who are generally wealthier, more numerous, and more likely to vote and otherwise participate in politics.

    This feedback effect creates a difficult dilemma for liberals and leftists who support immigration but also want to expand the welfare state. Paul Krugman calls the welfare-immigration tradeoff an “agonizing issue” for liberal Democrats. But for libertarians and other supporters of economic liberty, immigration is a win-win game. It is both an important exercise of economic freedom in its own right, and has the secondary effect of constraining the welfare state.

    It may be lamentable that immigration fails to expand the welfare state primarily because of ethnic bias. I would rather that voters had more admirable motives. But in politics, we often face tradeoffs where it’s better to do the right thing for the wrong reason than not do it at all. Moreover, it is no more bigoted to oppose welfare state benefits because they go to members of other ethnic groups than to support them because they go to members of your group. For example, Kinder and Kam find that strongly “ethnocentric” white voters are more likely to support Social Security benefits than other whites, because they see it as a program that primarily benefits non-Hispanic whites like themselves. In relatively homogeneous states, voters tend to support higher levels of welfare benefits than they would otherwise because they see them as supporting members of their own ethnic or racial group. In more diverse societies, the public supports relatively lower benefits because of a perception that too much of the money goes to racial or ethnic “others.” The former attitude is no less biased than the latter.

    Finally, it’s worth noting, as Bryan Caplan emphasizes, that we need not choose between limiting immigration and cutting welfare benefits across the board. We can, instead, selectively deny such benefits to new immigrants and/or require them to pay special taxes to offset any fiscal burden they might impose on natives. Conservative critics of immigration who recognize these alternatives fear that they won’t be politically viable. But the feedback effect discussed above implies that their political prospects are quite good. Most voters are quite happy to support cutting welfare benefits for recent immigrants or making the latter “pay for themselves.” That’s why the extensive restrictions on immigrant welfare embedded in the 1996 welfare reform act were very popular, as are similar measures proposed in various European countries.

  • Libertarians and the Welfare State: Is It Time to Drop the Hard Line? by Bryan Caplan, where he counters bleeding-heart libertarians by arguing that support for the welfare state is an obstacle to freer immigration, and libertarians concerned about the poor should therefore oppose the welfare state.
  • Welfare and Immigration: The Flip Side of the Argument by David Friedman.
  • Immigrant benefit claims are an argument against the welfare state, not an argument against immigration on the Adam Smith Institute blog.
  • Dan Klein to Paul Krugman: You Can Do Better, a blog post by Bryan Caplan noting the contradiction between Krugman’s pro-poor image and his concern that immigration would undermine the welfare state.

Note: Certain empirical objections have been raised to the empirical “contraction of welfare state” argument. These can be found at the bottom of the political externalities page.

"The Efficient, Egalitarian, Libertarian, Utilitarian Way to Double World GDP" — Bryan Caplan