Bigger is better, but what you do with it counts too

Primary source : Amanda Toler Woodward, December 18, 2015

Much of the research on welfare state development has argued  that economic prosperity (ie., GDP growth) is the key factor for expanding social policies.  Of course, economic prosperity is important. It doesn’t always, however, improve a population’s health.  The post-communist countries come to mind.

This suggests that wealth is necessary for improving health, but it is not sufficient. What countries do with their wealth is also important. Growth in GDP is not just about increases in money.  Over time, it’s one piece of larger scale modernization and development which could include (gasp!) changes and growth in the welfare state.

Today I am musing on a 2010 article by Olli Kangas that considers the issues of economic prosperity, the welfare state, and life expectancy.

Kangas is with the Social Insurance Institution of Finland, known in Finland as Kela.  Although the provision of services is the responsibility of the municipalities, Kela oversees the administration of family benefits, health insurance, rehabilitation, basic unemployment security, housing benefits, financial aid for students, basic pensions, disability benefits, conscripts’ allowances, and assistance for immigrants.

“To make a long story short,
money matters,
war kills,
and the welfare state is good for life expectancy”. (Kangas, 2010)

The punch line of the article is that bigger is better and not just in terms of the level and growth of GDP.  More importantly, a generous welfare state with broad coverage does more to increase a population’s life expectancy than economic prosperity alone.  Kangas uses a century of data (1900 to 2000) from 17 OECD countries, including Finland and the United States, to support his conclusions.

Here are some of the key findings:

  • Life expectancy almost doubled  from 1900 to 2000 while differences across the 17 countries countries decreased.  The increase continues, but at a much slower pace.
  • The variation across countries is greatest during the war years.  In the United States, for example, the effect of the war on life expectancy for men was a loss of about a year. In Finland, where the fighting against the Soviet Union was particularly devastating, male life expectancy lost 13.5 years in 1939 to 1940 and 11.6 years in 1934 to 1944. They also suffered losses during their civil war in 1918.
  • Higher life expectancy is associated with higher GDP, but only up to a point.  The effect of GDP levels off after a certain point. The United States is an outlier.  We have high prosperity, but relatively low life expectancy compared to other OECD countries.  (Hooray for American exceptionalism.)  Japan is also an outlier with moderate GDP, but the highest life expectancy.  This suggests that GDP is not the only important factor determining longevity.
  • The amount of money spent on social programs explains some of the variance in life expectancy across countries, but as with GDP the impact levels off after a certain level of spending.
  • Spending also doesn’t tell us anything about what is being done with the money spent.
    In some countries, a limited number of people get a lot.  Kangas calls this the Central-European cluster where there are “workers insurance” programs with high benefits.  In the Nordic model,  there are “peoples insurance” programs with good benefits for everyone, if not necessarily the highest.  In liberal regimes, very few people get only a little from the welfare state.
  • Life expectancy is higher in those countries with welfare systems that are both universal (where everyone gets something) and what everyone gets is generous.  This relationship is linear, meaning it doesn’t level off like the relationship with GDP or overall social spending.

I see this last point as good news in some ways because it suggests that perhaps systems can be improved over time without a complete (and politically contentious) overhaul.  Stealth policy, if you will, gradually expanding benefits to more people and increasing their generosity. (Shhh, don’t tell you know who).

It also suggests that it is better, in terms of overall population health, to give an adequate amount to everyone than to give lavishly to just a few.

Of course, that’s assuming that helping everyone be healthier is our goal and that we’re willing to spread the wealth more equitably to make it happen.

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Amanda Toler Woodward
Amanda Toler Woodward is an associate professor in the MSU School of Social Work. Her goal is to share reflections on a wide range of topics related to aging research, social work, academia, and whatever else catches her fancy.
Amanda Toler Woodward

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