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Poverty and the Social Insurance Programs

Income inequality and poverty are two of the most important issues concerning the state of society today. Although much research has been conducted and much knowledge has been collected regarding the two topics, both still persist to be major problems around the world. This paper aims to define income inequality and poverty as well as to understand the basic aspects about both. It will also analyze the effectiveness of the use of social insurance programs as an answer to the growing threat of income inequality and poverty.

Income inequality may be seen as a state of relative deprivation of a certain individual in terms of his or her basic financial needs. (Kovandzic et al, 571) Deprivation is taken to mean the lack of an opportunity or advantage of an individual to meet certain necessities. The word “relative” is used to indicate a comparison between the state a particular individual is in with that of another individual’s. Thus income inequality is the stress of the state of financial deprivation of a particular individual compared to another individual who is deemed as being in a better financial situation than the other.

There is a factor of financial evaluation of oneself, when speaking of income inequality, for the individual in question. The evaluation is based on a set standard that has been taken from another individual or the financial situation of someone else in the same society. Poverty, on the other hand, is seen as a state of absolute material deprivation of a certain individual in terms of his or her basic needs. (Kovandzic et al, 571) This indicates that even without prior evaluation of the self in comparison to another individual, there is already a state of deprivation.

Poverty is absolute lack of advantage or opportunities to acquire and meet the financial needs of that individual. Poverty is different from income inequality because the latter indicates a state of lack due to the advantages seen in another although not necessarily in everyone. The former may be taken as an extreme version of income inequality in that individuals in a state of poverty are in an ultimate state of lack compared to all other economic classes within that society. Income inequality may be seen as a state of disadvantage while poverty is a state of deprivation.

(Kovandzic et al, 598) Poverty and income inequality can cause much unrest in a society. One particular study has shown that both factors are independently linked to the increase of homicide rates in a given community. This was found to be due to the aspiration of individuals subject to poverty or income inequality to alleviate their state of deprivation. It was also indirectly associated to the deprived individual’s experience of social disorganization, anomie, and strain. (Kovandzic et al, 589)

Poverty was specifically seen to be positively linked with homicidal rates because of the greater inclination of impoverished individuals to want to achieve a state of relative ease from their deprivation. The direness of their situation leads them to want to be able to remove themselves from their state of poverty even if it is by illegal and immoral means. This indicates that individuals who are experiencing situations of poverty are more motivated to better their situation than those individuals who are experiencing situations of income inequality. (Kovandzic et al, 598)

Income inequality, on the other hand, although perceived as a lesser evil is also directly linked to homicidal rates because of the fact that it increases the inclination of these deprived individuals to choose illegitimate means of generating income in order to maintain their lifestyle or to enhance their existence. This is due to the fact that as these individuals become more and more marginalized in society or as they progress further down the rungs of the social ladder, they have less and less access to the legitimate opportunities given to those above them.

Inequality is more dangerous in that it adds a sense of competition for the individuals experiencing the disadvantage. (Kovandzic et al, 598) Because poverty and income inequality are issues that place burden on all members of society in that they affect everyone within that society (as evidenced by the Kovandzic et al study), the whole of society tries to provide ways by which these issues can be resolved. Numerous strategies and frameworks have been taken and employed to eradicate poverty and inequality but none have yet succeeded to completely abolish the two.

Due to the resulting incomplete success of programs to abolish poverty and inequality, some programs have simply targeted the alleviation of the effects of both issues. One of the ways by which society has hoped to alleviate the effects of poverty and inequality is through the offering and implementation of social insurance programs. Social insurance programs involve programs wherein individuals are able to receive benefits or services as acknowledgement of these individuals’ contribution to a given social insurance scheme.

This insurance may be one of a variety of different types which include retirement pensions, unemployment insurance, unemployment assistance, disability insurance, survivor benefits and the like. Social insurance programs typically involve four main characteristics. First, the benefits, inclusion requirements as well as all aspects of interest about the program are defined by a specific statute. Second, the sources of funds of these programs are taxes or premiums paid by or for the individual involved.

Third provisions are made by those involved to account for the income and expenses included. And lastly, the population to which the program caters is defined and that particular population is usually stipulated to participate in the program compulsorily. If the participation has not been made compulsory it must be due to the fact that the program is already highly subsidized and as such, participation is voluntary for the greater majority of the said population. Social insurance programs are actually very numerous in society.

The growing number of these types of programs only serve to show the awareness of individuals that society is in dire need of a solution to the problem of poverty and income inequality. Some of the more popular social insurance programs include Social Security, Medicare, Aid to Families with Dependent Children (AFDC), Medicaid and even food stamps that are most often offered to individuals in the throes of deprivation. The government is usually involved in social insurance programs in terms of policy and regulations. However, local governments at the level of the community can take action against poverty and inequality through several means.

First, they can pinpoint the impoverished individuals in a community and identify the basic needs that are unmet in these individuals. They may then link these individuals, or the entire community if that is the case, with programs launched by the government that address the identified needs. Second, local governments can try to assimilate impoverished individuals into the production process or the labor market. This will allow the individual to receive constant wages which will in turn assure the entitlement to benefits from social insurance programs.

Third, the government at the community-level or even local organizations wanting to contribute to the effort against poverty can also establish specific programs dealing with the needs of impoverished communities which will in turn provide alternatives to the social insurance programs. It is evident from the definition of social insurance programs that certain individuals whose employments have not been constant or whose works have not been in the formal sectors might not be able to find sufficient aid from these programs.

For example, retirement pensions might not be able to serve as sufficient replacement of income for those individuals working in situations stated previously. The same can be said for unemployment insurances which are only applicable for unemployment that is involuntary and short-term. This indicates that social insurance programs might not be the ideal answer to the plight of individuals experiencing poverty and inequality as these individuals are most often self-employed, involved in unregistered income-generating activities, or subject only to an occasional employment with wages.

Because contribution is either absent or inconsistent, impoverished and deprived individuals are most likely the last people who will benefit from social insurance programs. (World Bank) Social insurance programs, therefore, are limited in their scope. The extent to which these programs can offer help to individuals experiencing poverty and income inequality is greatly limited. There is, therefore, a need for supplementary programs or alternative measures to be developed and employed.

However, researchers have found that Social Security and other social insurance programs are actually very much effective in fulfilling the goals they were made to reach. These programs (Social Security, Medicare, and the like) were seen to significantly decrease the amount of income inequality present in a given society. Programs such Medicare, which offer aid and give benefits to individuals regardless of their financial need, were the main reasons for the resulting decrease in income inequality.

In the United State of America, Medicare and similar programs affected inequality by a factor of four as opposed to programs such as Social Security, these took into consideration an individual’s financial need before allowing him or her access to benefits. (Pear, 1988) The benefits provided by American Social Security, for example, alleviated poverty conditions for 15. 1 million people in the year 1986 alone. The poverty rate went down that year from 21. 2% to 14. 9%. Families of four with less than $11,203 in annual earnings were categorized as poor.

In the elderly, the decrease of the poverty rate was incredible during 1986 as it went down from 47. 5% to 14%. (Pear, 1988) The findings of the study conducted to understand the effect of social insurance programs, including both programs similar to Medicare and programs similar to Social Security, on poverty and income inequality are thought-provoking. The statistics shown are clearly very convincing of the viability of social insurance programs as instruments against poverty and inequality. Also, the study takes into account two different kinds of social insurance programs.

Programs with structures similar to Medicare were not accounted for by critics against social insurance programs and as such may have resulted in the prejudice against such benefit programs. However, the data offered by the research is noticeably outdated and may no longer be applicable to the present time. These findings, then, may not be sufficient proof of the effectiveness of social insurance programs. The doubt these findings bring is most especially emphasized when we take into consideration the arguments against social insurance programs which also bring out very valid points.

There is, therefore, a need for more researches and studies to be conducted aimed at understanding the effectiveness of social insurance programs. More information must be accumulated regarding these programs in order for governments and organizations across the world to better understand whether or not they should continue their application of these programs. Without substantial proof that such insurance programs are effective in aiding the poor, there might be more help offered if governments merely stop deducting from the worker’s wages in order to place these in the social security systems.

Perhaps it would be more beneficial for workers, especially those in impoverished conditions and those who are just barely able to get by, if compulsory deductions for social security were stopped and the money was channeled, instead, into the worker’s account or tax payments. These alternatives can only be considered and discussed if social insurance programs were conclusively found not to work according to their desired effects. There are a few alternatives to social insurance programs that have been conceptualized through the years.

One of these involve the conservatives’ viewpoint of things. This involves the privatization of institutions involved in social insurance programs. The employment of this alternative reinstates the conservative ideology that the primary institutions involved in the consideration of an individual’s well being are the family, basic unit of society, and the market. (Hudson, 159) However, this specific alternative to present day social insurance programs involves ideal settings. The market focuses on the individual’s economic and financial well being.

The family focuses on the emotional and psychological well-being. And the government and its actions serve as measurements or instruments to assess how near or far actual society has come from the ideal. (Hudson, 159) Many more alternatives to social insurance programs can be conceptualized easily. However, the initial step should be to understand and research the viability of today’s programs. If research can externally validate the results of the 1986 study, there might not be a need for conceptualization of alternative programs.

Nevertheless, it is evident that social insurance programs do offer relief from the poverty and inequality experienced by society. The only question remaining today that researchers and concerned individuals must answer is whether the relief given is significant and whether it is worth the sacrifice given by those availing of the benefits of the program.

Works Cited

Hudson, Robert. “The Role of Government in a ‘Society for all ages’”. Health and Social Work 24(1999), 155-160 Kovandzic, Tomislav V., Vieraitis, Lynne, M. , Yeisley, Mark R “The Structural Covariates of Urban Homicide: Reassessing the Impact of Income Inequality and Poverty in the Post Reagan Era” Criminology 36(1998), 569-599 Pear, Robert. “Social Security Said to Bridge Gap in Income” New York Times 28 December 1988 Retrieved December 4, 2007 from http://query. nytimes. com/gst/fullpage. html? res=940DE2D71739F93BA15751C1A96E948260&sec=&spon=&pagewanted=all World Bank. “Social Protection and Social Services” The World Bank Retrieved December http://go.worldbank.org/ZL8IL1J830

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