Welfare for the Unemployed in Britain and Germany: Who benefits ? by Frances McGinnity

Edward Elgar, 2004, 240 pp, hardback, 1 84376 220 X, £55 Order this book

During the twentieth century, different nation states built very different welfare states, and this book is an exploration of the different provisions made for the unemployed in Germany and Britain. The author notes persistent controversy over whether payments should be low and short-term (in order not to damage employment incentives) or high and long-term (in order to prevent deprivation). ‘Broadly speaking, the German welfare state views unemployment as a risk that individuals insure themselves against, with the state administering the insurance and treating the unemployed according to their employment record. In Britain, by contrast, the principle of poverty alleviation provides the basis for compensating the unemployed. Benefits for the unemployed are primarily means-tested in Britain, and these are not based on contributions’ (p.2).

In order to study the consequences of the difference the author uses longitudinal data from large representative panel surveys ( – longitudinal data because this enables unemployment to be studied as a process rather than as a state), and she categorizes welfare provision using Gallie and Paugam’s work on ‘the degree of coverage, including the balance, between insurance and means-tested benefits; the level of financial compensation; and the extent of active labour market programmes’ (p.11f), leading to four categories: the sub-protective, the liberal/minimal, the employment-centred and the universalistic (p.12). McGinnity also distinguishes clearly between means-tested and insurance benefits and discusses the pros and cons of both, and recognises that a more rigid labour market is partly a function of the welfare system, meaning that the welfare system might reduce welfare by making unemployment more frequent and/or of longer duration.

There are chapters on the labour markets and unemployment in Britain and Germany (but only up to the mid-1990s), on the development of benefits for the unemployed, on income poverty amongst the unemployed, on the process of escape from unemployment, and on the effect of a household member’s unemployment on the labour market participation of other household members. The final chapter repeats the conclusions of the previous chapters and concludes that ‘other institutions also matter, especially the family and the market’ (p.177). Interestingly, McGinnity finds ‘a limited effect of receipt of benefit on the duration of unemployment in Britain, and no such effect in Germany’ (p.179) – but she does find that ‘in Britain women are less likely to move into part-time work when the husband is receiving means-tested benefits’ (p.180) – a problem which does not arise with insurance benefits.

The author suggests that a limitation of much research, including her own, is that it treats welfare regimes as static systems, whereas in fact they are constantly changing. To map the changes against the longitudinal data (and against the new longitudinal data that would be needed) would be instructive, for it would provide comparisons more related to a real world in which change is ubiquitous. But for the time being, she concludes that in Britain the ‘unintended consequences of means-testing’ (p.185) – and particularly the consequence that means-tested benefits discourage the partner of someone unemployed from seeking part-time employment – need attention; and she suggests that in Germany the coverage of insurance benefits should be extended, though she also recognises that if contributions are imputed to too many people who are not paying contributions (such as those caring for children) then those actually paying contributions might lose confidence in the system.