What's the issue?

The UK's social security system is both dysfunctional and unjust, not to mention coercive and harsh, in its mode of operation.

Analysis

All countries beyond a certain level of development have social security systems whose principal task is to manage risks of interruption to income from employment. These can arise from contingencies such as unemployment, sickness and invalidity; life cycle effects, including old age; and family responsibilities. It is no accident that Britain, the first country to industrialise, should have developed, through its ‘Poor Law’, one of the earliest national social security systems. It's no accident either that, in today's China, the largest ever transition to a market economy is being accompanied by large-scale planning around the issue of social security.

The British Poor Law was often coercive and stigmatising, and many of the features of what became the welfare state began through workers and communities pooling their own resources to manage risks. One policy option for restoring fairness and dignity to unemployment compensation systems would be to devolve this power back to trade unions and bodies similar to the mutual societies of the 19th century. There is, however, a limit to what can be achieved in social security without state intervention. Private insurance markets are not good at protecting high-risk, that is, low-income, groups.

Social insurance schemes around the world continue to operate on the principle of the pooling of contributions, and hence of risks, within the working population, and, by extension, across generations. Just how egalitarian such schemes are depends on matters such as the level of financing, the division of the burden between workers, employers and the state, the strength of the link between contributions and payments, and the conditionality attached to benefits. Also, social insurance schemes can be more or less gender-egalitarian, depending on such factors as how far they assign contribution credits for periods when employment is interrupted by childrearing or other family responsibilities, and whether they are individual-or household-based.

When we compare the UK's current system of social security to how it operated in the relatively recent past (the late 1980s was the turning point), and to systems operating elsewhere, certain features stand out.