Social Policies in an Age of Austerity

Social Policies in an Age of Austerity

A Comparative Analysis of the US and Korea

KDI/EWC series on Economic Policy

Edited by John Karl Scholz, Hyungypo Moon and Sang-Hyup Lee

Social Policies in an Age of Austerity is the first major publication on the topic, with a particular interest in the United States and the Republic of Korea. The authors of the ten chapters in this book review recent developments in social policies in OECD countries, with a focus on achieving greater effectiveness in public spending on social programs, under increasingly tight national budgets. The contributions cover social and fiscal policy and issues in labor market policy, in addition to the effectiveness of social insurance, education and antipoverty policy.

Chapter 2: Tax and spend: the interplay of fiscal and social policy

John Karl Scholz and Hsueh-Hsiang Li

Subjects: asian studies, asian economics, asian social policy, economics and finance, asian economics, social policy and sociology, comparative social policy, economics of social policy


Karl Scholz and Hsueh-Hsiang Li examine the interplay of fiscal and social policy in the context of antipoverty policy, schooling, disability rolls and unemployment. They examine several potential explanations for the aversion of US policymakers to tax increases, and conclude that there is no obvious answer. The authors provide an overview of five major policies in the United States: antipoverty measures, K–12 education, infrastructure investment, unemployment and disability assistance, and population aging. They explain why poverty rates have changed little over time, even though per-recipient means-tested transfers have risen sharply. First, most of the increase in these antipoverty measures is due to the increasing costs of Medicaid: health insurance primarily for poor mothers, for very young children and for the indigent elderly who need nursing home care. Second, within the nonelderly and nondisabled group, there has been redistribution among low-income families, but it did not significantly affect the proportion of the population living in poverty. Concerning intervention in education, the authors mention that financing of education is the responsibility of state-level governments, whereas the federal government plays a relatively minor role. For this reason, financial and other constraints make progress difficult when trying to overcome the disadvantages related to poverty.

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