The importance of housing costs in cross‐national comparisons of welfare (state) outcomes

Mainstream comparative research on welfare policy outcomes has focused mainly on the role of government benefits and resulting distributions of income. From the point of view of the economic well‐being of households, it is said that this narrow approach has produced results which have exaggerated the difference between continental western Europe and the New World. It has been argued that, to get fair results, comparative studies of welfare outcomes should take into account the differences in housing policies and structures of tenure. The ownership of private houses is more common in the New World nations than in Europe. Home ownership is thought to improve the economic well‐being of the typical poverty‐prone group, namely older people. This article tests how the cross‐national picture of poverty and inequality changes when we approach the economic well‐being of households on the basis of disposable incomes after housing costs instead of the traditional, purely income‐based approach. The empirical analysis shows that, instead of vast differences in inequality, poverty and, in particular, old‐age poverty, the real differences between Australia and Finland are only modest when housing costs are taken into account.