The Nonprofitized Welfare State: Examining the Relationship between Social Welfare Nonprofitization and Service Expansiveness in Canada and the United Kingdom

Summary of Key Findings

When governments reach out to nonprofit organizations to provide social welfare services, a common argument posits, service expansiveness is weakened: either contracting out is an explicit abdication of public duty or it creates incentives that undermine service expansiveness over time. And yet the evidence does not seem to support this simple explanation of welfare state nonprofitization. The central proposition of my book project is that there is no simple, unidirectional relationship between the level of nonprofitization and social welfare expansiveness. However, the choices that governments make about how to institutionalize nonprofit social welfare can influence whether welfare expansiveness erodes over time, stays the same or increases. Nonprofit service providers rarely receive dedicated theoretical attention in comparative welfare state politics research. This dissertation makes the case that welfare state researchers ought to care about nonprofit social welfare, due to its prevalence and political consequences, including the stakes for democracy.

I argue, first, that welfare nonprofitization occurs within a context where the public duty is being continuously renegotiated, meaning that the boundaries of the welfare state are always in flux. Two pathways to nonprofitization result from the different directions of these fluctuations: cost-cutting and co-optation. While the cost-cutting pathway is linked to service contraction, co-optation is linked to the expansion of public duty. Thus, there is no simple, unidirectional relationship between welfare nonprofitization and service expansiveness: nonprofitization operates in both directions. Second, the institutions of nonprofitized welfare can create causal mechanisms which either advance or undermine service expansiveness. Service expansiveness is facilitated where the policy structure offers opportunities for nonprofit voice through advocacy, shaping the service, and piloting. Service expansiveness is undermined when institutions of acquisition embed values of free-market competition, rather than collaboration or service stability.  

The dissertation demonstrates these theoretical arguments empirically utilizing cross-case as well as within-case analysis of nonprofitized welfare in two liberal welfare states (Canada and the United Kingdom), across two policy areas (homelessness and emergency management).

Chapters two and three provide empirical studies of the pathways to nonprofitization. While the nonprofitization of British homelessness is primarily driven by cost-cutting, chapter two shows that Canadian homelessness nonprofitization is primarily driven by co-optation. Chapter three offers evidence of co-optation in emergency management nonprofitization in Canada and the United Kingdom, including as Canadian emergency management has been transformed by recent climate-linked disasters.

Chapters four and five offer empirical evidence linking institutions of nonprofit welfare to service expansiveness. Chapter four contrasts the regimes of government social welfare service acquisition in British and Canadian homelessness and emergency management. British homelessness is a case of highly marketized government-nonprofit social welfare service acquisition, while non-market values are more prominent in the case of Canadian homelessness, as well as emergency management in both countries. As the case comparison shows, marketization has certain advantages. But it also creates incentives that undermine service expansiveness. Chapter five presents empirical evidence that policy structure determines the extent to which nonprofits are able to ratchet up the welfare state through advocacy, shaping the service, and piloting. It does so through comparative analysis of nonprofitized social welfare in homelessness. Chapter five contrasts a policy context defined through legislated rights (Britain) to one where there is more ambiguity (Canada). It finds that the policy structure provides more space for Canadian nonprofits to exert influence, whereas in the British case the boundaries of the welfare state are rigid.

Access the full dissertation here.

Implications for Policy

The findings of this study offer several insights for practitioners on both sides of the nonprofitized welfare state – government and nonprofit service providers – as well as for the nonprofit sector support organizations and philanthropic funders.

For governments, this research illustrates the importance of designing nonprofitized welfare bearing in mind the long-run effects of institutions on the nonprofit sector itself. As this study has shown, the institutions of acquiring social welfare services can create variable incentives which in turn reward some kinds of nonprofits over others. A government that values a local, community-based sector may be led to choose different institutions than one that prefers larger, more standardized ones. This study also highlights possibilities for non-transactional relationships that can arise when long-standing, trusting service relationships form between governments and nonprofits. Especially where government expertise is low, this is an important factor that policy designers may wish to consider.

For nonprofit service providers, this study highlights the different opportunities and constraints that will be available depending on the institutions of social welfare that are in place. Service providers will have the greatest scope for advocacy when they operate in the absence of direct competition, receive funding from different government agencies, and are relied upon for service stability and expertise. This implies that nonprofits can, to a degree, generate freedom to advocate through accumulating expertise, demonstrating indispensability, and seeking funds from diverse levels of government as well as different departments within government. This study also suggests that nonprofit service providers can creatively use their philanthropic resources to ratchet up the welfare state over time.

Beyond service providers, this dissertation suggests implications for nonprofit sector membership, infrastructure, and advocacy organizations. In particular, the findings demonstrate how important it is for governments to get policy design right when they decide to nonprofitize an area of the welfare state. Nonprofit support organizations should resist attempts by government to implement competitive contracting, especially with mixed-form markets (markets in which nonprofits compete directly with for-profits), for two reasons. First, as this study shows such institutions erode social protections over time by creating direct incentives for less costly contracts. Second, competitive contracting systems make it more difficult to draw on service provider nonprofits to collaborate in support of mission-based advocacy.

Finally, this study offers lessons for philanthropic funders that might wish to see a more expansive welfare state. The findings suggest that piloting can be an effective way to influence welfare state expansiveness, but only if there is an avenue for the philanthropic program to be adopted within government. Thus, philanthropic funders should pay attention to this aspect of the equation when they fund ‘pilot’ research and should be attuned to how they can assist their fundee in making the case for the service to government.