Reconceptualizing the welfare state An empirical investigation of its growing symbiosis and contradiction with capitalism in rich European democracies. Bea Cantillon Herman Deleeck Centre for Social Policy, University of Antwerp CASE Social Exclusion Seminar, London School of Economics 2/12/2015
The Puzzle What s Behind the Stunning Standstill ( or even increase ) of Poverty among the Working Age Population despite the Social Investment Turn and the Growth of Employment, Incomes and Welfare State Efforts, before the Crisis? ( Bea Cantillon, Frank Vandenbroucke ( 2015 ), Reconciling Work and Poverty Reduction, Oxford University Press ) 2
The Claim In the last few decades both the symbiosis and the contradictions between the market and the welfare state have increased. That is why although the welfare started to work harder in many countries the welfare state became less performant for flourishing the lives of the most vulnerable in society. 3
Symbiosis & Contradictions Politics against markets (Esping-Andersen, 1988) Politics for markets ( Soskice & Iversen, 2015 ) The welfare state is an essential basis for human flourishing in capitalist society and an essential basis for capitalist flourishing in human society ( Garland, 2014 ) 4
Politics against markets : The welfare state as a 'moral economy forced and forged by harsh social conflict : -Repairing market damages -Redistributing the unequal benefits of growth -Protecting against squalor, ignorance, want, idleness, and disease -De-commodifying Hence a) the focus on social transfers, taxes and equality of outcomes b) the predominance of the pre/post approach in evaluating the adequacy of social policies 5
Politics for markets : The welfare state is also important to support capitalist production : - Preventing strikes - Preparing people to the labour market - Adapting them to the requirements of the capitalist economy - Investing in productive capacities - Preventing social risks Hence a) the focus on Social Investment and equality of opportunities b) the predominance of the study of the impact of activation, child care, education 6
Pre- and redistribution are inextricably linked Much more complex than : The predistributive agenda is concerned with how states can alter the underlying distribution of market outcomes so they no longer rely solely on post hoc redistribution to achieve economic efficiency and social justice (The Predistribution Agenda: Tackling Inequality and Supporting Sustainable Growth, edited by Patrick Diamond and Claudia Chwalisz (I.B. Tauris 2015). Predistribution Redistribution
Taking this integrated perspective, in recent decades : 1. Increasing symbiosis between the economy and the welfare state, between pre- and redistribution 2. However, growing tensions at the bottom 3. That is why, although it started to work differently and relatively harder, the welfare state became less performant for flourishing the lives of the most vulnerable
Growing symbiosis, in principle The post war welfare state & the market Avoiding strikes / Bringing social rest / Responding to market failures The new welfare state Maximizing men s and women s contribution to economic growth / Sustaining the low wage sector 9
=> New tasks for the welfare state : -Income maintenance for the employed ( tax credits, child benefits, in work benefits ) -Subsidizing low productive work ( tax credits ) -Facilitating the work & family balance ( income maintenance for carers, child and elderly care ) -Activation & life long learning 10
11 Growing symbiosis, in practice What can be learned from spending data?
Social expenditure Belgium 70 60 50 40 30 20 10 0 1995 2000 2005 2010 2013 Total (in % of GDP) Total (in % of total public expenditure) Source: Eurostat, General government expenditure by function (COFOG) ESA2010 data. 12
Social expenditure The Netherlands 70 60 50 40 30 20 10 0 1995 2000 2005 2010 2013 Total (in % of total public expenditure) Total (in % of GDP) Source: Eurostat, General government expenditure by function (COFOG) ESA2010 data. 13
Social expenditure United Kingdom 70 60 50 40 30 20 10 0 2000 2005 2010 2013 Total (in % of total public expenditure) Total (in % of GDP) Source: Eurostat, General government expenditure by function (COFOG) ESA2010 data. 14
Social expenditure Germany 70 60 50 40 30 20 10 0 1995 2000 2005 2010 2013 Total (in % of total public expenditure) Total (in % of GDP) Source: Eurostat, General government expenditure by function (COFOG) ESA2010 data. 15
Social expenditure Sweden 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1995 2000 2005 2010 2013 Total (in % of total public expenditure) Total (in % of GDP) Source: Eurostat, General government expenditure by function (COFOG) ESA2010 data. 16
Active age spending, excluding health, OECD OLD : transfers & child benefits NEW 1 : Parental Leave NEW 2 : Elderly Care NEW 3 : Child Care NEW 4 : ALMP NOT INCLUDED : TAX EXPENDITURES! 17
Public Social Expenditure, active age population in % GDP, Belgium 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OLD3 (total) NEW1 NEW2 NEW3 NEW4 Source: OECD SOCX and education data. 18
Public Social Expenditure, active age population in % GDP, The Netherlands 16 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OLD3 (total) NEW1 NEW2 NEW3 NEW4 Source: OECD SOCX and education data. 19
Public Social Expenditure, active age population in % GDP, UK 10 9 8 7 6 5 4 3 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OLD3 (total) NEW1 NEW2 NEW3 NEW4 NEW6 Source: OECD SOCX and education data. 20
Public Social Expenditure, active age population in % GDP, Germany 9 8 7 6 5 4 3 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OLD3 (total) NEW1 NEW2 NEW3 NEW4 Source: OECD SOCX and education data. 21
Public Social Expenditure, active age population in % GDP, Sweden 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 OLD3 (total) NEW1 NEW2 NEW3 NEW4 Source: OECD SOCX and education data. 22
Percentage change for old and new public expenditures, 1985-1989 vs. 2005-2007 NEW WORKING AGE OLD WORKING AGE BE 106.3-22.2 NE 50.4-46.08 DE 54.6 3.8 SE 15.71-14.54 UK 55.6-21.8 Note : Education expenditures have been excluded from these calculations since data for tertiary education are only available from 1995 onwards. Family allowances are included in working age benefits (OLD 3), as is the case in the graphs. Source : OECD SOCX and education data. 23 voorbeeldpresentatie
Percentage change of normalized spending 1985-1989 vs. 2005-2007 family allowances cash benefits working age parental leave elderly care child care ALMP BE NE DE SE UK -19.6 2.6 1.7 86.0 1.7 10.2-43.2 1.7 58.3 176.7 24.3-41.4 31.1 31.1-47.7-15.9-68.9-37.4 56.4-37.4-82.2 36.1 54.1 292.5 71.6 292.5-22.1 Note: (*) DE 1993 = 100; NEW6: 1997=100, BE 1999=100 (**) OLD3 family allowances = (absolute public expenditure for OLD3 family allowances)/(population 0-18)*(GDP/capita); OLD3 cash benefits without family allowances = (absolute public expenditure for OLD3 cash benefits excluding family allowances)/(unemployed)*(gdp/capita); NEW1 = (absolute public expenditure for NEW1)/(population 18-64)*(GDP/capita); NEW2 = (absolute public expenditure for NEW2)/(65+)*(GDP/capita); NEW3 = (absolute public expenditure for NEW3)/(population <5)*(GDP/capita); NEW4 = (absolute public expenditure for NEW4)/(unemployed)*(GDP/capita); NEW5 = (absolute public expenditure for NEW5)/(population 5-19)*(GDP/capita); NEW6 = (absolute public expenditure for NEW6)/(people enrolled in tertiary education)*(gdp/capita) Source: OECD SOCX, demography and education data; Eurostat, population data. 24
Conclusion (1) 1. Increased ( normalised ) welfare state effort ( except SE ) 2. Especially for new spending 3. In general, no resource competition => Welfare states started to work harder and differerently => Non amenable to retrenchment? => And/Or the reflection of growing market and human needs 25
Growing tensions at the bottom, in principle - either unskilled workers become unemployed or they see their real pay fall ( Atkinson, 2013 ) and, with them, the unemployed face declining benefit levels -or gross-to-net welfare state efforts should be increased 26
Trilemma Jobs Adequate income WELFARE STATE EFFORT 27
How did welfare states respond? The income side of the trilemma 28
Low incomes sliding away from the middle? 120% 100% 80% Poverty line 60% 40% 20% Low gross wage 29 0% Source: based on Cantillon, Collado & Van Mechelen (2014)
140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% The minimum floor as % of the poverty threshold BE - 2000s 2002 2003 2004 2005 2006 2007 SE - 2000s 2003 2004 2005 2006 2007 10th percentile gross wage 0% growth rate 2004-2007 net income single parent on SA 1.9% growth rate 2001-2009 10th percentile gross wage 1.8% growth rate 2004-2007 net income single parent on SA 1.4% growth rate 2001-2009 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% Source: based on Cantillon, Collado & Van Mechelen (2014) NL - 2000s 2004 2005 2006 2007 UK - 2000s 2005 2006 2007 10th percentile gross wage 0.3% growth rate 2004-2007 net income single parent on SA 1.4% growth rate 2001-2009 10th percentile gross wage 2.4% growth rate 2004-2007 net income single parent on SA -0.9% growth rate 2001-2009
Source : Percentage change low wages and benefits 1995-2007 Eurostat, OCDE, simulations GAK BE NL SE Average wage 13 8 36 Minimum Wage 1 3 30 Unemployment (short term, couple, 35y ) -16 2 28 Disability ( short term, couple, 55y ) -2 / 11 Social assistance 6-51 22 Source : Centre for Social Policy MIPI data voorbeeldpresentatie
How did welfare states respond? The effort side of the trilemma 32
Increasing welfare state effort? 120% 100% 80% 60% 40% Poverty line Low gross wage 20% 0% 33 2004 2005 2006 2007 Source: based on Cantillon, Collado & Van Mechelen (2014) Low net wage
Gross-to-net effort, lone parent family with two children, minimum wage, 1992-2001 Gross-to-net Effort NL + DE - LU + BE + FR = AT + 34
How did welfare states respond? The job side of the trilemma 35
Polarization : the proportion of work poor and work rich households, 1994-2009 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 BE - WI = 0 DE - WI = 0 FR - WI = 0 NL - WI = 0 UK - WI = 0 BE - WI = 1 DE - WI = 1 FR - WI = 1 NL - WI = 1 UK - WI = 1 36
Jobs Adequate income Conclusion (2) WELFARE STATE EFFORT 1. Downward pressures on low wages & benefits for unemployed 2. Jobless households did benefit less from job growth 3. Most countries increased gross-to-net efforts WS clearly struggling with the trilemma ( e.g. tax credits & minimum wage in the UK ) 37
Pp change at-risk-of-poverty, work poor households, active age population (20-59), work intensity < 0.5 B.Cantillon & F.Vandenbroucke, Reconciling Work and Poverty Reduction, Oxford University Press, 20151995-2ooo001), EU-SILC (2005-2008) and SOEP (1995-2001), EU-SILC (2005-2008) and SOEP 38
Conclusion (3) 1. There is evidence for increasing symbiosis & tensions between the WS and the market, but this should be investigated more in depth 2. Although welfare states started to work differently and relatively harder, some ( not all ) became less performant for flourishing the lives of the most vulnerable 3. This deserves much more attention, in politics and in research 4. The integrated approach seems to be more appropriate than the new focus on predistribution 39