The New Welfare State An Answer to New Social Risks? Joakim Palme Institute for Futures Studies

The New Welfare State An Answer to New Social Risks? Joakim Palme Institute for Futures Studies

The Characteristics of the Nordic Welfare States

Shaping the Nordic Model Gerhard Lenski s perspective on inequality: - inequalities in human societies are shaped by political conflicts as well as economic structures The emergence of universalism 1930s Population crisis and Depression Social citizenship Earnings-related social insurance Modern family policy - dual-earner model What about ageing societies?

Nordic model of social protection Universal benefits Earnings-related social insurance Targeted benefits to poor Social services -universal -decentralized -separated from cash benefits Individual social rights Taxation Employer contributions Central/local taxes Local taxes with state subsidies Dual-earner model Full employment and active labor market policies

The merits of the model Low life-cycle poverty Reduced inequalities High employment High female participation Strong support for social security Incentives and cost control?!

Strategies of Redistribution R H Tawney - Welfare State as a Strategy of Equality G Tullock and J Le Grand - middle class inclusion damages the poor The Paradox of Redistribution Robin Hood Simple Egalitarianism Within Group Redistribution Mattew s principle: Give to those who have

Equality and efficiency Universal coverage combating poverty and exclusion Transaction costs - low with nationwide systems Portability good for labour mobility Incentive structure poverty traps avoided Investments in health and education productive labour force Stable institutions positive for growth: social rights as property rights Expenditure levels not the critical factor but program design

Rowntree s Poverty Cycle 10 0 Poverty low - high Childhood Youth Family Empty nest Old age

Life Cycle Poverty 1970 20 18 16 14 12 10 8 6 4 2 0 CAN71 SWE67 FIN66 USA74 YOUTH FAMILY EMPTY NEST OLD AGE

Life Cycle Poverty 1990 30 25 UK SWE 20 15 FIN USA CAN 10 5 0 YOUTH FAMILY EMPTY NEST OLD AGE

Young persons, Single mothers, Immigrants Increased unemployment Increased economic difficulties More temporary employment contracts Declining health status Increased accumulation of welfare problems

Current dilemmas of the model Nominal cost limits vs. the insurance principle Choice vs. segregation and no voice Necessary reforms vs. trust in stable institutions Social welfare policy vs. occupational and fiscal welfare policy Local autonomy vs. equal citizenship rights Interest formation: where is the middle class going and which political forces mobilise? End of full-employment?

Organisation of social services Common trends: Decentralization Consumer-financing Privatization see graph right: Employment in private provision of publicly financed social services P r o c e n t 14 12 10 8 6 4 2 0 1993 1994 1995 1996 1997 1998 1999 2000 Public companies Profit Non-profit

Welfare and welfare institutions Welfare: Individual resources making it possible to control living conditions Several dimensions: health, work, income, education etc Institutions as individual resources: state, family, market Misfortune: social policy challenge Welfare institutions: Resoures for the individual as user Insurance for future needs Investment in the future Access and quality State, municipalities, market, voluntary sector, family

The Future of the European Social Model

Common European Trends Ageing: More old people! First Marriage Rate down Age at First Marriage up Age at First Birth up Extramarital Births up Total Divorce Rate up Total Fertility Rate down Female Labour Force Participation up Inequalities up Common Futures? More people above 80 years of age Elderly dependency rates Population decline!? Fertility? Migration? Continued pattern in family change?

Rethinking social policy in ageing societies Social security is strongly redistributive over the life cycle: the ageing of societies puts tough fiscal pressures on public spending The debate on ageing issues has been overly focussed on pension reforms and savings How social policy interact with fertility, education and labour supply (the future tax base) is of vital concern We need to reform the system of social protection in order to make it sustainable for the future

Education and Growth: Macro model The statistically significant relations Education expenses have a positive impact on GDP/capita GDP/capita has a positive impact on average years of education but a negative impact on the GDP share of education expenses Education expenses have a negative impact on fertility.

Education and human capital formation Education as investing in the future School performance: level and distribution Social background and school performance Life-long learning starts year one Parental labour force participation and performance Gendered performance, and sustainable family policy in ageing societies

700 600 500 400 300 Variation in student performance on the combined reading literacy scale, mean score and standard deviation Sweden Austria Belgium France Norway United States Denmark Switzerland Spain Czech Republic Italy Germany Hungary Poland Greece Portugal Finland Ireland United Kingdom Source: PISA (2000) OECD

Modern family policy: Sharing the costs of raising children - to avoid population decline and its consequences for growth and intergenerational equity

2,7 2,6 2,5 2,4 2,3 2,2 2,1 2,0 Ideal Fertility in Society EU14 EB 11 (1979) and EB 56.2 (2001) Total Women Men Age 16-24 Age 25-39 Age 40-55 Age 55+ 1979 2001

Personal Desired Fertility EU14 EB 37.1 (1989) and EB 56.2 (2001) 2,7 2,6 2,5 2,4 2,3 2,2 2,1 2,0 Total Women Men Age 16-24 Age 25-39 Age 40-55 Age 55+ 1989 2001

Dimensions and Models of Family Policy DUAL EARNER SUPPORT A B High General family policy model Contradictory family policy model* GENERAL FAMILY C D SUPPORT Low Market-oriented family policy model Dual earner family policy model Low High

Family policy, female economic activity, child poverty and fertility Female labour force participation +/- - + Family policy + Fertility - - Child poverty

Family policy generosity in different models of family policy in the mid- 1990s Family policy index 45 40 Dual earner family policy model 35 30 25 General family policy model 20 15 Market-oriented family policy model 10 5 0 SWE FIN DEN NOR HUN FRA BEL ITA CZE AUT GER POL SPA NET IRE UK USA

Family policy index and average poverty among the three types of families with children in the mid 1990s. Poverty limit 50 percent of equivalized median income Poverty 40 USA 35 30 25 IRE UK GER AUT ITA 20 POL 15 SPA NET CZE FRA HUN DEN 10 5 0 BEL 0 10 20 30 40 50 Source: SCIP, LIS NOR FIN SWE Family Policy Index

Female labour force participation and poverty in 1995-2000 80,0 70,0 NO00 SW95 SW00 FI00 NO95 FI95 DK95 UK00 60,0 CZ95 NL00 GE00 GE95 FR95 NL95 PO00 AT95 PO95 UK95 BE95 50,0 HU00 HU95 SP95 IR95 IT00 40,0 IT95 0 10 20 30

Family policy and female labour force participation in 1995-2000 80,0 75,0 70,0 65,0 60,0 55,0 US00 US95 IR00 UK00 UK95 GE00 NL00 CZ95 CZ00 GE95 FR00 AT95 AT00 PO00 PO95 FR95 NL95 BE00 BE95 FI00 NO00 SW95 NO95 DK95 FI95 DK00 SW00 50,0 SP00 HU00 HU95 45,0 IR95 SP95 IT00 IT95 40,0 0 10 20 30 40 50 Source: SCIP + OECD (diff. Years): OECD Labour Force Statistics. Paris, OECD

Female labour force participation and fertility in 1995-2000 2,2 US00 2,0 US95 1,8 1,6 IR95 HU95 IR00 FR00 NO95 NO00 FI95 NL00 FI00 DK00 FR95 DK95 UK95 SW95 BE00 UK00 PO95 BE95NL95 SW00 1,4 1,2 IT95 IT00 SP95 PO00 HU00 SP00 GE95 GE00 AT95 AT00 CZ95 CZ00 1,0 40 50 60 70 80

Net parental leave benefits first year 1 0 0 after confinement in 2000 2 0 0 0 9 0 D u a l e a r n e r m o d e l 8 0 7 0 G e n e r a l m o d e l 6 0 5 0 4 0 M a r k e t-o r i e n te d m o d e l 3 0 2 0 1 0 0 N O R D E N F R A A U T G E R IR E C A N U K A U S U S A M a te rn it y in s u ra n c e M a te rn it y G ra n t D u a l p a re n t a l in s u ra n c e C h ild c a re le a v e P a te rn it y In s u ra n c e

Generosity of paid parental leave and poverty among families with infants Poverty 35 USA 30 25 UK 20 15 10 5 0 AUS CAN FRA SWI AUT GER BEL ITA NET DEN FIN NOR SWE 0 20 40 60 80 100 r= -.826** **significant at the 0.01 level, one-tailed test Sou rces: LIS, SCIP Total Paid Leave

Perceived Consequences of Family Formation among Europeans EU15 Questions in Eurobarometer 1998 Cut short education Limited promotion chances Reduced working time Took a break with working life Took a job below qualifications Stopped working for good Improved quality of life Improved social networks Men <44 5 6 6 4 5 2 80 66 Women <44 13 23 37 41 15 25 70 61

What Europeans think Governments should prioritise - to influence the number of children 1. Reducing unemployment, Flexible working hours, Childcare 2. Family allowances, Tax advantages 3. Cost of children s education, Housing 4. Parental leave, Maternity benefits Source: Eurobarometer

Dilemmas of the reform work Expansion of tertiary education and family formation Social protection and labour supply Equality and efficiency Gender and division of paid and unpaid work Interest formation: - where is the middle class going and which political forces mobilize? - will employers use exit or voice?

Modernise family policy - to promote inclusion Policy and policy design matters! If politicians do not respond; European achievements are jeopardized Modernisation is about: Gender and work in ageing societies Extend social inclusion goals in terms of the situation of children OMC and serious monitoring Rights and responsibilities of European citizens

Modernisation of European social policy should be about recasting: Gender and work in ageing societies

The European Social Model Goal The European social model is about social inclusion and equality of opportunity. Barrosso July 12, 2005 Strategy Human capital response to ageing societies Middle class inclusion Universalism Equality of conditions Gender: Care and work Quality and quantity of employment

Open Method of Coordination Lisbon Strategy on Employment Sustainable pension systems Health insurance Social inclusion indicators Why not? Family policy and the rights of children

Why the principles and exact design of ESM are important How benefits are distributed: coverage and adequcay How social security create interest coalitions and political support How social security programs may contribute to increase the number of taxpayers The road to hell is paved with good intentions The devil is in the detail

New Publication Sustainable policies in an ageing Europe: A human capital response www.framtidsstudier.se info@framtidsstudier.se

Sustainable Welfare Policy: Goals and Means Welfare Individual resources making it possible to control living conditions Several dimensions: health, work, income, education etc Institutions as individual resources: state, family, market Fertility, Children s Life Chances, Inclusion Family policy design Adequate in aging societies Supportive of reproduction - Fertility, - Human resources Supportive of labour supply: -Incentives, -Human skills, - Social services, - Opportunities

Global ekonomisk utveckling

EU25 2003 65+ 2003 50-64 30-49 MENA 2003 15-29 65+ 0-14 50-64 -80 000-60 000-40 000-20 000 0 20 000 40 000 60 000 80 000 30-49 15-29 EU25 + MENA 2003 0-14 65+ -80 000-60 000-40 000-20 000 0 20 000 40 000 60 000 80 000 50-64 30-49 15-29 0-14 -150 000-100 000-50 000 0 50 000 100 000 150 000

EU25 2030 65+ 2030 50-64 30-49 15-29 MENA 2030 65+ 0-14 -80 000-60 000-40 000-20 000 0 20 000 40 000 60 000 80 000 50-64 30-49 15-29 EU25 + MENA 2030 0-14 65+ -100 000-80 000-60 000-40 000-20 000 0 20 000 40 000 60 000 80 000 100 000 50-64 30-49 15-29 0-14 150 000 100 000 50 000 0 50 000 100 000 150 000