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Economic Sociology
Welfare States and Pressures for Reform


Typology of European Welfare Regimes
o

o

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Nordic Model
o
o
o
o
o



Defamilialisation
 Highly developed services for children, disabled and frail elderly
Decommodification
 Universal income guarantees
Maximising employment and productivity
Cost containment
 Balanced budgets since 1990s
High taxes
 Need to assess cost via complete regime accounting system
 I
...
taxes and personal expenditure on private services
o Ref
...
: Esping-Andersen (2002)
 Liberals advocate primacy of markets
 Conservatives favour family and local community
 Social Democrats have preference for collective solutions
Ideal Types
 Some significant recalibration over past decade; particularly conservative
type

Familial welfare responsibilities and social insurance
Passive income supports
Labour shredding as response to unemployment problems
 Narrow tax base and costly pension commitments
 Difficult to finance services
Welfare without work trap
Insiders V growing number of outsiders

Liberal Model
o
o

Market solutions preferred (exception UK NHS)
 Taxes low, family care a private matter
Targeting benefits to demonstrably needy
 Means tested, flat rate, modest benefits

Economic Sociology
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o


Pressure for Change
o

o
o

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

Since 1990s, new welfare challenge
 Sustainability and adequacy
 Ageing
 Fiscal Austerity
 Welfare viewed as barrier to work
 New winners and losers in new world of work
o Less secure, polarised, services based knowledge economy
1980s Neoliberalism
 Too much state responsibility for social segmentation
1990s Third Way of New Labour
 Individual and Public Responsibility
 Not taming markets, empowering citizens
Late 1990s Social Investment Model
 Social protection as a productive factor
 Prepare not repair
 Reallocate social expenditure towards ALMPs
 Early childhood education and lifelong learning, reconciling work
and family life, and raise pension age
 Bad jobs badly effect families
 Heightened uncertainties
 We are all at risk so should opt for egalitarianism

Responses to Pressures
o

o

o

o



Middle class encouraged to get private insurance
Problems of coverage gaps, poverty, welfare dependency

Policy Learning
 Bismarckian Welfare System copied in Italy and Japan
 Fashionable models e
...
Danish Flexicurity, no consensus on model today
Political Obstacles to Reform
 Popularity of welfare programmes like pensions
 Powerful interest constituencies
 Pre-commitment of resources constrain innovation
How to Measure Change
 What is included as welfare policy?
 Ref
...
: Hemerijck V Pierson

Nordic Recalibration
o

Well equipped for new risks

Economic Sociology
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o
o


Conservative Recalibration
o
o
o
o
o

o
o

o
o


Most significant changes
Trimming pensions and passive benefits
Introduction of flexible contracts
Reducing payroll charges
Social assistance
 E
...
RMI in France in 1988
 Paid by general taxation
Stricter alleviation and in-work benefits for low wage earners/employers
Increased means testing
 E
...
Hartz IV reform, Germany 2005
 General assistance scheme for working age
Updating family policy
 E
...
tax deductions for childcare use, new parental leave benefits
Reduced role of social partners

Liberal Recalibration
o
o
o
o
o
o
o
o



Reduction in benefits and tightened eligibility
ALMP developed since 1990s
 E
...
decentralised services
More focus on healthcare development
More focus on early childhood education
Enlarged role private provision and social insurance

Britain since late 90s
Equality of opportunity
 “Enabling state”
Work conditional benefits
 Cushion for increase in low paid work; downward pressure on wages
NMW
Aim of eradicating differences between social benefit categories e
...
unemployed,
disability
Tax credits
Expansion in private provision e
...
ALMP
Early childcare/education

Trends Since 1990s
o
o
o
o
o
o

ALMP
 Conditional benefits, case management
Curtailments in replacement rates
Welfare provision more universal
 Harmonising benefits across risk categories
Minimum income protection
Expanded social services
Pensions – delay early exit, more occupational/private

Economic Sociology
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Current Financial Crisis
o
o



Rise in welfare retrenchment
ALMP
 In hard hit countries

Reading I; Hemerijck (2002) Chapter 6; Welfare Recalibration in Motion
o
o

o
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o

o

Question; are European Welfare States fit for 21st Century global capitalism?
 Key focus for European policy makers
Early 2000s
 Slow economic growth and elusive job creation culminated in fierce
ideological battle between different socioeconomic models
French Model (high degree of social protection) Vs Anglo-Saxon Model (Capitalism;
free market without safety net)
Classifying Welfare States in the Expanded EU
 Welfare States in EU displaying substantial differences in policy design,
development and institutional make up
Nordic Model
 Denmark, Finland, Sweden
 Social protection is a citizen’s right
 Coverage is fully universal
 All are entitled to the same basic guarantees
 Generous replacement rates
 Wide array of public social services beyond health and education
 ALMPs to promote gender equality
 Extensive public employment
 Provision is responsibility of public authorities
 Bar unemployment insurance which is managed by trade unions
 Highly centralised systems of industrial relations
 Public social services free women from unpaid caring tasks
 General taxation plays dominant but not exclusive role in financing the
welfare state therefore high tax levels by international standards
 Ideological roots in Lutheranism and 20th Century democracy
Anglophone Model
 Ireland, UK
 Highly inclusive social protection system but not fully universal
 Modest, flat rate benefits
 Targeted, needs based entitlement
 Low replacement rates
 Unemployment benefits low and of short duration
 Relatively low taxes
 High deregulated labour markets
 Reliance on market for welfare production
 Tax and transfer system that does little to promote equality
 Strong poor relief orientation
 Citizens sell manpower in exchange for income

Economic Sociology


o

o

In principle, transfers are only provided on a means tested basis for the
most disadvantaged citizens
 Family care and servicing is largely perceived as a private matter
 Traditional Beveridgean welfare state founded on principle of providing
minimum income protection
 UK; healthcare/social services financed through general taxation but
contributions play important role in financing cash benefits esp
...
, Slovakia, Slovenia, Estonia Latvia, Lithuania
 Plus Bulgaria and Romania (2007)
 Have gone through two radical changes in past 70 years
 Shift from capitalism to state socialism in 1940s
 Shift back from state socialism to capitalism after 1989
 Therefore impossible to define stable institutional characteristics
 Prior to WWI, Bismarckian nature
 Then communist commitment to state guaranteed full employment for all
 State socialist era saw universalisation of employment based welfare
system through full employment
 But welfare state suffered from low quality services, limited choice,
low standard of living
 Transition to capitalism and democracy; legacy of egalitarianism remained
strong
 Impossible to place NMS in single group
Welfare State Regimes
 N
...
no one real national welfare state corresponds completely with these
theoretically constructed ideal typical welfare regimes
 Array of hybrid forms
 Key theoretical claim of welfare regime analysis is that social reform and
institutional change is conditioned not only by external economic pressures
and emerging social policy needs but equally by variations in endogenous
complementary policy design and institutional capabilities leading to
distinctive patterns of policy continuity and change
...
: Castles (1993)
Nordic “Dual Earner” Post-Industrialism
 Have proved to be relatively well-equipped for the challenges of economic
internationalisation, ageing societies, gender equality and transitions to
the post-industrial economy

Economic Sociology
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



Combination of generous income maintenance benefits, well developed
public social services and ALMPs to sustain high male and female
participation rates
 Cost is high tax rate
Response to shocks in 70s/80s
 Nordic countries expanded employment by increasing it to the
public sector
 Expansion of public childcare
 Strong commitment to gender equality
o Already resulted in child care allowance in 1940s
 Public elderly care increased in 1960s
 Early family social policy innovations made it easier later on to
expand new child and elder care services and catalyse dual earner
family-friendly welfare state across the region
 Today all Nordic countries have evolved towards dual earner model
 Politically, social reform agenda shaped by pragmatic, problem
solving approach centred on issue of cost containment
 As a result, the principles of universalism have not been significantly
questioned
o Even if this means cuts across the board in replacement
rates or transfer payments
1980s/90s
 All 3 EU Nordic states successfully rebounded from severe crisis of
80s/90s
 Surprised ideological critics by rebounding balanced budgets and
economic dynamism with relative ease while maintaining high levels
of employment and low poverty rates
 Besides cost containment, most important aim was “activation”
o Modification of social security payments in a direction that
gives actual and potential beneficiaries incentives to find
gainful employment
 Ref
...
al
...
Sweden) is the enlarged role of private
provision of public services
o Has increased substantially in most areas
o E
...
childcare, school education, medical care, old age care
 Performance of the Nordic regimes remarkable in spite of
considerable economic turmoil in 80s/90s
 Capable of recovering from monetary and economic crises
 Managed to restore balanced budgets and economic dynamism

Economic Sociology
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

o

Maintain high employment and low poverty rates
Scandinavian tradition of universal coverage provided effective
safeguard against poverty and exclusion
 Most reforms based on strong consensus amongst the Soc Dem govs
and conservative parties as well as employers and trade unions that
there was a need for modernisation
 In terms of functional recalibration the Nordic countries have moved much
earlier than other social policy regimes, towards dual earner economies
with extensive public service provisions, parental leave opportunities and
activation programmes for mothers returning to work
Anglo-Irish Third Way
 Ireland and UK considered closest approximation of liberal regime
 Modest levels of protection
 Targeted provision
 Constrained role for the State
 This view is partly exaggerated
 Aggregate spending in UK is close to EU average
 NHS is solid institution that caters to the needs of the entire
population and offers wide range of provisions
 But unemployment benefits are meagre and of short duration
 Wage dispersion is high
 Labour markets largely deregulated
 Widespread social assistance (perhaps as income support is less stigmatised
than in other countries)
 Low corporate, income and payroll taxes
 Liberal market economy features
 Britain
 Conservative gov
...

o Reward those in work through increase in tax credits
o Extended to adults without children, disabled persons,
pensioners
Minimum wage introduced
Pensions
o 2000; Gov
...
g
...
65 (one of most generous in Europe)
 Revitalisation of Irish economy also based on investment in
education
 Efforts to reconcile work-family life by improving quantity/quality of
childcare
 Paid maternity leave extended late 90s
Most critical difference between Ireland and UK is re dissimilar approaches
to institutional recalibration
 Both followed path of decentralised wage bargaining in the 80s
 But Ireland returned to concerted approach to wage setting and
social reform after mid 80s
 Blair Gov
...

Overall Conclusion – positive
 Enlarged scope of welfare to work strategies in UK/Ireland made
welfare systems more inclusive and unified
 Activation policies widely expanded
 Supported by strong individual responsibility normative policy
approach
 Social insurance remodelled as a bridge to employment
o Stricter conditions and sanctions
 Both countries departed from neo-liberal orthodoxy by developing
social liberal model of enabling (UK) or developmental (Ire) welfare
states, making supports contingent upon paid employment
Functional Recalibration
 Both countries have improved “goodness of fit” of policies in
support of making work pay

Economic Sociology


o

Explicit strategies to fight social exclusion implicate a distinct form
of redistributive calibration
Continental Model
 Reversing the Continental Syndrome of “Welfare Without Work”
 Late 90s Continental type regime seen as sick man of Western Europe
 Due to costs but also inherent perversities captured by the metaphors of
“frozen Fordism” and “inactivity trap”
 Root cause lies in combination of 4 of its distinct institutional treats
 Generosity/long duration of insurance based income replacement
benefits
 Passive or compensatory nature of such benefits
 Contributory pay roll financing
 High minimum wages
 Adverse labour market consequences
 70s/80s; continental regimes resorted to disability pensions, early
retirement and LT unemployment schemes to remove older/less productive
workers from the labour market
 Some Govs preferred to increase social contributions, making labour more
expensive rather than cutting benefits
 Luring people out of the workforce by facilitating early retirement,
increasing benefits for the long term unemployed, lifting the obligation of
jobseeking for older workers discouraging mothers from jobseeking,
favouring long periods of leave and reduced working hours
 Conjures up the Continental predicament of welfare without work
that remained politically popular into the 90s
...
in
countries where outsider target groups e
...
lone parents, young, LT
unemployed discriminated against in traditional social insurance schemes
 Netherlands; adopted more encompassing strategic approach to continental
welfare restructuring and employment creation with the revitalisation of
corporatist negotiations between social partners & Govs from 80s onwards
 Combined wage restraints, cuts in social benefits &first step towards
activation with expansion of flexible, part time service sector jobs
 1994 onwards; Dutch Govs led by Soc
...
Ageing in tandem with labour shedding, early retirement strategy
overburdened the system as they produced adverse effects on the financial
nominator and denominator
 Model proved ever more dysfunctional as the two main pillars that
sustained the edifice (familiallism and full employment, male breadwinner
based labour market) could no longer be counted on to ensure against risks
 Bismarckian model is inherently ill-equipped to confront new risks
Where is the Bismarckian Welfare State Heading?
 Lack of policy coherence
 Highlight changes in contribution and benefit schemes, particularly re
pensions
 Move towards defined contribution plan and changes in assessment of
pension accruals (to postpone retirement age)
 Such reforms present no departure from Bismarckian model
 Simply return to principles that guided the model prior to the 70s
 On other accounts, key attributes of the model are weakening
 Many countries have sought to diminish corporativistic character of
social insurance
 Plenty of evidence to suggest move towards liberal regime
 Almost all Bis
...
: Ferrera
 Almost all countries have taken steps in this direction by relaxing conditions
related to private employment exchange, fixed term contracts, part time
jobs, etc
...
g
...
Members that would lead to superior
Pareto frontier if reformed
 First symptom is related to fertility and therefore to population ageing
 Continental European countries stuck in persistent low fertility trap
 Huge effects on population growth
 Ageing burden greater in Germany, Italy and Spain than elsewhere
 Telling statistic is from surveys that ask citizens their desired number
of children
 Across EU countries, people invariably embrace two child norm
o Any deviation from this signifies welfare deficit
 Preconditions for high fertility
o Adequate parental leave
o Job security
o Access to childcare
 Fertility in advanced societies depends on gender egalitarianism and
obstacles to female LFP
 Suggests typical cash incentives for caring at home may be counter
productive
 Secondly, repressed female labour supply related to motherhood widens
the gender divide and reduces potential economic growth
 Employment gap of women substantial in continental countries
 Activity rate down 20% by mothers with preschool aged children
 And mothers overwhelmingly in part time jobs esp
...
Countries emphasise family services/take leap towards universal
pension, would have irrefutable evidence of change beyond path
dependency or ad hoc forms of adjustment
 Some convergence towards Soc Dem model seems more realistic than
going for liberalism
 Would imply massive process of dismantling

Reading III; Murphy (2012) The Politics of Irish Labour Activation; 1980 to 2010
o
o
o

Unlike most OECD counties, Ireland not yet developed full labour activation policies
 But is under increasing pressures to do so
Why has Irish labour activation policy/implementation stalled over last 3 decades?
Framed by two crises; 80s and Now

Economic Sociology
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o

Introduction
 Labour Activation Policy aims to make effective use of both welfare
expenditure and a claimant’s time on income support to maximise the
possibility of return to paid employment
 Low in Ireland Vs OECD countries
What is Labour Activation Policy?
 Language – controversial; implies inactivity?
 Encompasses wide range of approaches
 From full conditionality (no welfare without work) to fully voluntary
(offer of support not linked to income support)
 Liberal LAPs push toward low paid work, limits role of social policies
 Universalistic LAPs stress high standards of social protection & ALMPs;
training/decent employment
 Where does Ireland stand?
 Interpretations of labour activation depend on ideological predispositions of
those in power
 Dept
...
: NESC (2011)
 Most agree Ireland has made slow progress towards labour activation but
little agreement what type of LAP Ireland should implement
 Three different models of LAP
 Flexicurity
 Mutual Obligations
 Active Inclusion for All
 Flexicurity (I)
 Danish model
 Flexibility and security
 Aims to enable flexible transitions between work & unemployment
 Periods of unemployment cushioned by generous welfare schemes
and workers remain active by participation in ALMPs
 Mutual Obligations Model (II)
 Promoted by the OECD
 Recommends intensification of benefit control activity for the
unemployed and other benefit recipient grous in a more coercive
approach
 Moderate benefits used to support compulsory education, training
or labour market participation
 Obligations of the unemployed
 Active Inclusion for All (III)
 Promoted by the European Commission
 Holistic strategy that stresses work for those who can work and
inclusion for those who cannot
 Less work focused

Economic Sociology
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o

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Avoids punitive conditionality
Focus on adequate income support, inclusive labour markets and
decent public services

Irish Inertia
 Irish approach characterised by “inertia”
 Weakness in capacity to respond to unemployment crises
 Due to failure to move from passive to active welfare admin
...
g
...
g
...
Changes in the economic performance, demographics and political environment
of each country have led to a need to reform the welfare system in many European states
...
In order to do so I follow Hemerijck’s classification system of welfare
states into Nordic, Anglo-Saxon & Continental Regimes
...
It is important to note that there is no
one real national welfare state that corresponds completely with either the Nordic, AngloSaxon or Continental Regime
...

The first model examined by Hemerijck is the Nordic Welfare State Regime
...
According to Hemerijck, the Anglophone
countries such as Ireland and the UK have highly inclusive but not fully universal social
protection systems with modest, flat rate benefits of short duration, targeted needs based
entitlement, low replacement rates and reliance on the market for welfare production
...
Finally, the Continental
Model, which is found in countries such as Germany, Austria and France, is underpinned by a
Bismarckian tradition of social insurance based on a single breadwinner model with
generous replacement rates, long benefit durations, occupationally distinct employment
related social insurance and high tax levels (Hemerjick, 2002)
...
In the 1970s
and 1980s Europe experienced an economic crisis (after a global oil crisis in 1970 whereby
oil prices soared and led to soaring inflation for many countries)
...

Combined with specific problems of individual states regarding ageing populations (Bulgaria,
Estonia, Latvia, Lithuania, Czech Rep
...
With different welfare state
principles and ideologies in place, their responses to challenges have varied considerably
...
Overall, a combination of generous income maintenance benefits, welldeveloped public social services and ALMPs has sustained high male and female
participation rates
...
At the same time, public childcare
and eldercare was increased (Hemerijck, 2002)
...
These
measures further increased employment by facilitating female labour force participation
...
They surprised ideological critics by rebounding balanced budgets
and economic dynamism while maintaining high employment and low poverty rates
...
e
...
Since the 1970s, the Scandinavian tradition of universal
coverage has provided an effective safeguard against poverty and exclusion, two challenges
which have been the focus of welfare states in recent decades
...

The Anglophone, or Anglo Saxon, Welfare States of the UK and Ireland are
considered to be the closest approximation of the Liberal welfare regime (Esping-Andersen,
1990; Hemerijck, 2002; Murphy 2012)
...
Activation policies were widely expanded, supported by a strong
emphasis on individual responsibility to find gainful employment
...

However the most notable difference between Britain and Ireland’s responses to
challenges is their dissimilar approaches to institutional recalibration (Hemerjick, 2002)
...
But Ireland
returned to a concerted approach to wage setting and social reform in the late 80s/early
90s
...

This approach proved to be advantageous for Ireland as not only did it boost FDI,
employment rates and output, but the regional and local partnerships compensated for
weak local governments
...
These institutional challenges
have resulted in Ireland remaining at least a decade behind institutional reforms that
merged income supports and employment services in most OECD countries (Murphy, 2010)
...
New Labour’s
approach to institutional recalibration was unilateral in keeping intervention burdens to a
minimum in a deregulated labour market (Hemerijck, 2002)
...
The response of the Continental Welfare Regime to
challenges in recent decades show that most mainland welfare states have been radically
transformed
...
In response to the economic
crisis of the 1980s, Continental welfare states introduced flexible employment to allow for
additional job creation
...

However, the combination of economic crises and inadequate policies led to a
considerable inactivity trap
...
The generosity and long duration of
insurance based income replacement benefits, the passive nature of such benefits and high
minimum wages had adverse labour market consequences
...

These countries therefore experienced a severe employment crisis
...
The employment
predicament kick-started a long, complex and cumulative recalibration agenda, involving
wage containment, pension trimming, introduction of means testing and financial
restructuring
...
I
would argue that the Continental regime was the least well-equipped to deal with
challenges of recent decades and thus has had to undergo the most radical transformation
...
Not
only have countries had to deal with turbulent economic conditions, but many confronted
considerable problems with demographic change, inadequate institutions, changing political
environment and soaring unemployment rates
...
The Nordic Regime was arguably the most
well-equipped to face these challenges and thus had to undergo little change to the overall
framework of the system
...
Finally, the
Continental Regime was arguably the most poorly equipped regime in the face of new risks
...




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