Whither the 'European Welfare State'?

Published on June 18, 2004

Story by

tobias lenz & martin schröder

Translation by:

claire mcbride

‘Ending welfare as we know it’. This statement from former US President Bill Clinton could just as easily have come from so many European politicians. Increasing signs of crisis have heightened national reform debates in Europe in the last century. Gone are the days when ‘pensions are secure’, as Norbert Bloom, the long-serving German Employment Secretary, reassuringly stated in the 1990s. The trade unions speak of ‘axing’, while businesses fear location-related constraints. One thing is clear: the pressure on the social security system is becoming unbearable, because in the context of increasing globalisation, competition will become more intense, unemployment figures will increase rapidly and current demographic trends herald a change in family and social structures in Europe.

The three European models

Even though the various welfare states of Europe have come under similar pressures to adjust, the national reform debates are proceeding differently. In this respect it is misleading to speak of a European welfare state model. National social security systems are too diverse, the traditions of welfare state development in the course of over one hundred years are too different. These findings form the basis of the work of Danish Socialist Esping-Anderson who supported the theory that in Europe three types of welfare state are distinguishable.

Employed but poor

Great Britain is regarded as the European representative of the Anglo-Saxon or liberal model. Indeed the country is currently faced with unemployment figures of just 5%. However at the same time the achievements of the welfare state, which are primarily financed through taxation, are relatively modest. Citizens are encouraged to make provisions privately for illness and old age, the state concentrates on the distribution of social benefits. An abundant supply of low-wage jobs coupled with a weak welfare state provide an incentive for a rapid return to the job market. The drawback of this model however is the existence of an increasingly impoverished lower-class – the so-called ‘working poor’, who live at subsistence level, despite the fact that they are employed. The high flexibility of the labour market and the relatively modest financial ‘burden’ of the welfare system make it possible to adapt to a change in structural conditions without far-reaching reform – the consequence of a traditional attitude that has favoured a limited state and the ‘achievements’ of the Thatcher Government of the 1980s.

Expensive Solidarity

In Scandinavian countries, the unemployed, the sick and the old belong to a wide social network. The goal is to achieve the highest possible level of equality – it is in these countries that the welfare state is the most fully developed. Along with financial contributions there exists a dense network of social services, which everyone can take advantage of more often than not for free. The existence of all-day crèche and kindergarten places available to everyone or of student subsidies which are awarded regardless of parental income illustrate this. Nevertheless unemployment in Scandinavian countries is relatively low (Sweden 4%, Denmark 5.1%) and nowhere else are so many women integrated into the labour market (Café Babel, 12.01.04). Otherwise such a generous welfare state could hardly be financed even though the tax burden is particularly high – which many Scandinavians complain about. Equality, like solidarity, must be paid for. High welfare state spending made reforms necessary in the 1990s: after years of being spoiled by the welfare state, Scandinavians have had to come to terms with making more individual contributions and with a reduction in welfare contributions from the state.

Individual status instead of equality for all

Germany, France and Italy are seen as representatives of the continental European or Conservative welfare state. This type lies between the generous Scandinavian model and the stingy Anglo-American model. The goal is not equality of all, as in Scandinavia. However it aims at maintaining status through gainful employment. Therefore, social achievements are strongly connected with making individual contributions during one’s working life. The social security systems are financed extensively by individual contributions, which has raised the problem that in times of high unemployment such as we are currently experiencing in Germany (9.7%), France (9.4%) and Italy (9.1%), the financial bases of these welfare systems melt away. Conservative welfare states fight against low unemployment quotas – especially of women. The classic role allocation of the sexes – men work, women raise children and look after the household – continues to prevail. All of this is the subject of the current reform debates in the continental European welfare states. Hence in Germany and France under left-wing governments, there have been more attempts at a stronger incorporation into the labour market of unemployed young people and mothers (of whom 94% express their wish to work, but only 48% of whom could fulfil this wish). As well as this, private contributions are encouraged.

Every model has different strengths and weaknesses: a close-meshed social network goes hand-in-hand with a high tax burden in a ‘slim’ welfare state and the growth in income inequality and high unemployment rates pose a problem for the continental European states. In spite of the differences, in the coming years all welfare states face more or less far-reaching changes. In the course of these adaptations a change between the models is not really expected – developments are mostly ‘path-dependent’. Nevertheless, the hope remains that social equality will not lose the traditionally high status it has enjoyed in Europe.

Story by

tobias lenz & martin schröder

Translated from Wo liegt die Zukunft des „Europäischen Wohlfahrtsstaates“?