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Table of Contents

Broadening Perspectives on Social Policy

Series Editor: Bent Greve

The object of this series, in this age of re-thinking on social welfare, is to bring fresh points of view and to attract fresh audiences to the mainstream of social policy debate.

The choice of themes is designed to feature issues of major interest and concern, such as are already stretching the boundaries of social policy.

This is the fifteenth collection of papers in the series. Previous volumes include:

Title page

NOTES ON CONTRIBUTORS

Bent Greve is Professor of Welfare State Analysis at Roskilde University, Denmark.

Barbara Vis is Associate Professor in Comparative Politics at the Department of Political Science of VU University Amsterdam, the Netherlands.

Kees van Kersbergen is Professor of Comparative Politics at the Department of Political Science of Aarhus University, Denmark.

Thomas H. Hylands is alumnus of the MSR program of the Faculty of Social Sciences at VU University Amsterdam, the Netherlands.

Heejung Chung is a Post-doctoral Researcher at the Department of Sociology at Tilburg University, the Netherlands, and the Manager of the European Data Centre for Work and Welfare.

Stefan Thewissen is a Research Master Student in Public Administration and Organizational Science at the Universities of Utrecht, Rotterdam, and Tilburg, The Netherlands.

Peter Saunders is Research Professor in Social Policy in the Social Policy Research Centre, University of New South Wales, Australia.

Chris Deeming in Senior Research Fellow at the Personal Finance Research Centre, University of Bristol, UK.

Anne Daguerre is a senior lecturer in Human Resources Management at Middlesex University, London. She is currently serving as a public policy scholar in the Woodrow Wilson Center, Washington DC.

Fiona Dukelow is a lecturer in social policy at the School of Applied Social Studies, University College Cork, Ireland.

Mara Yerkes is Senior Research Fellow at the Institute for Social Science Research, University of Queensland in Brisbane, Australia.

Romke van der Veen is Professor of Labour and Organisational Sociology of at Erasmus University, Rotterdam, the Netherlands.

Franca Maino is Assistant Professor of Public Policy and Administration at the Department of Labour and Welfare Studies of the University of Milan.

Stefano Neri is Assistant Professor of Economic Sociology at the Department of Labour and Welfare Studies of the University of Milan.

Stefano Sacchi is Assistant Professor of Political Science at the University of Milan and Carlo Alberto Affiliate at the Collegio Carlo Alberto of Turin.

Federico Pancaldi is a PhD candidate in Political Science at the Graduate School in Social, Economic and Political Sciences of the University of Milan.

Claudia Arisi is a PhD candidate in European Studies at the Salzburg Centre of European Union Studies of the University of Salzburg and at the Graduate School in Social, Economic and Political Sciences of the University of Milan.

Lorraine Frisina Doetter is a Senior Research Fellow at the Collaborative Research Center of the University of Bremen in Germany.

Ralf Götze is a Research Associate at the Collaborative Research Center of the University of Bremen in Germany.

Editorial Introduction: Overview and Conclusion

Bent Greve

Introduction

It is said that welfare states have been in crisis since, at least, the first and second oil-price shock in the seventies. Many and varied words have been used to analyze and to describe the situation of the welfare states – recalibration, recast, dismantled, restructured – to mention just a few. Still, until now at least the welfare states of many countries have been stable or even witnessing expansion. The expansion has especially been into new areas in order also to be able to cover new social risk. Thereby welfare states have often been increasing the level of public sector spending, either directly or through the labour market or as tax-expenditures. It has seemingly been possible to continue to increase new initiatives and coverage, and also new risks. Improvement and expansion have been witnessed despite some cutbacks. Naturally, we do not know if the recent change is only a short-term change, but as is argued later this, presumably, is not the case, and by this a new era of welfare states emerges where targeting and emphasis on work are more substantial than earlier.

The autumn of 2010 and spring of 2011 witnessed profound changes in several European countries in order to cope with public sector deficit in the wake of the financial crisis and to set up packages to help the financial sector. International economic support was given to countries like Greece and Ireland, but also strong austerity measures were taken in countries like France, Spain, Portugal and the UK. Many countries introduced reductions in welfare spending and tax increases to reduce public sector deficit. Sometimes this also meant a direct reduction in public sector employee wages. In this sense the recent economic crisis has to larger degree than previously seemingly put cuts in welfare spending on the agenda. This has implied reductions in the level of benefits for pensioners and unemployed, later retirement age and decrease in services, presumably in most countries with spending on health care being an exception. A window of opportunity has seemingly been opened.

Reductions in spending have often implied a more targeted and narrower welfare state. This has changed the focus from how to improve service and transfers in welfare states towards how to reduce spending or increase public sector income. Two elements have been central to the arguments. First, as mentioned above, the high level of public sector deficit implying that the sustainability of public financing was in danger in many countries. Second, at the front line of the argument have been the expected demographic changes, especially in Europe, with a greying society and fewer people in the labour market, increasing pension expenditures and possible reduced ability to finance welfare state expenditures in the future. This has seemingly been an explosive cocktail for the welfare state and has paved the way for acceptance, although naturally not by all, of reductions in spending and changes in the balance between state, market and civil society. A question naturally is whether the changes would have come anyhow and the financial crisis thus only the excuse for doing what would have been done in any case.

Up to the G-20 summit in November 2010 it was clear that austerity measures were taken more or less all across Europe, given that most countries had large public sector deficits. This despite the fact that part of the deficit was due to cyclical movement, but at the same time it showed that there was an insufficient level of savings in European economies in good times, as witnessed by the fact that the national debt as a percentage of GDP in many countries had passed the Eurozone agreed level of 60 per cent of GDP. The implication here is that in future a stricter budget policy will be pursued in order to save for a rainy day in good times. The Europact is a further indication hereof. Even in the Nordic countries, cutbacks are evidenced, as shown in the regional issue dealing with the Nordic welfare states (Greve 2011; Kvist and Greve 2011). Despite these changes, Nordic countries seem to continue to form a distinct cluster, at least in relation to income for older people (Haynes 2011), albeit convergences towards a European type of welfare state can be witnessed.

Overview of the Articles

The series of articles opens with a comparative analysis by Vis, van Kersbergen and Hylands, which shows that when analyzing the USA, the UK, Germany, The Netherlands, Denmark and Sweden, Germany especially has chosen a different path to the other countries, one that can even be considered different from what one could expect, given that it can be seen as a Keynesian-inspired type of response. Furthermore, that the retrenchment, at least so far, has been less than what could have been expected. Finally, that welfare regimes still seem to be rather different. Crisis or no crisis, this analysis does not point to the fact of a chosen path being changed. Further, also, that welfare states are still popular.

The historical path taken is also at the core of the conclusion to the contribution by Chung and Thewissen who, in an analysis of Germany, the UK and Sweden, e.g. three distinct welfare state countries, state that there has been as a reaction to the crisis a focus on the historical roots and traditions of these welfare states. Germany followed its historical roots of support, especially to the insider, by making extensive use of short-term work as part of the active labour market policy (see also later); the UK choose a laissez-faire approach; and Sweden a more active stance, with the ambition of stimulating employment. However, one can question whether there is convergence, as the approach in Sweden by now has shifted even more towards a work-first approach.

Australia has, as Saunders and Deeming show, due to fiscal stimulus packages, avoided the fate of most other western countries of ending up in recession, and has also had only a modest increase in the level of unemployment to around 6 per cent in 2010. Furthermore, despite what is often claimed, Australian governments seem not have used the economic crisis, neither historically nor now, to make dramatic changes to the welfare state. It is argued, however, that this is because the crisis emerged at a time when the Australian political system was in political turmoil, and also that there was a locked-in effect to continue welfare policy unchanged. Further, even more surprisingly, that the crisis has made it possible to establish an agenda for social inclusion.

In the USA there is, as shown in the article by Anne Daguerre, despite the crisis, seemingly strong institutional constraints that hinder systematic social reforms, cf. the debate over health care reform. Lack of coverage in relation to health care of those outside the labour market has had the impact of, in order to have more people covered, unemployment insurance time being longer than the statutory 26 weeks. This is despite a system that is built upon the labour market and wage income being the central income resource. Furthermore, this is in spite of the fact that there has been over the last 20 years growing economic insecurity in the USA, so not only an economic societal fiscal crisis, but also clearly one at the individual level.

From one liberal welfare state the focus moves to another liberal welfare state, although in Europe. Ireland once labeled the Celtic Tiger has been hard hit by the financial crisis, and here the relation between economic change and retrenchment of the welfare state is clearly witnessed, as Dukelow shows, and the contrast between the period of expanding welfare when the Irish economy flourished and recent changes is profound. However, the response in this crisis has been different from the one in the eighties making it difficult to estimate how different periods of economic downturns will have an impact on social policy; however, Ireland seems now even more than in recent years to belong to a clearly liberal idea of a welfare state.

A welfare state once close to the universal Nordic welfare state, e.g. the Netherlands, has been witnessing dramatic changes over the last 30 years, including a stronger focus on market-driven reform, however, with clearly different patterns in the seventies and eighties and thereafter, as Yerkes and van der Veen describe. In particular, reforms related to the disability benefit system started early. The Dutch disability benefit system was peculiar in having a system with a clear incentive for both employer and employee to use it, which then in 1996 was changed in order to give higher responsibility to the employers. An increased focus on activation has also taken place. A specific trait has been the increasing role of private financing from 14 per cent in 1980 to 28 per cent in 2003. Finally, it is concluded that what has been witnessed is, perhaps, only the frontrunner in dramatic changes to social rights in a welfare state that can no longer, therefore, be argued as belonging to the Nordic universal type of welfare state, but also that system change can be influenced both by internal barriers and bias in the political environment.

In Southern Europe, welfare states have also been changed and there, clearly, also in times of crisis. In Italy, one of the European countries with a large budget deficit, due to the economic crisis reforms have been made, as Maino and Neri show, especially in the nineties, and particularly in the pension system with a movement towards a contributory pension system. The pressure from the EMU deadline seems to have been a core issue in the way to achieve the balance. Reforms have also been passed in the area of social assistance, whereas in health care with the exception of devolution the reform path is less clear, although managerialism and managed competition have been part of the reform process. The high level of public sector debt has had a clear impact on budget cuts in order to maintain or reduce public sector deficits.

One way to cope with a specific problem in relation to the crisis and an increase in unemployment has been to share the available work. In the article by Sacchi, Pancaldi and Arisi, different approaches to the use of short-time work are compared for Italy, Germany and Austria. Despite, at the outset, there seems to be some convergence, this is less clear when taking a more systemic type of approach, where path-dependency seems to be integrated in the changes. Nevertheless, at the same time, there have been clearly marked changes to the systems in the wake of the financial crisis, and in using them actively as a way of coping with the rising level of unemployment.

Finally, Doetter and Götze look specifically on the reforms in relation to the National Health Services in the UK and Italy. They argue that, despite the economic crisis opening a window of opportunity for making changes, this has not been the only reason for changes in recent years. Also specific aspects related to the system itself, e.g. endogenous factors, related to for example, the way incentives are working in the area of health care. Therefore, reforms also depend on ideas and how policy ideas can be diffused into societal decision-making. This might, perhaps, be a specific trait related to the way the health care system works and function (cf. also the other articles in this special issue), but might also be a more general understanding of changes that they are neither resistant to change, nor just changing when the opportunity is there.

Conclusion

This special issue probes into how and whether the crisis has changed welfare states around the globe. The focus is on Europe, but also with an eye to Australia and the USA. The picture emerging from the articles is more diverse than one could have expected, still I would argue that we have seen a turning point in welfare states’ development with a move towards a more restrictive stance on public sector spending, at least in relation to societal total production, and a stronger emphasis on public sector deficit than we have witnessed earlier. In this way the financial crisis has had a profound effect on welfare states, or has at the least been used as a scapegoat in order to pursue dramatic changes in welfare systems in many countries. In particular, the development in Australia is different from the other countries analyzed, and in Europe Germany has seemingly chosen another path, albeit not that different.

This does not imply that the time for welfare and welfare states has ended, although the balance between state, market and civil society seemingly is moving away from the state and more towards market, albeit also with a central role for the family in particular.

Fiscal crisis thus opens a window for change that is used in some countries, whereas in others the development to a larger degree follows the path already chosen. However, at the same time, the opportunity provided by the crisis has not reduced the pressure for change.

References

Greve, B. (2011), Editorial Introduction: The Nordic Welfare States – Revisited, Social Policy & Administration, 45, 2: 111–13.

Haynes, P. (2011), Are Scandinavian Countries Different? A Comparison of Relative Income for Older People in OECD Nations, Social Policy & Administration, 45, 2: 114–30.

Kvist, J. and Greve, B. (2011), Has the Nordic Welfare Model been Transformed? Social Policy & Administration, 45, 2: 146–60.