Politics and inequality

Joakim Palme

Uppsala University and Institute for Futures Studies

Perspectives on inequality

• Lenski (1966) - inequalities in human societies are shaped by political conflicts as well as economic structures

• Tawney (1931/52)- the Welfare State as a Strategy of Equality

• Tullock and Le Grand (1980s) - middle class inclusion damages the poor

Models of social policy• typologies useful tool for simplifying complex

patterns of differences and similarities• different strategies and principles for

determining eligibility and entitlement levels, as well as financing

• strict focus on institutional aspects of the social protection programs; not to be confused with their political driving forces/potential outcomes

Paradox of redistributionKorpi, Walter and Joakim Palme.1998. ‘The Paradox of Redistribution and

Strategies of Equality: Welfare State Institutions, Inequality and Poverty in the Western Countries.’ American Sociological Review 63:661-87.

Social insurance model

• Targeted• Basic security• State corporatist• Encompassing

Redistributive strategies

• Robin Hood• Simple egalitarianism• Within group

redistribution• Mattew’s principle:

Give to those who have

Quality of the Last Resort: K. Nelson. 2003. Fighting Poverty.

SOFI: Dissertation no. 60.

• Income security and middle class inclusion• Social segmentation• Minimum protection• The economic crowding-out hypothesis

Case: Family Policy T. Ferrarini 'The Family, the State and the Labour Market'

Forthcoming: Edward Elgar. DUAL EARNER SUPPORT

A

General family policy

model

B

Contradictory family policy

model*

High GENERAL FAMILY SUPPORT

Low

C

Market-oriented family policy

model

D

Dual earner family policy

model

Low High

Family policy, female economic activity, child poverty and fertility

Family policy

Female labour force participation

Child poverty

Fertility

++/- -

- -

+

Swedish 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

•From child-care to life-long education

• Taxation• Employer contributions

• Central/local taxes• Local taxes with state

subsidies

• Dual-earner model

• Full employment: active • labor market policies

Swedish model under EU membership

• Less extensive than what many expected (hoped and feared 15 years ago).The traceable consequences are chiefly indirect, direct only in a few cases.

• Common expansive macroeconomic policy…..German unification, failure to deliver macro economic discipline. The stabilization pact one-sided focus on price stability.

• Positive employment effects of the economic integration as such.• Universality of security systems remains.

Gender equality reinforced by ECJ.Social tourism no but remaining tensions due to different financial structures

• The collective agreement model the ruling of the Laval case?

Trends

• Capital income vs. earnings

• Top earnings, management premiums

• Tax reforms: flat tax rates, broadened bases

• Social insurance decline

• Education spending lagging behind

• ALMP stagnation

Social assistance scale rate in relation median income (Nelson/Kuvalainen

2011, Working paper IF)

30

35

40

45

50

55

60

65

70 Sweden

Sweden

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 is of vital concern: secure the future tax base!

Agenda for a social investment approach

• Go beyond immediate responses to the current crisis not to reproduce the failures of the recent past.

• Global crisis in the financial system is changing our views on what is possible.

• Human capital investments have been getting less attention in the debate.

• How can we rethink the future with the time horizon being prolonged by the issue of climate change?

Time to change perspective

• The economic crisis and climate change will in many ways impose constraints

• But also provide a chance to innovate, and prolong the time horizons for policy making

• Without losing the academic rigour and without losing sight of the practical instruments needed to be successful policy wise

Social investment and learning

• No way around; investment today less resources for consumption today.

• Possible or not to extract the necessary taxes now and in the future will depend on what people want, and probably on international co-operation.

• A balanced approach: a synthesis involving a concern with the way that the social investment supports different groups in society and a realistic view of how society works.

• ‘Learning’ as a part of European integration carries a great - but largely under-utilized - potential.

The Social Investment Paradigm

- In-work poverty and unemployment are linked to lack of adequate skills to fill today’s jobs and to create better jobs of tomorrow

- Positive economic role for new forms of social policy: social policies that invest in human capital to increase employability and employment levels; to support labour market fluidity (flex-security); to prepare for the “knowledge-based” economy.

- Social policy as a pre-condition for economic growth and job creation

Capability formation: a life course perspective

Publicly funded child-care invests in cognitive skills essential for life chances of children

Quality of compulsory education – PISA studies of core competencies: reading, mathematics, science

Skill needs in advanced industrial societies have changed –polarization among youth is a reality and a threat

The ”learning economy” requires a constant renewing of capabilities in firms and competences of workers

AU

AT

BE

CA

CZ

DK

FIFR

DE

GR

HU

IE

IT

JP

NLNZ

NO

PLPT

SK

ES

SE

CH

UK

US

46

81

01

2in

vest

me

nt so

cia

l po

licie

s

4 6 8 10 12 14compensatory social policies

1 2

3 4

Nelson and Stephens:Policies Outcomes

• Cumulative Educational Spending

• Educational Spending 1995

• Skill Acquisition Index

• Cumulative ALMP Spending in 1995

• ECEC (cumulative daycare spending)

• Short Term Unemployment Replacement

• Bottom 5th Percentile Literacy

• Average Literacy• Employment Levels in

1995• Discretionary

Learning Employment

EU 2020 Agenda

• Focus on the expanding sectors of the knowledge-based economy; innovation

• Employment targets; gender neutral• Skills, and educational attainment• Social inclusion; primarily in poverty terms

Flaws of the EU 2020 Agenda

• Focus on expenditure cuts, instead of increasing the revenue, might block potential of social investment approach

• Missing targets concerning secondary education• Sustainability of social protection• Poverty focus without meaningful targets

Political economy of social investment

• European social models are attempts to apply ‘strategies of cooperation’, time to revitalise

• Social investment approach is unattainable and elusive, unless boldness and willingness to take political and other risks

Herald Tribune, editorial: September 30, 2011

The world has barely dug out of recession and the global economy is again slowing dangerously. Most leaders seem eager to make things even worse. Instead of looking for ways to reignite growth, Europe’s leaders – and Republicans on Capitol Hill – are determined to slash public spending. Europe’s fixation on austerity is also compunding its debt crisis, bringing the Continent even closer to the brink.