Strenghts and weaknesses of the Nordic and Continental

Welfare State Models: What can We Learn from Each Other?

Olli Kangas

Danish National Institute of Social Research & Department of Social Policy, University of Turku

Content of the presentation

• important values and importance of values

• social insurance

• labour markets

• social services

• poverty, social exclusion

ein einzig Volk von Brüdern?

• ”Now let us take the oath of this new federation. We will become a single land of brothers, nor shall we part in danger or distress.” – Friedrich Schiller (1759-1805): Wilhelm Tell

• EU: a federation of brothers / sisters?

• members may have common interests but• what about common values / solidarity?

• The Nordics trust on their national institutions (parties, parliament, government, police and justice system) but distrust on the EU

• Italians trust on EU but not on their national institutions

• Estonians trust neither on national nor EU institutions

DISTRUST ON NATIONAL INSTITUTIONS

11,511,010,510,09,59,08,5

DIS

TRU

ST

ON

TH

E E

U3,0

2,8

2,6

2,4

2,2

SWE

SPA

POL

ITA

GER

FRA

FIN

EST

DEN

BEL

DISTRUST ON COUNTRYWO/MEN

90807060504030

DIS

TR

US

T O

N N

AT

ION

AL IN

ST

ITU

TIO

NS

11,5

11,0

10,5

10,0

9,5

9,0

8,5

SWE

SPA

POLITA

GER

FRA

FIN

EST

DEN

BEL

• there are big differences in general trust

• Nordics high-trust societies

• Belgians trust in their welfare state system

• how to increase trust in EU in the Nordics?

• how to increase trust in national institutions in the other countries?

• how to increase trust in other nations within the EU?

DISTRUST ON NATIONAL INSTITUTIONS

11,511,010,510,09,59,08,5

DIS

TRU

ST

ON

TH

E W

ELF

AR

E S

TATE

8,5

8,0

7,5

7,0

6,5

6,0

SWESPA

POL

ITA

GER

FRA

FIN

EST

DEN

BEL

Workers’ insurance versus national insurance

• a long term convergence between models• in the Nordics income-relatedness has taken over and

unconditional benefits have lost relatively• in the Continental model (notably so in Belgium) basic

security has been improved• consequently, differences in financing has been

diminished– employees’contributions have been introduced in the Nordics

• Fin/Swe vs. Den

– is it the level of social security contributions or the structure of financing or the structure of labour market & welfare state that is important for employment?

• the latter

Central European corporatism:a hindrance for reforms?

• participation of social partners makes the system robust– not directly open for political manipulation– high degree of legitimacy ”our system”

• harder to change, if needed, than politically administred systems

• In Sweden and Finland a number of important reforms were carried through; in Denmark welfare comission is preparing its proposals

the Finnish example

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10 111980 2000 2030

no changes

after changes

Social expenditures after the reforms of the 1990s

SWE

BEL

EU

DEN

SPA

• the Nordic have been able to cut public debts (that are among the lowest in OECD hemisphere)

• budgets are in surplus

• Economic growth has been pretty good since the mid 1990s (in Fin & Nor extremely good)

• Unemployment rates are low (Den, Nor, Swe)

• Employment rates are highest in the world

• female lf-participation due to the public sector

Maternal employment rates by the age of youngest child 2002 (OECD)

0

10

20

30

40

50

60

70

80

90

0-3 yrs 3-6 yrs 6-16 yrs

CanadaDENFINSWEUKBELGERFRA

Probability not to be employed after care-taking period (ECHP / Koistinen 2005)

0 5 10 15 20 25

Time (months)

0,0

0,2

0,4

0,6

0,8

1,0

Cu

m S

urv

iva

l

countryDenmark

Belgium

Ireland

Italy

Greece

Spain

Portugal

Austria

Finland

Survival Function

Some Danish lessons

• high wages

• financed via taxes and SOCIAL security contributions

• easy to dismiss, easy to get social security

• high employment mobility– 30% of employees change their jobs annually!

• effects of globalization may be more severe e.g. in Fin & Swe than in Den

How to finance social services?• social insurance vs. tax financing• user fees vs. tax financing

• problems in tax financing– tax levels are high– EU sets limits for the Nordics to use previously proven devices– discrepancy between risk pool and financial pool

• User fees– how to guarantee access to the poorest sections– income-tested user fees

• pros & cons

Rowntree's poverty cycle in York 1899 and 2000's cycle in Continental Europe / Scandinavia and the United States and the United Kingdom.

0

5

10

15

20

25

Childhood Youth Family Empty nest Old age

Po

vert

y R

ate,

%

Rowntree

U.S. / U.K

Nordic/Continental

third sector as a provider of social services

• traditionally in C-E the 3rd sector has been important• it has played a role in the Nordics, too• state-subsidized • EU directives on competition hollow up the possiblities

of the 3rd sector that bifurgates into the private for-profit systems or into the public sector

• private legislation penetrates into the social legislation– EU– municipal tenders (subject to law suits)

• common-law takes over the codified law?

the old are not poor and the poor are not old; problem of social exclusion: youth and immigrants

0

5

10

15

20

25

Childhood Youth Family Empty nest Old age

Po

vert

y R

ate,

%

Rowntree

U.S. / U.K

Nordic/Continental

The Belgian tax experiment

• the dilemma between decent income from work and too high wage levels for unqualified labor– in the US also analfabetics get job– how to avoid the working but poor situation

• the experiences from the Belgian experiments?

PISA: pupils’ acievement results

Countries Problem solving

Mathematics Reading Science

         

SWE 22 17 18 15DEN 12 12 13 20FIN 6

714

18

16BEL        

GER 19 20 12 16FRA 17 16 21 5       

AUS 9 8 7 9CAN 10 9 8 8IRE 18 25 6 17UK 19 18 10 7USA 28 28 15 21         

KOR 2 5 2 4JAP 3 3 19 12

COGNITIVE PERFORMANCE AMONG 15-YEAR OLDS.

               

  USA U.K. GER NL DEN NOR SWE

Constant 421.34*** 444.86***

375.97***

465.29*** 388.85***

406.06***

433.92***

Gender 18.68*** 15.53***

25.57***

10.04*** 20.24***

27.51*** 

27.51***

Immigrant - 15.98* - 14.01** -40-92***

-30.87*** -25.48***

-35.25***

-35.66***

FatherEducation

  3.57*

  .76

  7.52***

  .58

  8.19***

  2.98*

 - .27

Mother educ:Secondary

  13.79*

  10.31

  43.61*** 

  27.24***

  37.87***

  30.83***

  20.59*

Mother educ:Tertiary

  13.88*

  15.42*

  50.01***

  22.34***

  52.72***

 20.44**

 17.07*

Socio-economicLevel

  1.10***

  1.17***

  .90***

  .92***

  .50***

  1.01***

  1.06***

Cultural Capital   34.21***

  40.65***

  36.39***

  35.82***

  34.17***

  38.73***

  30.84***

               

Mother part-time

  16.84**

  12.92***

  5.00

  9.55**

  8.24

  4.76

  5.05

Mother full-time

 - 8.91*

  5.99**

 - 3.09

 -10.66*

 - .77

  2.91

  7.41

R2 .182 .200 .247 .230 .199 .170 .170

N 2571 7458 3933 2169 3933 3470 3836Espinng-Andersen 2005

Challenges for educational systems

• those countries with good performance display low social inheritance

• problems of education / segregation in Den & Swe

• In Europe education more evenly distributed than e.g. in the U.S.

• but top-education more succesfull in the US

What can we learn from each other?

• to be small and clever

• national strategies

• the common European welfare project?

• what are the smallest denominators for the European project?