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?

3,0 2,8 2,6 2,4 2,2 8,5 DEN FIN SW E 9,0 9,5 GER 10,0 POL FRA BEL SPA ITA 10,5 EST 11,0 11,5 • 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

11,5 11,0 10,5 ES T BE L ITA POL FRA SP A GE R 10,0 9,5 SW E FIN 9,0 DE N 8,5 30 40 50 60 70 DISTRUST ON COUNTRYWO/MEN 80 90

8,5 8,0 7,5 7,0 6,5 6,0 8,5 DEN 9,0 FIN SW E 9,5 GER 10,0 ITA SPA POL FRA 10,5 BEL EST 11,0 11,5 • 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

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

40 35 30 25 20

the Finnish example

Social expenditures after the reforms of the 1990s no changes SWE DEN BEL EU SPA after changes 15

1

1980

2 3 4 5

2000

6 7 8 9 10

2030

11

• 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)

90 80 70 60 50 40 30 20 10 Canada DEN FIN SWE UK BEL GER FRA 0 0-3 yrs 3-6 yrs 6-16 yrs

Probability not to be employed after care-taking period

(ECHP / Koistinen 2005) Survival Function

1,0 0,8 0,6 country Denmark Belgium Ireland Italy Greece Spain Portugal Austria Finland 0,4 0,2 0,0 0 5 10 15

Time (months)

20 25

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.

25 Row ntree 20 U.S. / U.K

15 Nordic/ Continental 10 5 0 Childhood Youth Fam ily Em pty nest Old age

third sector as a provider of social services

• traditionally in C-E the 3 rd 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 3 rd 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

25 20 15 10 5 0 Childhood Youth Fam ily Em pty nest Old age Row ntree 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?

Countries SWE DEN FIN BEL GER FRA AUS CAN IRE UK USA KOR JAP PISA: pupils’ acievement results Problem solving Mathematics Reading 22 12 6 7 19 17 9 10 18 19 28 2 3 17 12 1 4 20 16 8 9 25 18 28 5 3 18 13 1 8 12 21 7 8 6 10 15 2 19 Science 15 20 1 6 16 5 9 8 17 7 21 4 12

COGNITIVE PERFORMANCE AMONG 15-YEAR OLDS.

Constant Gender Immigrant Father Education Mother educ: Secondary Mother educ: Tertiary Socio-economic Level Cultural Capital

USA

421.34*** 18.68*** - 15.98* 3.57* 13.79* 13.88* 1.10*** 34.21*** Mother part time Mother full-time R 2 N Espinng-Andersen 2005 16.84** - 8.91* .182

2571

U.K.

444.86** * 15.53*** - 14.01** .76

10.31

15.42* 1.17*** 40.65***

GER

375.97** * 25.57*** -40 92*** 7.52*** 43.61***

NL

465.29*** 10.04*** -30.87*** .58

27.24*** 50.01*** .90*** 36.39*** 12.92*** 5.99** .200

7458 5.00

- 3.09

.247

3933 22.34*** .92*** 35.82*** 9.55** -10.66* .230

2169

DEN

388.85** * 20.24*** -25.48***

NOR

406.06** * 27.51*** -35.25***

SWE

433.92** * 27.51*** -35.66*** 8.19*** 37.87*** 52.72*** .50*** 34.17*** 8.24

- .77

.199

3933 2.98* 30.83*** 20.44** 1.01*** 38.73*** 4.76

2.91

.170

3470 - .27

20.59* 17.07* 1.06*** 30.84*** 5.05

7.41

.170

3836

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?