Transcript Stretching the Safety Net: Is the European Welfare State in Crisis? European Roundtable VI April 8, 2006 European Roundtable VI.

Stretching the Safety Net:
Is the European Welfare State
in Crisis?
European Roundtable VI
April 8, 2006
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Names on welfare …
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Gerhard Schröder
Dominique de Villepin
Kurt Biedenkopf
Wolfgang Clement
Tony Judt
Fritz Scharpf
Jürgen Habermas
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Overview
• The background: Different conceptions of
the state in Europe and the US
• A case in point: Welfare policies in
Germany
• Challenges to the welfare state
• Comparative perspectives on the welfare
state
• What’s so good about the welfare state?
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1. The background: Different
conceptions of the state in
Europe and the US
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2. A case in point:
Welfare policies in Germany
• The scope and volume of the German
welfare state
• Course correction: The “Agenda 2010”
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Social Data: Germany, 1950-2001
Indicator
1950
1970
2001
Population (million)
50.0
60.7
82.3
Employed (% of pop.)
45.9
44.2
50.8
Unemployed (% of
7.2
employable)
Women in labor force (%) 35.7
0.6
9.4
35.9
44.0
White collar (% of labor)
19.8
36.6
56.3
Blue collar (% of labor)
48.6
46.8
32.6
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The major elements of the German
welfare state (1)
• Insurance-based benefits
– Social security (old age) pensions
– Unemployment insurance
– Mandatory health insurance
– Mandatory hospice insurance
• Contract-based benefits: Company
pensions
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The major elements of the German
welfare state (2)
• Need-based benefits
– Social assistance (including housing, clothing,
Christmas allowances)
– Unemployment assistance (after exhaustion of
unemployment insurance)
• Policy-based benefits
– Child allowances
– Educational services and financial assistance
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Welfare Data: Germany
Indicator
Unit
Total
welfare
Billion
€
89.3 243.8 346.9
Total
welfare
% of
GDP
25.7
32.1
30.0
33.8
13.3
16.2
18.0
20.6
Employee % of
Contribut. wages
1970
1980 1989
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2000
680.8
11
Number of Welfare Recipients:
Germany, 1970-2000 (in million)
Service
1970
1989
2000
Pensions
10.2
14.8
23.0
Unemployment
benefits
Child subsidies
0.1
1.4
3.2
6.9
9.2
9.7
Social welfare
1.5
3.3
2.7
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Increase in Welfare Payments:
Germany, 1970-2000 (Billion €)
Service
1970
1989
2000
Pensions
27.9
111.3
232.0
Medical care
12.2
68.7
133.7
Unemployment
1.1
13.2
60.3
Child subsidies
1.5
5.7
25.9
Social welfare
1.7
14.7
23.3
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Contributions to Social Security
Pension Fund: Germany, 2003
• Premiums: 19.5% of wages (equally
shared between employer and employee)
• Wage limits for assessing premiums:
– Western Germany: € 5.100
– Eastern Germany: € 4.250
• Revenue of pension fund:
– Premiums: 75%
– Federal subsidy: 25%
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“AGENDA 2010” (Germany 2003):
Major Reform Items (1)
• Tax Reform (previously>1/1/04>1/1/05):
– Lowest tax bracket: 19.9 > 16 > 15%
– Highest tax bracket: 48.5 > 45 > 42
• Modest loosening of job security (esp. for
small firms): facilitating termination
• More flexibility for mini jobs
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“AGENDA 2010” (Germany 2003):
Major Reform Items (2)
• Tightening unemployment compensation
– Unemployment insurance: 18 > 12 months
– Combine unemployment assistance with
social welfare
– Any reasonable job offer must be accepted
• Reducing health care benefits
– Copayments of 10% for physicians,
prescriptions, hospital (min.€5/max.€10 per
service, max. 2% of gross income/year)
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“AGENDA 2010” (Germany 2003):
Major Reform Items (3)
• Scaling down social security benefits
– No increase of payments in 2004
– “Sustainability Factor” for adjusting future pay
levels to ratio contributors/recipients
– Cap premiums (now 19.5%) at 20/22%
(’20/’30)
– Increase age of eligibility to 63 (67 in 2035?)
– Enhance employment opportunities for older
workers
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3. Challenges to the welfare state
• More people are in need of welfare:
– There are more older people
– More people need (increasingly costly)
medical care
– More people are (longer) unemployed
• Resources remain (at best) constant
– Largely stagnant economies
– Shifts in ratio of working to retired population
– Contributory schemes drive up cost of labor
– Limits to tax increases
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The Ageing of Germany
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Ratio of population 65 and over to the
labor force, 2000 and 2020 (OECD)
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Total tax revenue (as % of GDP), 2003
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4. Some comparative
perspectives on the welfare
state
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Public social expenditures, 1998
Country
as % of GDP
France
28.82
as % of public
expenditure
55.27
Germany
28.48
59.87
UK
25.07
63.84
USA
14.96
43.77
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Public social expenditure (as % of
GDP) 2001 (OECD)
Unemployment Compensation,
1998
Country
as % of GDP
France
1.48
as % of public
expenditure
2.83
Germany
1.31
2.76
UK
0.32
0.82
USA
0.25
0.73
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Public Health Benefits, 1998
Country
as % of GDP
France
7.27
as % of public
expenditure
13.93
Germany
7.80
16.39
UK
5.62
14.32
USA
6.00
17.54
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Public and private health expenditure
(US-$ per capita) 2003 (OECD)
Infant Mortality (deaths per 1000 live births),
2003
5. What’s so good about the
welfare state?
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The welfare state and its socioeconomic context: Some evidence (1)
Relationship
Correlates
Correlation
Welfare and
poverty
Social expenditure
rate/Poverty rate
-.74
Change in
Δ Social exp.rate/ Δ -.66
welfare/poverty poverty rate
Welfare and
Social exp. rate/
income inequity Income distribution
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-.79
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The welfare state and its socioeconomic context: Some evidence (2)
Relationship
Correlates
Correlation
Welfare and
Social expenditure
+.23
civic engagem’t rate/% of volunteers
Welfare and
criminality (1)
Welfare and
criminality (2)
Social expend. rate/
# of prison staff per
100 k population
Social expend. rate/
# of police per 100k
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-.60
-.79
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The European Roundtable
Website:
http://www.stanford.edu/~weiler/
ERT_website.htm
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THE SPEAKERS
• Marina Bourgain, European University
Institute, Florence; University of California
at Santa Cruz
• Isabela Mares, Department of Political
Science, Stanford University
• Jonah Levy, Department of Political
Science, University of California at
Berkeley
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PRESENTATIONS
• Marina Bourgain: “Stretching the Safety
Net Beyond National Boundaries: The
Welfare State and the Role of the EU”
• Isabela Mares: “Business Interests, Wage
Bargaining, and the Political Economy of
Employment and Unemployment in
Europe”
• Jonah Levy: “On the Compatibility of
Economic Liberalism and Welfare Policies”
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