Is the welfare state dying out?
OPINION: The economic crisis has given rise to numerous headlines about budget cuts, savings and changes in welfare states. The question is whether the traditional welfare state is dying out.
Since the start of the current financial crisis in 2008, many welfare states – especially in Europe – have made significant changes to the public sector, its size and its structure.
Large state deficits and difficulties in meeting formal EU standards regarding the size of the annual state deficits, together with high levels of governmental debt in a number of countries, have led to dramatic changes in many countries’ welfare systems.
One of the explanations of the deficits has been the big bank guarantees provided by a number of EU countries and the US.
The decline in economic activity also meant higher unemployment and thus higher government spending and less public revenue.
Welfare states have a new focus
There have been expense cuts in the public sector, and some countries have introduced salary cuts for public employees.
There have been and still are high levels of unemployment, not least for youths in most European countries.
And there have been adjustments of taxes and charges, albeit to a lesser extent.
In this way, the focus of the European welfare states has shifted from trying to deliver more and better welfare services to a much stronger focus on how these expenses can be reduced or how some areas can be moved from the public to the private sector.
Decided changes in welfare states are thus now to a greater degree backed up with arguments about economic necessity, rather than the ideological arguments about the relationship between the state and the market that used to dominate the welfare debate.
It is, however, not easy to say whether this is all merely due to a change of rhetoric because these arguments have now become more effective than they used to be for making changes to the welfare state.
The pressure is on the welfare state
The pressure on welfare states as a consequence of demographic changes has also played a part.
Surprisingly, the Nordic welfare states have, more than any other European countries, managed to sustain a more universal approach and with less dramatic changes in key areas than what is seen in several other European countries.
A possible explanation for this may be that the welfare states are more consolidated in the Nordic countries, but it may also be a linked to the fact that, despite myths to the contrary, they are no more expensive than other welfare states. They merely have a different approach and a different way of delivering and financing welfare benefits and services.
In addition, the Nordic countries had better opportunities – albeit on a relatively modest level – for pursuing a more expansionary economic policy and thus reduce the effects of unemployment to a greater extent than the other European countries.
This indicates that historic decisions still have an effect on the countries’ development – a form of path-dependence – even though adjustments and changes are still being made, which increasingly opens up for the question of whether the historical definition of the Nordic welfare states still exists.
A wish to better target welfare services to those who need them the most appears to be a consequence of our conception of the changes required to reduce public spending. The long-term consequences of this are, however, not clear.
Examples of changes in welfare states
Liberal welfare states such as Ireland and Great Britain have undergone significant changes and budget cuts. Holland, which in many ways is more similar to the Nordic countries, has also implemented major changes in its welfare state.
Overall, in addition to public spending cuts, there has also been a focus on various forms of changes in labour market policies regarding activation and job-sharing.
Public savings have involved everything from a direct reduction of public service and public salaries to a slower indexation of social benefits, a later retirement age and fewer welfare services.
Although not all the countries use the same type of changes, there are common features.
The financial crisis has also shown that the degree to which the countries are affected by the changes is strongly linked to how much the countries are affected by the global economic crisis.
That’s why Australia which, due to its closer affinity with Chinese economy, has found it less difficult than most European countries to get through the economic crisis.
All in all, it appears that many countries see it as the role of the state to create the framework conditions and the support that helps ensure social security, but also that the public activities have some form of a social investment perspective.
This would for instance mean fairly priced child care that’s of a high quality, since not only does this ensure good educational opportunities for the children, it also opens up for equal opportunities for men and women to combine work and family life.
So welfare states are not dying out but are – just like they always were – changing, with less emphasis on the public sector than before. Whether this will change once we’ll be seeing economic growth again is not clear.
Further arguments and details can be found in Greve, Bent (2012 (ed.)); 'The Times They are Changing? Crisis and the welfare state'.
Read the Danish version of this article at videnskab.dk
Translated by: Dann Vinther
- Greve, Bent (2012 (ed.)); 'The Times They are Changing? Crisis and the welfare state'. Oxford, Wiley and Blackewell
OPINION: Is Danish welfare facing a break-up?
Denmark is now discussing a break with the philosophy of universalism, although social expenditure in the Nordic countries is no higher than in Germany or France. Social policy experience tells us that universal welfare schemes are the most redistributive and that welfare for the poor always ends up as ‘poor welfare’.