Strenghts and weaknesses of the Nordic and Continental Welfare State Models: What can We Learn from Each Other?

1. 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

2. Content of the presentation • important values and importance of values • social insurance • labour markets • social services • poverty, social exclusion

3. 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?

4. 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

6. 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?

7. 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

8. 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

9. the Finnish example

10. 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

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

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

15. 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

16. 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

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

18. 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?

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

20. 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?

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

22. 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*** Father Education 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-economic Level 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 3836 Espinng-Andersen 2005

23. 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

24. 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?