In search of a new welfare state

Anton Hemerijck

As the financial crisis deepens and spills over into rising unemployment and social duress, the need for resilient employment and social policy is greater than ever. We need to seize the moment for a major change in the way we think about 21st century welfare provision. Now is the time to modernise social services, safeguard pensions, and narrow the gap between rich and poor, while simultaneously consolidating state revenue. There needs to be a re-orientation in social citizenship, beyond freedom from want towards freedom to act. This involves prioritising high levels of employment while enabling a good work-life balance and guaranteeing a rich social minimum for citizens to pursue fuller and more satisfying lives. There are seven social policy priorities at stake:

Flexicure labour markets for all
In the face of demographic ageing and a declining work force, nobody can be left inactive (for long). Impending redundancies should be mitigated by temporary and short term unemployment benefits, combined with additional training measures. Any kind of job is better than no job at all, especially to forestall long-term unemployment. The boundaries between being “in” and “out” of work have been blurred by increases in atypical work, low-wages, and subsidised jobs. Yet the challenge is how to mitigate the emergence of new forms of labour market segmentation. Relaxed hiring and firing legislation is best combined with generous social protection and active training and labour market policies. The ability to balance careers and family-life also depends on effective employment regulation that recognises part-time work as eligible for social insurance, while also offering possibilities for career mobility.

Increased female participation in the labour market
Depressed female labour participation widens the gender gap and constrains economic growth. Moreover, fertility also hinges on effective gender equality. This implies generous parental leave, employment security, and, especially, high quality child care. Higher fertility and higher female earnings lead to improved skills for future generations. Ultimately, this increases long-term productivity and significantly mitigates the adverse effects of population ageing.

Child-centred social investment strategy
As inequalities widen, parents’ ability to invest in their children’s success is also becoming more unequal. Childcare demands cannot be adequately met via commercial care markets. And the dangers of inadequate childcare are immense. Inaccessible childcare and continuing gender biases in labour market policies will lead to low fertility; low quality care is harmful to children, and low female employment increases child poverty. Increasing opportunities for women to be gainfully employed is a key step. But the concept of early childhood development needs to go beyond the idea that childcare is necessary to allow parents to reconcile work and family life. A comprehensive child investment strategy with a strong emphasis on early childhood development is imperative. A “child centered social investment strategy” is needed to ensure that children will be life-long learners and meaningful contributors to their societies.

Lifelong human capital investment push
In the new, knowledge-based economies, there is an urgent need to invest in human capital throughout the life of the individual. Considering the looming demographic imbalances in Europe, we cannot afford large skill deficits and high school dropout rates. Social and employment policies that are aimed at increasing skills and developing the quality of human resources act as ‘productive factors’ in our economies.

Later and flexible retirement
As life expectancy increases and health indices improve, it will be necessary to keep older workers in the market for longer. Sustainable pensions will be difficult to achieve unless we increase employment rates of older workers and raise the retirement age to at least 67 years. Delaying retirement is both efficient and equitable. It is efficient because it implies more revenue intake and less spending at the same time. It is also inter-generationally fair because retirees and workers both sacrifice in equal proportions. In the future, older workers will be much better positioned to adapt to new labour market conditions, with the aid of retraining, lifelong learning, and flexible retirement.

Migration and integration through participation
Priority should be given to problems of participation and integration of migrant groups, whose rates of unemployment in the EU are, on average, twice that of nationals. In our ethnically and culturally diverse societies, the welfare state faces a major challenge in ensuring that immigrants and their children do not fall behind. Economic exclusion and physical concentration (ghettoisation) reinforces educational underperformance, excessive segregation and self-destructive spirals of marginalisation.

Minimum income support
We cannot assume that the measures described above will remedy current and future welfare deficiencies. Hence, it is impossible to avoid some form of passive minimum income support. An unchecked rise in income inequality would worsen citizens’ life chances and opportunities. Widespread low-wage employment poses a scenario of overall insecurity for a large section of society. It is, therefore, necessary to have an even more tightly woven net below the welfare net for the truly needy to meet minimum standards of self-reliance.

Anton Hemerijck is director of the Netherlands Scientific Council for Government Policy