The progressive welfare mix

Maurizio Ferrera

As the financial and economic crisis deepens, the need for effective safety nets and social protection systems is today greater than ever. Yet the question of how the welfare state can meet the new challenges in a sustainable way, considering demographic trends and budgetary constraints, remains complex. The following key issues should be given priority attention:

Introduce/redesign the safety net for the most vulnerable
The “litmus test” for the welfare state is its effectiveness in alleviating poverty and promoting social inclusion. A successful anti-poverty strategy must provide resources to those most in need but also opportunities for them to (re)gain individual autonomy. Thus the so-called safety net must incorporate incentives for social and occupational insertion (including in-work benefits) and for personal development through commitment and learning. Activation through workfare and “learnfare” is progressive.

Focus on childhood and youth
The prime objective of the 20th century welfare state was to guarantee economic security during old age. The prime objective of the 21st century must be that of promoting fair life chances to the young. This means investing in early child education and care, in educational quality more generally, and also in child-centred family policies: the so-called “Lego model”. Education must become an organic and central component of the welfare state. It is of paramount importance to combat as early as possible the effects of the “social lottery” on individual prospects and attainment,  promoting effective equality of opportunity and fair chances of social mobility. Child-centred social policy is progressive. Investing in human capital and skill formation is progressive.

Put female employment upfront
Promoting female employment is good for growth and makes families less vulnerable – economically and socially. It is also in line with women’s aspirations and increased educational credentials. High rates of female employment do not hamper fertility: quite to the contrary there is now evidence that it tends to favour it. Labour markets must be re-organised around the principles of gender equality and, more generally, non discrimination. Social policies must encourage the formation and meet the needs of dual “earner-dual carer” families, in which both partners share work and family responsibilities. “Womenomics” is progressive. Gender equality and non discrimination are progressive.

Recalibrate social insurance
The traditional catalogue of social risks must be updated and recalibrated, in both functional and distributive terms. Old age must be thoroughly redefined through policies of flexible retirement and “active ageing”. Dependency must be recognised as a new risk that can be countered through collective arrangements. Public health systems must guarantee universal coverage for high quality care, but must also be able to select cost-effective treatments. Prevention must become a top priority; medical risks and inequalities in health conditions should be combated by encouraging healthy life styles and behaviours. New schemes of universal insurance should be developed with a view to a) offering targeted support for coping with the adverse contingencies of the entire life cycle, and b) organising the provision of an adequate mix of benefits in cash, services, and time entitlements that individuals can combine as they need and wish for the pursuit of their professional and personal ambitions. Access to social insurance (old and new) should be designed so as to avoid labour market segmentation and the emergence of insider/outsider gaps. Pension reform is progressive. “Soft paternalism” in health care is progressive. A life-cycle approach to social insurance is progressive.

State or market? It’s the mix, stupid!
The notion of “state vs. market” has become a false dichotomy for developing social justice strategies. The real challenge is that of identifying efficient, effective and equitable mixes between public and private arrangements, and developing adequate institutional capacities (including financial sustainability) for delivering a “fair distribution” of resources and opportunities. Welfare has traditionally been about security, equality, redistribution, and inclusion. Today it is also about personal autonomy, responsibility, capacity-building, and the expansion and enrichment of individual options. A progressive welfare state rests on a dynamic mix of normative objectives and pursues them through intelligent mixes of public and private instruments, with the ultimate view of improving people’s chances throughout their entire life.

Maurizio Ferrera is professor of social policy at the University of Milan