Social policy and economic development in the Nordic Countries

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Social policy and economic development in the
Nordic Countries

• Joakim Palme

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Nordic model of social protection

• Universal benefits
• Earnings-related social insurance
• Targeted benefits to poor
• Social services-universal-decentralized-separat
  ed from cash benefits
• Individual social rights

• Taxation
• Employer contributions
• Central/local taxes
• Local taxes with state subsidies
• Dual-earner model
• Full employment and active
• labor market policies

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Shaping the Nordic Model

• Gerhard Lenskis perspective on inequality
• - inequalities in human societies are shaped by
  political conflicts as well as economic
  structures

• The emergence of universalism
• 1930s Population crisis and Depression
• Social citizenship
• Earnings-related social insurance
• Modern family policy- dual-earner model
• What about ageing societiSes?

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The merits of the model

• Low life-cycle poverty
• Reduced inequalities
• High employment
• High female participation
• Strong support for social security
• Incentives and cost control?!

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Equality and efficiency

• Universal coverage combating poverty and
  exclusion
• Transaction costs - low with nationwide systems
• Portability good for labour mobility
• Incentive structure poverty traps avoided
• Investments in health and education productive
  labour force
• Stable institutions positive for growth social
  rights as property rights
• Expenditure levels not the critical factor but
  program design

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Rowntrees Poverty Cycle
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Peoples pension 1913
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Peoples pension 1935
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Peoples pension1948
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Peoples pension ATP 1960
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Peoples pension ATP Supplement 1969-

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The Great Pension Reform 1994/98

• Ageing society
• Problems of cost control
• Incentive problems
• Individual choice in a compulsory system
• Political compromise in the most controversial
  policy field

• Defined contribution formula 18,5 of income
• 16 Notional Defined Contribution Accounts
• 2,5 Fully Funded Accounts
• Pension Credits child-rearing etc.
• Guarantee pension, no means-testing!
• Buffer funds and automatic balancing

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Reformed system Income pension and universal
guarantee (supplement)
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Dimensions and Models of Family Policy
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Family policy generosity in different models of
family policy in the mid- 1990s
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Family policy, female economic activity, child
poverty and fertility
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Family policy index and average poverty among
the three types of families with children in the
mid 1990s. Poverty limit 50 percent of
equivalized median income
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Strategies of Redistribution

• R H Tawney - Welfare State as a Strategy of
  Equality
• G Tullock and J Le Grand- middle class inclusion
  damages the poor

• The Paradox of Redistribution
• Robin Hood
• Simple Egalitarianism
• Within Group Redistribution
• Mattews principle Give to those who have

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Common challenges of ageing societies

• Insecurity
• Aging of populations, falling birth rates
• Divorce rates and lone-parenthood
• The gender issue
• Late entry and early exit in working-life
• Unemployment and social exclusion
• Legitimacy and financing

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Current dilemmas of the model

• Nominal cost limits vs. the insurance principle
• Choice vs. segregation and no voice
• Necessary reforms vs. trust in stable
  institutions
• Social welfare policy vs. occupational and fiscal
  welfare policy
• Local autonomy vs. equal citizenship rights
• Interest formation where is the middle class
  going and which political forces mobilise?

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Welfare and welfare institutions

• Welfare
• Individual resources making it possible to
  control living conditions
• Several dimensions health, work, income,
  education etc
• Institutions as individual resources state,
  family , market
• Misfortune social policy challenge

• Welfare institutions
• Resoures for the individual as user
• Insurance for future needs
• Investment in the future
• Access and quality
• State, municipalities, market, voluntary sector,
  family

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Rethinking social policy in ageing societies

• Social security is strongly redistributive over
  the life cycle the ageing of societies puts
  tough fiscal pressures on public spending
• The debate on ageing issues has been overly
  focussed on pension reforms and savings
• How social policy interact with fertility,
  education and labour supply (the future tax base)
  is of vital concern
• We need to reform the system of social protection
  in order to make it sustainable for the future

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Framework for reform increase the number of
taxpayers

• Incentives individual taxation and rights,
  universal benefits and earnings-related social
  insurance vs. means-testing,
• Human resources lifelong learning starts at age
  1
• Social services child care, elderly care
• Employment opportunities goals and priorities of
  macro-economic policy, rehabilitation in social
  security

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The European Social Model

• Scandinavian strategy
• Middle class inclusion
• Universalism
• Human capital response to ageing societies
• Gender and work
• Equality of conditions

• Goal
• The European social model is about social
  inclusion and equality of opportunity.
• Barrosso July 12, 2005

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Open Method of Coordination

• Lisbon Strategy on Employment
• Sustainable pension systems
• Health insurance
• Social inclusion indicators
• Why not?
• Family policy and the rights of children

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Why the founding principles of social security
rights are important

• How benefits are distributed coverage and
  adequcay
• How social security create interest coalitions
  and political support
• How social security programs may contribute to
  increase the number of taxpayers