Nordic Welfare:
A DIY Guide
Jon Kvist
Centre for Welfare State Research
University of Southern Denmark
Denmark – the land of
fairytales and LEGO
High equality
Between rich and poor
Between men and
women
Incomes
Employment
Earnings
Subjective measures
High employment
For all
Particularly for women
The higher the skills, the
higher the employment
High employment is
important:
- To increase welfare
- To finance welfare
Without high employment, no “welfairytale”  how to
make the welfare model employment-friendly?
Question: The Welfare Puzzle
Generous cash benefits
≠
=
High taxes
Low wage inequality
High employment
Answer: Employment-friendly policies
Activation requirement polices moral hazard
Encompassing labour, social, educational and health services
that helps to create, maintain and utilize human capital
Nordic approach
• Goal is to maximise the realization of human
capital for all
• Almost all public policies are directed towards
increasing work
• Welfare model not only about securing a
safety net or providing insurance and
compensation, but also social investments
Social investments over the life course
Childhood
Youth
Fertille
Working age
Old
Social investments: Example of policies
Early
childhood
education
and care
Childhood
Primary,
secondary
and
tertiary
education
Youth
Care for
children
and
elderly,
leave
schemes
Fertille
Life-long
learning,
ALMP
Working age
Home
help,
health care
Old
Social investments: Returns
Rate of return
Cognitive skills
Competences
and knowledge
Children
Skills and taxes
Less expenses
Childhood
Youth
Fertile
Working aged
Old age
The Welfare Circus
(Re)distribution
Insurance
Social
investments
Safety
Equity versus efficiency
Standard focus
Negative trade-off through distortions from redistributive policies
Scandinavian focus
1. Insurance promotes
risk behaviour
2. Human capital investments
increase qualifications
3. Cash benefits are
automatic stabilizers
4. Moral hazard can be policed
Life satisfaction
UK
DK
Organisation of welfare services
State
Authority to
tax
Legislate on
cash benefits
Tertiary
education
Regions (5)
Municipalities (98)
No authority to
tax
Health services
Authority to tax
Social services
- Childcare
- Elderly care
Education
Employment services
Some health services
In part reimbursed in part
by state for cash benefits
Inter-municipal
redistribution
Active labour market policies
Workfare
intensity
Targetted programmes:
Training
Education
Short programmes
Counciling
Job search courses
Job search
Contact to job exchange
Duration of
unemployment
spell
Changing
demographics
G
B
R
• Changing household
composition
• Ageing populations
• More ethnic diverse
populations
Maternal employment rate (youngest child 6-14 years)
95
Challenges
80
• (Re)conciliation of
work and family life
• Less people to care
and finance more
elderly
• Maintain solidarity
65
50
35
20
DK
Employment rate of females (25-54 years), 2009
Trust in others
GBR
70
60
50
40
30
20
10
0
DK
The way we combine Lego bricks
constitute our welfare societies
Employment protection
÷
+
÷
Social security
+
÷
Active labour market policies
+
+
÷
Social services
+
÷
÷
…. AND THUS THEIR SOCIAL AND ECONOMIC SUSTAINABILITY
÷
Lego bricks in the Danish model
Employment
protection
legislation
Active labour
market policy
Social security
Social services
Lax
Rights and duties
Encompassing
Accessible, good
quality childcare
Contact and talks
Generous for low
income groups
Encompassing
elderly care
Job subsidy
In-work training
Courses and
education
Sanctions
In short
• By whom, where and when you are born matters for
your life chances
• No big trade-off between efficiency and equity
• Social security provide redistribution and insurance
• Activation polices moral hazard
• The effects of active labour market policies depends
on; economic cycle; type of instrument and target
group, program length, sequencing and timing; etc.
• Social investments crucial, especially in:
– Knowledge based societies
- People before they become adults
- Kids with disadvantaged family backgrounds
Is the Nordic model sustainable?
• Maintain high employment rates
• Avoid increase in long term unemployment
and marginalization
• Not new challenges, but changing focus and
forms
• Other forms of equality: gender, age, persons
with handicaps and illness, ethnicity, regional
etc.
• Social investments more needed than ever
Crisis perspectives
Cohort effects
Intergenerational effects
European polarization
Labour market polarization
Nordic model here to stay
Thanks for your attention
Good luck with
the Scottish Model!
www.jonkvist.com