Public Economics:
Welfare states and inequalities
University of Castellanza
Session #1
A European Social Model?
06 May 2013
Three sessions

The European Social Model (ESM)
» What is distinctive about Europe

One or many Europes
» Three worlds of welfare
» Flexible and inflexible Europe

Europe 2020
» Income inequality and social inclusion
» Inclusive growth?
Learning Objectives
By Wednesday evening you should be able to…

Identify key differences between the social
structure of Europe and the USA

Identify the different forms of labour market
participation and non-participation

Differentiate between the main groups of
European societies and welfare states

Explain different employment rates across Europe

Understand the concepts of income distribution
and poverty

Evaluate possible relationships between economic
growth and European social policy
This first lecture

Welfare state as defining Europe
» Social cohesion and social inclusion

Elements of the European Social Model
» Social citizenship
» Restrained egalitarianism
» Backbone state
» Economic citizenship

The EU and the ESM
Reading for today


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Anthony Giddens, Europe in the Global Age,
Cambridge: Polity Press,2007, Chapter 1.
James Wickham, ‘Potential and weaknesses of the
European Social Model’, Employment Research
Centre, Trinity College Dublin. Briefing paper for
Infowork Project. Available at
http://www.tcd.ie/ERC/symposiainfowork.php
T.R. Reid, ‘The European Social Model’, Chapter 6 of
The United States of Europe (2004).
Some quotes
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“There won’t be a bill to pay. We do it a bit differently
here. In the National Health Service, we don’t charge
for medical treatment’. (British nurse to American
visitor in casualty ward)… quoted in Reid, The United
States of Europe, p. 145.
‘This widely shared sense of the government’s social
responsibility to everybody is another unifying force
that makes Europeans feel they all belong to a single
place – a place they believe, that is definitely not
American.’ Reid, p.146.
But is this about being British (or French or Italian or
Swedish etc) or about being European?
A European Good Thing?


Europe has built a distinctive economic and
social model that has combined productivity,
social cohesion and a growing commitment to
environmental sustainability. (Kok, 2004: 7)
Preserving our European social model - our
specific combination of market economy,
welfare state and democracy - requires action
not only at the European level but also at the
global level. (Lamy, 2004:18)
Inclusion & Cohesion
INCLUSION
Measures for vertical axis:
Poverty rates (% below y%
of median income);
Income inequality (Gini
coefficients, decile ratios)
Vertical axis
is about
(in)equality
FRAGMENTATION
COHESION
Horizontal axis is
about trust and
‘social capital’
EXCLUSION
Meausures for horizontal axis:
Level of social capital and trust; crime
Inclusion & Cohesion
Cyber populism
INCLUSION
Millenarian egalitarianism
(Bolshevism…Pol Pot…Taliban
COHESION
FRAGMENTATION
Claudillo
dictatorships; China?
EXCLUSION
Fascism
Inclusion & Cohesion
INCLUSION
Cyber populism
Settler
democracies
ANOMIE
UK
Millenarian egalitarianism
(Bolshevism…Pol Pot…Taliban
European
Social
Model
Scandinavian
social
democracies
COHESION
Continental
corporatism
USA
Claudillo
dictatorships; China?
Representative
democracies
Mediterranean
familism
ÈXCLUSION
Fascism
Social citizenship





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Education, health, housing, income support…
Rights not charity
Baseline for participation in society
Financial costs (taxation)
Rights means obligations
Restrictions on diversity (‘thick citizenship’)
Involves both inclusion
and cohesion
Egalitarian Europe
(1) Income distribution
Proportion of Population in Income Bands
USA
UK
>200
150 to 200
Sw eden
No European
country has such
a large
proportion of its
population with
less than 50% of
median income
>120 to <150
>80 to <120
Italy
>50 to <80
<50%
Germany
France
0%
20%
40%
60%
Population (adult equivalent)
80%
100%
The US has a larger
proportion of its
population with
more than double
the median income,
but here Sweden is
the outlier
Egalitarian Europe
(2) Attitudes to inequality
‘It
is the responsibility of the
government
to
reduce
the
differences between people with
high incomes and those with low
incomes’ (% agreeing)
Legitimate income difference between
‘unskilled
factory
worker’
(income=100) and ‘Chairman of a
large national company’
Egalitarian Europe
(2) Attitudes to inequality
Swe Ger
‘It
Aus
NZ
Can
USA
is the responsibility of the 53.7 65.5 42.6 53.1 47.9 38.3
government
to
reduce
the
differences between people with
high incomes and those with low
incomes’ (% agreeing)
Legitimate income difference between 239
‘unskilled
factory
worker’
(income=100) and ‘Chairman of a
large national company’
711
480
419
Primarily about inclusion
512
1,114
Backbone state

Public realm
» NOT market, NOT personal
» Importance of state service (Beamte, service public, civil
servant)


‘This social capability is supported by a conception of
the public realm whose underwriting of public science,
public transport, public art, public networks, public
health, public broadcasting, public knowledge and the
wider public interest gives European civilization its
unique character while offering many of its enterprises
competitive advantage.’ (Hutton, 2002: 258-259).
Simplest measure: state expenditure as % GDP
Primarily cohesion
Economic Citizenship

Labour market regulation
» Employment protection
» Working time

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Health and safety
Rights to information
Rights to representation
» Trade union membership
» Trade union coverage
» Workplace representation (Betriebsrat, European Works Council)

Anti-discrimination
» Equal pay (including pensions, benefits)
» Equal opportunities (recruitment, promotion)

Work-life balance
» Parental leave
» Right to flexible working
Primarily cohesion
Emergence of social Europe

1956 Treaty of Rome
»

1974 Social Action Programme
»
»

‘A market economy, not a market society’ (Jospin)
Social expenditure to contribute to competitiveness
In parallel to single market programme
2000 Lisbon Declaration
»
»
»

Social Charter of Fundamental Rights of Workers
1990s Delors promoting ‘European Social Model’
»
»
»

Response to enlargement; 1960s militancy
Employee rights, equal opportunities
Maastricht Treaty 1991
»

Retraining for those effected by industrial change
– The Union has today set itself a new strategic goal for the next decade: to
become the most competitive and dynamic knowledge-based economy in the
world, capable of sustainable economic growth with more and better jobs
and greater social cohesion
An employment-based social policy
Intergovernmentalism (‘Open Method of Co-ordination’) and ‘Soft law’
So ending European Social Model or reformulating European Social Model?
Europe 2020
»
»
Smart growth with “smart sustainable and inclusive growth’
Explicit inclusion targets
The EU and the ESM

Positive integration:
» Creating a single European society
» EU creates basic social and economic rights for all
Europeans
» BUT these are limited; most social rights depend on national
welfare states

Negative integration
» Creating a single European market
» Removal national barriers to competition: Now very
successful
» BUT not a basis for a new European identity

The current crisis
» Austerity programmes seen as ‘European’ and destroying
welfare states!