The welfare state
§1. What is a Welfare State?
A welfare state is a state where the government plays an active role in ensuring the well-being of it’s
people.
Welfare: the extent to which people have access to means to meet their needs.
Well-being: The degree to which people are satisfied with their physical and mental health.
First a welfare state only included protection from poverty etc., but now it stands for collective wellbeing with capitalist production system  no interference at expense of economic freedom and
basic rights.
Solidarity concept: in a society there is a willingness to share risks. You help people because they
would help you.
The aim of a welfare state is not only benefits and insurances, but also creating conditions so that
people can undertake social and economic activities  facilities, roads etc.
The welfare state has 4 functions:
- An insurance function: ensures that people will have an income when they are unemployed,
ill, or unfit to work because of age or disability.
- A care function: When you need physical or psychological problems, you have insurance for
help.
- An improvement function: A good education increases opportunities and helps the society.
- A bonding function: A welfare state creates a bond, because we are all interdependent.
A welfare state has the duty to help people find a job and give benefits.
Communist societies work under equality and being taken care of by the government, but went hand
in hand with oppression and violence.
Capitalist societies value freedom and people insure themselves against unemployment and illness.
Emphasis it put on risk of sharing, because of this facilities are very expensive.
Countries?
Benefits?
Scandinavian model
Sweden, Finland,
Denmark, Iceland,
Norway
Easy to access benefits
System of services
Comprehensive system
of services
Interference state?
State has a lot of
influence, active role
Labourmarket?
Flexible labourmarket
Taxes high or low
Political name
High
Socio-democratic
welfare state
Anglo-Saxon model
US, England, Canada,
Australia, New-Zealand
Rhineland model
Netherlands, Belgium,
Germany, Luxembourg
Difficult to access
benefits
Limited system of
services
Moderately easy to
access benefits
Comprehensive system
of services, based on
how long you’ve
worked
Big role of state, fairly
active role
Give priority to good
entrepreneurial
climate, modest role
Flexible labour market,
wages determined by
market forces, free
market economy
Low
Liberal welfare state
Women who work less
get less benefits, free
market with
intervention
Normal
Corporatist model
§2. Origins of the welfare state
The process of developing welfare state went hand in hand with changing socio-economic
relationships and growing prosperity.
The night watchman state
During 19th century the government’s role was based on liberal ideology, there was a free market,
people could produce what they wanted, no minimum wage and you could be easily dismissed.
There was no governmental intervention in the economy. Night watchman state  main job of
government was maintenance legal order and protection possessions. Weak members (old, sick,
orphans) society were helped through private charity.
First practice of government looking after their people is the Poor Law in 1854. This was followed by
more social insurances for protection of workers. Also because healthy workers work better.
Examples:
- Van Houten’s ‘Child Labour Act’ 1874 (Kinderwet van Van Houten) : Child labour banned.
- Accident Prevention Act 1901 (Ongevallenwet)
- Disability Law 1913 (Invaliditeitswet)
- Unemployment Resolution 1917 (Werkeloosheidsbesluit)
- Public Housing Act 1901 (Woningwet) : building of workmen’s houses.
Around 1900, political parties all endorsed intervention in economy by government with own points
of view. Catholics and Protestants wanted help protecting vulnerable. Socialists wanted better living
conditions and a stronger legal position for workers. Liberals wanted to improve social order.
In the 20th century, the government began to pay a more active role in public life. The mixed market
was created, where the government provided certain goods and services in addition to free market.
The Wall Street Crash affected the Netherlands a lot and unemployment resulted in poverty. Here,
the government gave small benefits to breadwinners and organized public work programs.
After WWII, social security became a moral basis for post-war politics. Before war only people who
worked, after the wall all citizens.
During the rebuilding, government from then on would decide on a maximum wage and socialists
agreed to is provided that power of workers would be strengthened with new social legislation
(Unemployment Act 1949 and Sickness Benefit Act 1952). Catholics wanted labour unions (The
Labour foundation 1945 and Socio-Economic council 1950).
Real expansion of welfare state took place in 50s and 60s. Had impact in three areas:
1) Number of risks covered increased for everybody
2) Number of those who qualified increased, even people not contributing and because of this
people claiming benefits rose.
3) Number of sectors increased, benefits in more areas of a society.
Some milestones of Dutch welfare state are:
- Old Age Pensions Act (Algemene Ouderdoms Wet): permanent income after 65.
- Vaccination babies: protecting babies against disease.
- Social Assistance Act (Bijstandswet): Poor people entitled to a benefit, even without
contribution.
- Contraceptive Pill: Possibility to plan families and included in health insurance.
- Housing corporations: Rental subsidies made it possible for families to move to better
houses.
- Education: People went to school for longer periods of time and could even go to university.
Social security makes it possible to rise on the social ladder. This also changed Dutch culture and
increased individualism.
Liberals see welfare state as a safety net, but with burdens because of taxes and hindrance to
economic growth.
Social Democrats accept the free-market economy because it softens the unfair disadvantages and
see the increase of opportunities of the vulnerable.
Christian democrats are happy about the role of social mediator and collaboration between
representatives employers and employees.
§3. Social Partners
In the socio-economic part, two parties play a big role: the government and employers- and
employees organisations.
The government aims at five goals with mixed market economy:
- Balances labour market: Government invests in large-scale projects like infrastructure,
stimulates employment in hard times and can encourage employment of under-represented
groups.
- Distribution of income: With minimum wage, people on low end are secured and benefits
guarantee livelihoods for people not able to work.
- A stable balance of payments: Transactions made between countries should be balances and
when wages don’t rise too quick, we can compete more effectively.
- Terms of employment: Consultations between employers’ organisations and labour unions
on wage developments.
- Labour conditions: Government guarantees good labour conditions, also focuses on it’s task
in the area of collective facilities.
The major costs of a welfare state are covered by employers and employees.
Employees are organised per sector into trade unions, are often merged into a federation of trade
unions. Aim is to protect interests of employees in consultation with employers. Individual members
can appeal to a trade union and a settlement can be made between employer and employee, can
also take the case to court.
Employers’ organisations protect the interests of the business sector in consultation with trade
unions. They can also put pressure on the government.
Employers organisations and trade union federation together are social partners. Their relation is
known as labour relations.
National level: government decide on policies. Results is policies. The socio-economic council gives
advice (SER=sociaal economische raad):
33 members: 11 top employers organisations (vno-ncw and mkb-Nederland), 11 top employees
(labour unions), 11 crown members: independent experts appointed by government.
Labour foundation (Stichting van de Arbeid): employers organisations and labour union federations
(=vakcentrales)  CNV, FNV. Also, labour foundation makes ‘Centraal Akkoord’ (central labour
agreement, more general than CAO, it’s the guideline for CAO).
Industrial branch/sector level: consist of labour unions and employers organisations. Result is the
CAO, collective labour agreement (collectieve arbeidsovereenkomst)  contract between employers
and employees. Labour unions and employers organisations look at all aspects, there are primary
(wage and work hours) and secondary (lease car, babysitter at work) conditions.
Company level: consist of employer and employee, you get an individual labour agreement
(contract). MR=medezeggenschapsraad, company council have an advisory and approval function.
Trade unions and employers organisations will always try to make an agreement through
negotiations. If the emphasis is put on difference in interest: we speak of a conflict model. Since
WWII, the role has changed. During reconstruction, they kept wages low, after that, wages soared.
After that the unions decides on lower wages in exchange for more employment (polder model). Had
a lot of economic success. The recession of 2009 again put a strain on the relationship between
employers and employees.
§4. The welfare state – in practice
More than 70% of all costs are spent on collective facilities.
In education there are two important aims: To give everyone an opportunity to develop their talents.
Education increases the chances of a good social position, like was done with women. Also, the
Netherlands wants to have sufficient people with high education so that they can compete with
foreign business.
To stress the importance, the government monitors the compulsory school attendance. If you skip
school a lot, which is illegal, sanctions can be imposed. All educational institutions are monitored by
the Dutch Inspectorate of Education, both state schools (set up by government) and special schools
(set up privately). Achievements are put on the internet.
Since 2006, all people above 18 are obliged to be insured against health costs, people who can’t
afford this can get a healthcare allowance. We pay health insurance by means of:
- Healthcare contributions: basic and supplementary insurances have monthly costs,
- Income related contribution: deduced from salary
There is also a own risk, this means you have to pay the first health cost yourself up to a fixed
sum.
Market forces are now also allowed to operate in the healthcare system, from where they can buy in
healthcare for their clients.
Social insurances are employees insurances. Paid by premiums and are compulsory. They are for
people who work or have worked over 12h and it’s linked to wage:
WW (Werkeloosheidswet): Unemployment Insurance Act  When it is not your fault you lost your
job, you’re entitled to 70% of your last wage with a max. of 3000 euros and a max time of two years.
WAO (Wet op ArbeidsOngeschiktheidsverzekering) When you’re unable to work after illness.
When you got sick after 2004 you get the WIA
WIA (Wet werk en Inkomen naar Arbeidsvermogen) : Occupational Disability Insurance Schemes 
You can get it besides your wage and WW, you are checked up every year and you get 70% of last
wage with a max of 2 years.
WULBZ (Wet Uitbreiding Loondoorbetalingsplicht Bij Ziekte) : Sickness Benefit Act  When you are
ill, you need to get at least 70% of your wage on the days you are ill by your employer.
ZW (Ziektewet) : When the WULBZ doen’t apply, because people for example don’t have a fixed
employer, you get 70% of your last wage with a max of two years by the government.
National insurances are for everyone and you can recognize them starting with an A(lgemene). They
are not linked to wage.
AOW (Algemene Ouderdoms Wet): General Old Age Pensions Act  From the age of 65, you can
stop working and the state gives you a fixed amount of money: €1485.60 a month for two.
ANW (Algemene Nabestaanden Wet) : General Survivor’s Act  When your partner dies and
provided the income, you can get a certain amount of money from the state, not after you’ve gotten
AOW.
AKW (Algemene Kinderbijslags Wet): General Child Benefits Act  For everyone who has kids under
18 years, about 250 euros a quarter. This Act is initialised because the government feels every child
needs a certain basic care income.
AWBZ (Algemene Wet Bijzondere Ziektekosten)  Long term ill, handicapped or chronically ill
people get this to take care of their healthcosts. Depends on how much you need.
Social services are summplementary assistences.
WWB (Wet Werk en Bijstand)  A certain amount of money the government thinks we need to
survive in the Netherlands is given. A single person is given 50% minimum wage, single with children
70%, couple 100%.
Toeslagenwet  A supplementary assistance until your wage meets the minimum wage stated by
WWB.
§5. Work in the welfare state
On the contrary to hobbies, work has an economic purpose. It plays an important role in realising
human needs. Wages are important to get enough to eat and make bigger purchases. It gives you a
point of orientation and a purpose in life.
Work ethic has changed over the years. First work was considered evil and below the standards of
rich people. Enlightened thinkers were the first to see work as a source of social mobility. In the 20th
century for the first time, work was associated with realising potential in work, therefore the right to
work became an amendment. In the welfare state, work is seen as a duty.
In the Netherlands, not everyone has the same opportunities, this is social inequality, when there is a
unequal distribution of wage etc. Social privileges are privileges you derive from being rich and
powerful. These privileges give you a dominant position (social capital). The higher you rise, the
bigger your social capital.
Social inequality has to do with a social position on the social ladder. The factors playing a role in this
are: economic (profession, income and property), political (more power makes social position
higher), social (in a deprived area you have less opportunities) and cultural (knowledge of culture).
Since the 1960s, opportunities in education have improved and increased social mobility.
Uneducated people have little social mobility, therefore the government had set up a policy of
emancipation.
§6 The labour market
The supply of labour is called the labour force, the demand for labour is called labour opportunities.
If the demand is bigger than the supply, we need workers from abroad. This works the other way
around and if the demand and supply is the same we have full employment. This balance is always
trying to be achieved.
People are officially unemployed, when they are between 15 and 65, works less than 12h or not at
all, is actively looking for a job and is registered a jobseeker.
Personally, being unemployed is unpleasant, but economically it’s not unusual.
There are four kinds of unemployment:
- Frictional unemployment: when you’re in between jobs or unemployed for a short time.
- Seasonal unemployment: when work connected with a seasonal activity ends.
- Cyclical unemployment: Temporary period of declining demand.
- Structural unemployment: When work disappears due to automation.
The labour market is constantly shifting. In the Netherlands unskilled work had disappeared. Partly
because of automation and partly because of moving of businesses to low wage countries.
The call for high qualified personnel has increased. The service sector has increased a lot.
To confront increasing competition, companies merged into multinationals. Information technology
has become indispensable. The emphasis on quick access to get information is very high.
Employers and employees both have a preference for flexible work relations, working from home,
being on stand-by. This is cheap for employers and employees have less trouble finding a job this way
and can easily combine a busy life.
Because of globalisation, economies worldwide are interlinked. This is negative because of
displacement of Dutch workers and positive because of possibilities to widen perspectives.
Changes in labour markets can put a risk on financing the welfare state. To keep the people working
and pay social security contributions, the government needs to stimulate the labour market.
§7. The welfare state under pressure
The first criticism on the welfare state came shortly after WWII. Critical economists pointed out
dangers of increasing state intervention and were afraid it would limit people’s freedom. The second
criticism came in the 1960s, from left-wing parties. They believed the goals of a welfare state weren’t
achieved because there was no equality. The solution was expanding social and cultural facilities.
The welfare state soared because of laws reforming the welfare state. The first reversal came with
the oil crisis, companies brought their activities abroad and claims for disability and unemployment
made welfare state impossible. No effective solution has yet been found and collective costs have
become too high and the no. facilities made people passive. If more people make use of the facilities,
the system can burn at the seams. People become passive because financial stimulus is missing and
this leads to chronic dependence on benefits.
Some benefits are more open to abuse than others and the government is doing everything to stop
this. They stimulate people to hold their job or look for one and responsibilities have not only been
put on the government, but also on employers. They are using more effective ways to check if people
are entitled to a benefit and if they’re not, they get huge fines.
The welfare state mainly protects against work-related risks. One of these things that have changed
is that men were assumed to be the breadwinner, but when women also started working, child day
care was much needed. Another example is the flexibility. Employees change jobs much faster and
therefore need extra training to be able to get another job.
Because of aging and the lack of young-paid workers, there are less people to pay for more people’s
pensions. This relation got less attention during the forming of a welfare state. Solidarity between
generations is very important.
The welfare state hasn’t impacted on the help people give each other, but when the care is for a
longer period of time it gets difficult. In the bigger picture, the money to care for elderly is at risk and
people won’t get the amount of care they need.
To have an idea of future welfare state, we need to answer three questions:
- Which individuals or groups will have a right to provision?
- What does the government offer as a right or as a service?
- How will these facilities be financed?
Collectively, everyone has the same rights, if you think more individualistically, only people who need
it get the right. The Dutch society always alternates between the two.