Welfare Trends in the Scandinavian Countries

Robert Erikson, Erik Jorgen Hansen, Stein Ringen, Hannu Uusitalo

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781315488271
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Discusses important aspects of the development of the welfare state in the Scandinavian countries and Iceland since the mid-1970s. It focuses on societal changes during a period of modest economic growth. Topics include labour market benefits, education and social mobility, class and inequality, income distribution and trajectories and health.

Part I

The Scandinavian Model

1

OLLI KANGAS AND JOAKIM PALME

Statism Eroded? Labor-Market Benefits and Challenges to the Scandinavian Welfare States

Since the mid-1970s the Scandinavian welfare states, together with the other OECD countries, have to varying degrees experienced slower economic growth, changes in the labor market, changes in their class structure, and an aging population (OECD 1988a, 1988b, 1988c, 1988d). This has put new pressures not least of all on the “Scandinavian Welfare Model,” which is distinguished by its high degree of universalism, comprehensive level of social security, and “statism” in the provision of welfare services and transfers. Instead of a continued expansion of the welfare-state domains, cuts in public expenditures have become the central issue in the public debate. In this context, the vital role played by employer-related benefits is often neglected. We claim that understanding the role of these benefits is important for understanding the nature of the challenges to the Scandinavian statutory social policy, as well as understanding the consequences of possible future changes in this policy for income inequality and class formation. The underlying assumption is that class formation and class solidarity are affected by the structure of the welfare-state policies.

The purpose of this chapter is to identify the forces and mechanisms that can be seen as challenges to the “Scandinavian Welfare Model” and to outline possible effects of shifts in the model. The research strategy is to review trends in the economy, labor markets, class and population structures, and political attitudes toward the welfare state. Furthermore, by examining the development of public and private sickness-insurance and pension programs in Denmark, Finland, Norway, and Sweden, the chapter offers an analysis of the public–private interplay in the distribution of welfare.¹ We also try to chart the implications of expanding private-sector provisions for the cross-class alliances that promoted the emergency of the Scandinavian welfare programs.

The Scandinavian Model

The first social-security systems in the Scandinavian countries emerged at a time of very low socioeconomic development. In Central Europe, social-security programs were primarily designed to meet the needs of the industrial working class. The size and considerable political influence of the agricultural segments of the populations in Scandinavia generated solutions that also took into account interests of the agricultural population.

A close correspondence has developed between the socioeconomic structure and the political organizations in the Scandinavian countries (Valen and Rokkan 1974; Uusitalo 1975). Farmers formed their own political parties, which gained strong parliamentary representation. Within what developed into a tripolar class model (employers, employees, and farmers), coalition formations have shifted over time (Alestalo 1986; Castles 1978; Esping-Andersen 1985; Marklund 1988b).

The universality of the Scandinavian social-policy programs has its roots in the “red–green” coalition between the Social Democratic and agrarian parties (Therborn 1986a; Baldwin 1989). Later, when the agricultural population declined and the middle classes of salaried employees grew, working-class representatives came to see the new middle strata as their allies (Esping-Andersen 1985, 90–113). Both workers and salaried employees were dependent on earned income from employment, and both groups needed protection against loss of income from gainful employment (Marklund 1988b). The common ground to be found in the commodity status of their labor could be used for mobilizing workers and salaried employees to achieve income-related benefits in what can be called a “red-blue” coalition.

Despite this common interest, important differences between these two groups influence their social-policy objectives and the way in which social-protection goals are implemented, differences vital for understanding the current challenges to the “Scandinavian Model.” Upper white-collar workers have been better paid than blue-collar workers and therefore have tended to oppose social policy programs that imply vertical redistribution, while wage earners have supported such endeavors. Salaried employees have also had better possibilities for organizing collective social security linked to branch, occupation, or workplace (Marklund 1982, 143–46).

The social-policy strategies of the middle class have traditionally been based on the vision of a “minimal state,” where the public sector takes responsibility only for basic security, and other needs are to be supplied by the private sector—individually or by means of collective agreements. The different lines of reasoning were crystallized in the debate over supplementary pension schemes in Sweden (Molin 1965; Olsson 1987; Esping-Andersen 1985).² In countries where the middle class has substantial influence, there is a tendency for coalitions to be blue–red and social-security systems to be more fragmented. In Central Europe, income-related social benefits often vary according to branch or occupation (Esping-Andersen 1990; Palme 1990).

In coalitions dominated by labor parties, legislation has been used as a tool for fulfilling the demands for social security, and the role of the public sector has become pronounced. This strategy, led by a vision of what has been labeled “the strong society,” has often been described as one of the unique characteristics of the “Scandinavian Model.” International comparisons show that not only the basic-security systems but also the income-related systems in Scandinavia are more comprehensive than those in most other Western nations (Kangas and Palme 1989).

In this context, it is of interest to examine the abolition of means testing in old-age pension programs in the Scandinavian countries. The general notion has been that universal old-age pensions are the result of Social Democratic efforts. The reality is more nuanced, and it appears that the Social Democrats have not indiscriminately recommended equal pensions for everyone. Many Social Democrats have believed that the means test is an effective way of redistributing resources from the more well-off to the less well-off in society, particularly if the old-age pension system is based on the distribution principle and financed via tax revenue.

Such a model disfavors salaried employees and high-income persons. Employment-based pensions reduced their eligibility for means-tested old-age pensions or excluded them entirely from legislated benefits. Therefore, it is not at all surprising that the bourgeois parties were anxious to abolish means testing (see Baldwin 1989; Olsson 1989), even if this meant violating the principle of a minimal state.

The coverage of social-security programs has been assumed to have repercussions on class formation and the support that the welfare state enjoys among its citizens. Such support is greater in countries where the social policies are aimed at the entire population than it is in countries where only a part of the population is the target of the social-policy programs (Korpi 1980; Esping-Andersen 1985, 141). The nature of the social insurance system has also been seen as important for the legitimacy of the welfare state. Systems that provide both basic-security and income-related benefits gain greater support than systems based on means testing or flat-rate benefits (Øyen 1986). This implies that the Scandinavian programs ought to be unusually well protected against cutbacks. They are universal in character and secure an internationally high minimum level of benefits as well as satisfactory income-related benefits. This notwithstanding, the Scandinavian welfare statism is at present facing important challenges.

Can We Afford Social Insurance?

More Takers—Less to Take

The greatest expansion of the Scandinavian welfare states started in the early 1960s (see Alestalo and Uusitalo 1992). Characteristic of this expansion period was that following the lines of Keynesian teaching, people believed that social policy promoted and balanced economic growth (see Myrdal 1961; Kuusi 1966; Mjøset 1985; Kosonen 1987). The rapid economic growth also made possible simultaneous improvements of the income of both the passive and the active population.

Today, it seems that the golden age of growth has passed, and future prognoses for economic development start from clearly lower figures (e.g., United Nations 1988, 5). The positive Keynesian link between social policy and economy has also been called into question, and it has even been maintained that the public sector has became an obstacle to economic growth—Denmark and Sweden, in particular, have been used as examples of this (Lindbeck 1981, 1988). Even though comparative analyses have failed to provide consistent empirical support for the existence of a negative relationship between the welfare-state expansion and economic growth (Korpi 1985; Saunders 1986; Castles and Do wrick 1989),³ the fact that the traditional proponents of social policy seem to regard the present stalemate as a victory indicates changes in the political and economic possibilities for social policy compared with the early 1960s.

The predicted slower growth will not permit a positive-sum game on the same scale as previously. We will then proceed to a zero-sum game, where one group’s gain implies a loss for other groups (Thurow 1980). As a result, distributional conflicts among different occupational groups, and between the active and passive population, have been anticipated (Hatland 1986, 245).

The economic integration in Europe is also expected by some to cause darker clouds to gather over the Scandinavian model (Pedersen 1989; Petersen 1989a, 1989b). It has been assumed that in the Common Market, the role of local social-policy agreements within companies or between labor-market organizations will gain in importance relative to the statutory schemes. It has also been assumed that the projected development generates pressure especially in the Scandinavian countries where social-insurance systems function via the state to a greater degree than in the other Western European countries.

It is widely known that the proportion of elderly inhabitants is rapidly increasing at the same time as economic growth is expected to slacken. The increased number of elderly leads, in the first instance, to rising expenditures for pensions. It has been estimated that the proportion of the GDP spent on legislated pensions will double over the next four to five decades (Hatland 1986, 241–44; OECD 1988b, 35). This is not exactly breakneck speed against the background of previous Scandinavian experience, but it is now harder than previously to increase revenues at the same pace as expenditure growth. Therefore, in discussions on the future of social policy, various ways to lessen the burden on the public sector have been given a central place.⁴

Changing Labor Markets

Structural changes in the labor market have been said to lead to a situation where employment-based institutions in society, including social insurance, are facing a crisis. In this view, the platform for an earned, wage-based social insurance has collapsed.

However, the Scandinavian countries do not constitute a homogeneous group as regards trends in the labor market. There are, for instance, great differences in unemployment rates.⁵ A common feature of all of the Scandinavian countries is the increasing number of persons who receive their income from paid labor. The work society still seems to be going strong. This has certain ramifications for the further development of income-related provisions—whether public or private. As long as paid labor expands, the work-related provisions will maintain their base. Moreover, during full employment, or even...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Acknowledgments
• Part I: The Scandinavian Model
• Part II: Class Inequalities
• Part III: Income and Poverty
• Part IV: Social Trends
• Index
• About the Contributors