Combating Poverty in Europe

The German Welfare Regime in Practice

Gerhard Bäcker, Peter Krause

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138709263
• eBook ISBN:
  9781351772952
• Topic: Politics & International Relations
• Subtopic: Social Policy
• Index: Politics & International Relations

Title first published in 2003. This informative volume addresses the impact of the EU on national policies to combat poverty in European member states. The editors bring together leading academics to discuss the issue of and fight against poverty in Germany in particular, within the context of ongoing trends and debates across other European states.

Chapter 1
Combating poverty in Europe and Germany

Gerhard Bäcker, Walter Hanesch and Peter Krause

Welfare regimes and combating poverty: a European comparison

When we consider the welfare regimes which exist in the Member States of the European Union, there appear, at first sight, to be more points in common than differences. All states have a democratic politicai system, an economie system conforming to the type of a socially responsible market economy, and a developed social security system. The national benefits systems in the EU states provide protection against general risks to livelihood, as well as specific needs. Although these systems have come under some pressure to converge in recent years, both to ensure freedom of movement and to bring working and living conditions across the European Union closer together, regulatory competence within the European Union has nevertheless remained at the level of the individuai Member States. There are stili substantial national differences in the organization, the financing, the degree of cover and the level of payments offered by the various social security and benefit systems (see Hauser, 1997).

In comparative international welfare research, repeated attempts have been made to develop a comprehensive typology for so-called welfare or social state regimes. The best known is the approach proposed by Gòsta Esping-Andersen (1990), whose book ‘Three Worlds of Welfare Capitalism’ has had a lasting influence on international debate. Esping-Andersen uses complex explanatory models to distinguish three types of regime, the liberal, the corporatist-conservative and the social-democratic. The distinguishing features he uses are the relative significance of the three support institutions (state, market and family), the quality and scope of social rights (degree of ‘decommodification’, defined as freeing labour from the status of a commodity), and the degree to which the welfare state determines social distribution.¹ If we incorporate the proposai made by Stefan Leibfried (1990) to add a further type of regime, the ‘rudimentary’, we can distinguish four types of regime:²

• the ‘social-democratic’ welfare regime, typical of the Scandinavian countries;
• the ‘corporatist-conservative’ welfare regime, which characterizes most of the countries of Continental Europe;
• the ‘liberal’ welfare regime, found in the Anglo-Saxon countries and;
• the ‘rudimentary’ welfare regime, applicable to the states of southern Europe.

These welfare state types reflect ideal normalizing assumptions, and also specific conditions for access to the individuai safeguards provided by the various national social security systems. The use of state benefit systems to protect the individuai against social risks is given a particularly high priority in the social-democratic and conservative welfare regimes, while the liberal type ‘places more emphasis on the role of the free market and the family’, and provides protection only in the event of short-term loss of income. The rudimentary type applies especially to countries where the process of economie and social modernization began relatively late (and which were also integrated relatively late into the European Community), and whose social security systems themselves are in the process of modernizing and ‘catching up’ (see, for example, Schmid, 1996).

From the standpoint of comparative research into poverty, the centrai flaw in existing typologies is that they gloss over poverty policy. Given the growing importance of policies for combating poverty in the European welfare states, Voges and Kazepov have urged that the organization and intensity of such policies should be considered as an additional dimension (see Voges and Kazepov, 1998, p. 7) - a cali that has not yet been acted on, however (see also Eardley et al., 1996).

In respect of their social security systems, the welfare regimes mentioned are characterized by specific model types (see also European Commission, 1996):

1. The states with the Scandinavian social security model (Denmark, Sweden, Finland) are characterized by the fact that social security is defined as a civil right, and all citizens are entitled to the same tax-financed social security services. People in paid employment receive additional income-related payments from company systems. Only unemployment insurance is separate from the state benefits system, and is generally based on voluntary contributions. The overall level of social security benefits is comparatively high; financing is predominantly through (correspondingly high) taxes.
2. Germany, Austria, France and the Benelux countries represent the Continental European social security model. Here, social insurance forms the core of the social security system, and so social benefits are coupled to employment status, either directly or indirectly (for family members). Systems financed through contributions predominate, dependent on previous earned income and in part on membership of particular professional groups. Gaps in the cover provided by this primary network are bridged by a separate safety net of welfare services.
3. Great Britain and Ireland represent the Anglo-Saxon social security model. This is characterized by the existence of a comprehensive social security system in which means-tested welfare payments play a major role alongside a low level of social insurance. Whereas the National Health Service in Great Britain is available free of charge to all citizens, this applies in Ireland only to those on low incomes.
4. Finally, the southern European states are in an exceptional position, associateci with a social security model where universal social security systems have only been built up or expanded in the last decade or two in the wake of economie development and changes in socio-economie structure. In general, we find mixed insurance systems here, combining company and social insurance systems, with large gaps in cover and a comparatively low overall level of provision. In practice, the social security systems in these countries stili work on the premise that additional cover is provided by primary networks (family and private charity), although this assumption is being increasingly undermined by economie and social changes.

Each of these models is thus characterized by a combination of different forms of social security and by different types of financing. Each has its own dominant pattern of goals and organizational principles, with all models falling back on the same fundamental forms (insurance, support and welfare). Because of this, the classification of individuai countries is not always distinct and unambiguous (e.g. the Netherlands or Italy). We can, however, see that individuai countries have generally continued to develop along the path they have embarked on, and although they may have modified their basic form, they have not departed from the fundamental model.

From the types of welfare regime set out above, and from the different models of social security, we can see that there is currently no uniform European welfare state or social security model. Rather, the European nations have developed quite different welfare regimes and social security models according to their respective levels of economie and social development and their individuai social and cultural traditions. Leaving the southern European model to one side, we can distinguish three clearly defined social security models co-existing today in Western Europe, or in other words, within the European Union. While the Anglo-Saxon model is also widespread outside the European continent - p?rticularly in the countries of the former British Empire such as the USA, Australia and New Zealand - the Scandinavian and Continental European models can be interpreted as specifically European, and are mainly restricted to Europe itself.

Very different forms of welfare regulations and social security have therefore evolved in the individuai member countries to implement the objectives of the welfare state. In each of the welfare regimes mentioned, or rather in the corresponding countries, we find specific mixtures of labour market intervention, family benefits and systems of income support, each contributing in their own particular way towards combating poverty.

1. The liberal model in the Anglo-Saxon countries is based on a largely deregulated labour market with a conspicuous spread in wage levels. Compared to universal social security systems with relatively modest cover, income support is evidence of a highly developed system of social assistance. The family-related infrastructure must be purchased privately on the open market.
2. The continental European countries within the conservative-corporatist model combine a highly regulated labour market with a developed system of social security dominated by social insurance. Social assistance here plays a rather marginai role. Family policy, at least as regards the public infrastructure for child support, is rather underdeveloped (with the exception of France).
3. The social-democratic model in the Scandinavian countries is characterized by a state-regulated labour market with extensive rights of access (integration through work). Moreover, the universal social security system provides a high level of income replacement payments, while social assistance traditionally plays a subordinate role. Family policy is characterized by a broad range of state payments for childcare.
4. Finally, the southern European countries are characterized by a largely unregulated labour market, combined with an only partially developed benefits system, where even the safety net of social assistance hardly exists at the national level, if at all (with the exception of Portugal). Family policy is not highly developed either, and its functions are supported by traditional family structures.

Analyzes carried out by the European Community Household Panel (ECHP) have shown that social transfer payments in all EU states help to reduce income poverty, albeit to very varying degrees. This applies least of all to the countries of southern Europe, while it is most marked in the countries with a social-democratic welfare regime, which also have the lowest poverty rates after transfer payments. In the countries with a liberal welfare regime, we also see a sharp reduction, but in these countries the poverty rate is very high both before and after state transfer payments. Against this, the countries belonging to the conservative welfare state type occupy the middle ground in terms of distribution effects (see, for example, Marlier and Cohen-Solai, 2000; Hanesch, Krause, Bäcker, Maschke and Otto, 2000; and also the chapter by Jan Goebel and Birgit Otto in this volume).

Overall, it is clear that the scope and organization of the transfer system have a significant influence on the extent of inequality and income poverty. It is clear that the Scandinavian countries with their social-democratic welfare regime, and the continental European countries with their conservative-corporatist model and its transfer systems, are the most successful in eliminating poverty and low income. At the same time, inequality before redistribution is not as marked as in the Anglo-Saxon and southern European countries. It is no coincidence, then, that those countries with comparatively successful poverty policies also have levels of social security provision above the EU average, while the countries with less successful poverty policies have below-average levels of provision. However - as already emphasized - these findings have to be seen in the overall context of interactions between the labour market, lifestyles, social benefits and social infrastructure.

Combating poverty by the European Union

Combating poverty in the Member States of the European Union is supported and assisted by poverty policy at the EU level. The founding of the European Communities and the evolution of the European Union were driven from the outset primärily by economie motives, and served to establish a common European internai market. In contrast, social policy played only a very subordinate role from the start. The European Community’s competence in the field of social policy has remained limited to this day, and is mainly concentrated on promoting the mobility of labour and companies.

The limitation of the social policy competence of the EC/EU was and is motivated, not least, by the fact that social policy traditionally represents a key ground for securing mass loyalty, which national governments and parliaments are reluctant to give up. Moreover, national social security systems are marked by specific socio-cultural traditions, within which very different solutions have evolved to meet comparable objectives. Finally, there was and is a great fear that a shift of competence to the European level, and the establishment of uniform welfare benefit standards, would jeopardize national standards (for example in the Scandinavian countries) and lead to a general deterioration. Conversely, others (especially the southern European countries, and in the wake of EU enlargement, the Central and Eastern European countries in future also) fear that this allgnment could force them to raise their standards and overburden them economically. In view of this, it is understandable that the primary competence for social policy regulation has remained with the Member States - in line with the subsidiarity principle.

At the same time, with a multi-level system, social policy in the Member States is faced with a growing pressure to adjust, in three ways (see, for example, Leibfried and Pierson, 1998). First, the last decade has seen wider opportunities for intervention granted to the EU in the social policy field as well, and this includes, not least, poverty policy. On the other hand, an increasing pressure towards convergence has grown out of regulatory systems based on voluntary contributions, especially in relation to the structuring of social insurance systems. Finally, increasing economie integration and the ever-closer allgnment of economie, monetary and fiscal policy have imposed a growing pressure towards allgnment on national social policy regimes as well.

If we consider poverty policy in the narrower sense at a European level, we see an area in which the European Commission, in particular, became involved at a very early stage. For example, since the mid 1970s (in conjunction with Ireland’s accession), the EC has developed and implemented three poverty programmes. In the early 1990s, it also adopted a recommendation to Member States concerning the introduction of a national minimum income, and in the mid 1990s, it launched an admittedly rather unsuccessful attempt to anchor a catalogue of social basic rights in law and policy. Overall, these initiatives were driven by the intention of establishing uniform minimum standards in respect of social rights, minimum incomes and services across the European Union as a whole.

In connection with a planned fourth poverty programme, the early 1990s saw a blockade of poverty policy at the EU level, led by the governments of Germany and Britain. As a result of social policy arguments at that time, the problem of poverty has been supplanted in politicai debate at the European level by that of ‘social inclusion’. At the same time, there have been greater efforts to broaden the legai basis for anti-poverty initiatives at a European level. The Maastricht Treaty, and particularly the Treaty of Amsterdam, completed this expansion of competence for European initiatives in the fight against poverty and social exclusion.

The latest phase in European Union poverty policy began with the Lisbon European Council in March 2000. At this meeting, the Heads of State and Government of the EU Member States resolved unanimously that, in the light of the strategie goal for the next decade, i.e. for the EU to become the most competitive and dynamic knowledge-based economy in the world, combating poverty and social exclusion should be a centrai objective in modernizing the European social model. With the ‘open coordination’ method and the action programme on combating poverty, two new initiatives were developed to address this new priority, supplemented and supported by the Structural Fund programmes (for more on the Community strategy to promote social inclusion, see the chapter by Armindo Silva in this volume).

The extension of social policy competence and the upgrading of poverty policy to the European level may be assessed in different ways. On the one hand, the EU’s legai and politicai scope for action in combating poverty has been increased; on the other hand, this change is reflected in a paradigm shift in the social policy debate. The fact that the issue of poverty - or more accurately, the issue of social exclusion - has assumed a higher priority in the context of the Community strategy for modernizing social protection is noteworthy in three respeets:

1. The upgrading of poverty policy is closely linked to an assumption of responsibility for social issues within economie policy. This has the primary objective of strengthening the structure of European economies as a defence against the pressures of increased global competition. On the other hand, an emphasis on the goal of cohesion also provides an opportunity to avoid the trade...

Table of contents

• Cover
• Half title
• Title Page
• Copyright Page
• Contents
• List of Contributors
• Acknowledgements
• 1 Combating poverty in Europe and Germany
• PART I: THE EUROPEAN WELFARE REGIMES AND THE EUROPEAN UNION
• 2 Welfare capitalismi The ten year impact of governments on poverty, inequality and financial risk in West Germany, the Netherlands and the USA
• 3 How successful are European countries in reducing poverty? A micro-simulation with the ECHP
• 4 National Action Plans to combat poverty in Europe
• 5 Indicators for social inclusion in the European Union
• PART II: INCOME, INEQUALITY, POVERTY AND REDISTRIBUTION
• 6 Income, poverty and dynamics in Germany
• 7 Does low income mean poverty? Some necessary extensions of poverty indicators based on economie resources
• 8 Distribution patterns and social policy options in Germany
• 9 Social assistance between social protection and activation in Germany
• 10 Income distribution and poverty in the OECD area: Trends and driving forces
• PART III: LABOUR MARKET RELATED POVERTY A CHALLENGE FOR SOCIAL PROTECTION AND INTEGRATION STRATEGIES
• 11 Labour market related poverty in Germany
• 12 Immigrants between labour market and poverty
• 13 Social protection and activation for the unemployed
• 14 Activation in the Western Europe of the 1990s: Did it make a difference?
• PART IV: FAMILIES AND CHILDREN IN POVERTY AND CONCEPTS OF FAMILY POLICY
• 15 Child and family poverty in Germany
• 16 Why are day care vouchers an effective and efficient instrument to combat child poverty in Germany?
• 17 Social policy strategies to combat income poverty of children and families in Europe
• Index