Progressive State Strategies – Maurizio Ferrera
A precious legacy requiring
reform
The Welfare State is one of the
greatest achievements of the twentieth
century. Its programmes have given
institutional form to the grand ideals
of modern Europe: liberty, equality
and solidarity, and have contributed
enormously to the improvement of
conditions and life chances for all
citizens, particularly the most
disadvantaged. The Welfare State
constitutes a precious institutional
legacy which Europe (the European
Union) can demonstrate to other
regions of the world, persuading
them that it is possible to achieve a
Modernising the
European Social Model
Maurizio Ferrera
Sharpening priorities,
stepping up reforms
beneficial marriage between growth
and cohesion, the market place and
social security, the reward of merit
and the support of need.
While the validity of the normative
mission and the overall structure of
this institutional legacy remains intact,
there are, nonetheless, many aspects
that need to be reviewed and updated.
The European Welfare State emerged
in response to the challenges of the
industrial era and to serve the interests
of the nation state. Today’s external
benchmark context is radically
different. For its part, the internal
functioning of welfare programmes has
highlighted problems of efficiency and
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progressive politics
vol 3.3
effectiveness which call for a general
re-think of the borders between public
and private, between collective and
individual responsibility. No institution
can survive without adapting. Europe
must take up this challenge: it must
Modernisation of
the European social
model remains a top
priority despite the
commitments made
at Lisbon.
adapt the Welfare State to the new
context, at the same time making it
structurally more adaptable. Since the
1990s a number of steps have already
been taken in the direction of this
adaptation. Much remains to be
done, however. Modernisation of
the European social model remains a
top priority on the agenda of national
and supranational policy.
Two major transitions are changing
the socio-economic profile of our
continent:
First, the socio-demographic transition,
to a great extent linked (particularly in
terms of the decline in the birth rate) to
new gender relationships and women’s
increased aspirations of personal
independence and self-realisation.
Second, the transition towards an
economy based on services and,
above all, knowledge, within a
framework of increased economic
internationalisation and trade
liberalisation.
Both transformations are opening up
scenarios of greater well-being, wider
opportunities and new freedoms. The
European Union can really become the
most competitive as well as the fairest
and freest knowledge-based economy
on the planet, as anticipated by the
Lisbon strategy. However, beneficial
scenarios cannot be taken for granted.
The prospect of a ‘downward
equilibrium’, hinging upon
demographic decline, the loss of
efficiency and competitiveness,
the emergence of marked social
polarisations, remains one of the
possible outcomes of the dynamics
currently in progress.
‘Intelligent’ modernisation of the
Welfare State could do much to
combat detrimental outcomes and
promote beneficial ones. Such
modernisation must chiefly rest upon
correct identification of the new social
risks and requirements associated
with the two great transformations
just mentioned, namely:
• risks associated with the difficulty
in reconciling work and ‘care’,
a professional life (including
career aspirations) and family life,
particularly in the case of women;
• risks associated with the lack of
access to knowledge, particularly
among young people;
• risks associated with the
obsolescence of professional skills,
particularly in the case of workers
with few qualifications;
• as an effect of the risks listed
above, risks of marginalisation and
actual exclusion not only from the
knowledge economy (that is, the
more dynamic sectors of society),
but also from the job market in
general or from the very fabric of
society.
These risks have in part already
emerged in every European country.
The most common response has been
recourse to compensatory measures,
aimed at rectifying the damage
suffered by individuals or entire
social groups after the event: policy
measures involving educational
assistance, professional re-training,
subsidies for the most disadvantaged
workers, and measures to combat
poverty or exclusion. In addition to
financial limitations, this approach
also comes up against intrinsic
limitations of effectiveness: the
measures involved palliate needs
but fail to anticipate risks.
Naturally enough, needs cannot but
be met after the event, once they
have already come to light. But the
approach required should be of a
preventative nature. A new social
policy ‘grand strategy’ needs to be
deployed which puts the new risks,
women and young people at the heart
of the welfare system: a strategy which
places greater emphasis on the actual
promotion of opportunities rather than
subsequent reparation of damage
sustained on the occasion of negative
individual crises.
The European Union
really can become the
most competitive
as well as the fairest
and freest economy on
the planet.
The concept which I would like to
propose in order to identify more
closely the various elements of
this ‘grand strategy’ is that of
recalibration.1 Reforming welfare today
does indeed mean shifting the balance
– in terms of institutional and financial
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Progressive State Strategies – Maurizio Ferrera
resources, as well as of ideal emphasis
– from some functions to others, from
some categories to others, from some
values to others. Without recalibration,
the welfare system runs the risk of
coming to a complete standstill and
embarking upon a dangerous
downward spiral. Three different
recalibration dimensions or ‘fronts’
can be identified, upon which to
concentrate any efforts at reform:
functional, distributive and normative
recalibration.
From old risks to new
Functional recalibration concerns
risks involving protection. Due to a
sort of inertia effect, in most European
countries the Welfare State now
provides an intensive level of
protection for an old risk: old age,
A new social policy
‘grand strategy’
needs to be deployed
which puts new risks,
women and young
people at the heart of
the welfare system.
and too little protection for (new)
risks linked to other stages of life.
Atypical employment, family
commitments, lack of self-sufficiency,
social exclusion, non-availability of
adequate training opportunities
throughout life, obsolescence of
professional skills: these risks are not
adequately protected under European
welfare systems (at least with the
exception of Northern Europe).
Old age, on the other hand – which it is
almost improper nowadays to define
as a ‘risk’ – at least understood purely
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vol 3.3
and simply as ‘life after the age of 60
or 65’ – is ultra-protected in most EU
countries, often irrespective of any
actual contributions made by the
individuals insured or their actual state
of need. In a context of budgetary
restrictions, downsizing safeguards in
the old age sector and boosting them
in others is undoubtedly the number
one priority (albeit not the only one) on
the functional recalibration front.
Without removing anything from the
safeguards for the elderly in need, the
principal benchmark figures under the
new welfare system must be working
mothers and children in poverty.2
This type of recalibration would, in
addition, have positive long-term
consequences for the pension
schemes involved.
Demographic ageing represents a
formidable challenge for contemporary
welfare systems. Pension costs will rise
significantly over the next two
decades. Small changes in the
retirement age, in the birth rate and in
migratory dynamics can attenuate the
severity of the problem, but the priority
is clear: there is an urgent need to
re-write the contract between the
generations.
Demographic ageing, female
employment and social protection are
three phenomena which are intimately
linked. For the financial sustainability
of the welfare system of the twentyfirst century (and particularly with
regard to pension schemes) other
income generated by high levels of
female involvement in the labour
market will be crucial. Containment of
demographic imbalances will depend
upon the willingness of women to have
children. This double restriction poses
a serious policy challenge. The falling
birth rate, which is chiefly responsible
for demographic ageing, is linked in
complex ways to the involvement of
women in the labour market. While
two-income families are becoming the
norm in many EU countries, it is still
women who carry a good deal of the
responsibility for care within the
confines of the home. Recent research
shows, however, that high birth rates
and involvement in the labour market
can co-exist. The key to activating
this virtuous circle lies in promoting
a whole raft of policies, and more
specifically:
• services for babies or young
children and the elderly so as to
lighten the burden of unpaid ‘care’
which is still chiefly shouldered by
women;
• ‘time’ and scheduling policies
(schools, offices, shops), so that
both parents can collaborate in
handling domestic commitments;
• family allowances and tax
deductions involving substantial
amounts, to offset at least in part
the cost of raising a family;
• incentives to re-assign parental
duties from mothers to fathers, in an
attempt to break with customs and
a mentality which have become
entrenched;
• forms of assistance aimed at women
(thus resulting in gender equality)
in the labour market: not only at
entry level but also at re-entry after
maternity leave and during career
advancement.
Each country must obviously identify
its own mix of instruments. As has
been indicated, the countries of
Northern Europe have for some time
placed working mothers and dual
earner families at the centre of their
social policy. According to ECHP data,
there are no differences in the rate of
labour market participation (above
War against child
poverty must become
one of the central
pillars of the welfare
system.
75 per cent) between women with
children and women without children
in the Nordic countries. The challenge
remains almost entirely without
response in most of the continental
and Southern European countries,
where the gap in participation rates
reaches several percentage points,
including many of the new member
countries.
The second priority front as far as
functional recalibration is concerned is,
as has been stated, the one aimed at
combating the risk of child poverty.
Unlike (or rather to a greater degree)
poverty in adult life, the effects of child
poverty are many and long-lasting.3
The formative environment during the
first phase of infancy plays a crucial
part in the development of the
individual human capital. Numerous
studies have shown how deficiencies
and limitations in this environment
(particularly those linked to poverty
in the family of origin) lead in the
subsequent phases to problems
involving learning, lack of motivation
to learn, a greater likelihood of truancy,
drug dependency and in general far
fewer chances of social mobility. Data
exist according to which child poverty
is increasing rapidly in European
societies. In some countries – for
example, Germany, Spain, Italy,
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Progressive State Strategies – Maurizio Ferrera
Luxembourg, or The Netherlands –
the incidence of child poverty has
already exceeded poverty among the
elderly.4 These figures are alarming
because they can give rise to worrying
vicious circles.
These vicious circles must be
prevented by means of an outright
offensive in terms of the original
accumulation of individual human
capital. The training of young people
and, even before that, all out war
against child poverty must become
one of the pillars supporting the new
welfare system. Moreover, the goal
in this case is one which closely
reconciles the objectives and values
of efficiency, competitiveness and
economic modernisation with those
of distributive fairness and justice
in the fight against inherited social
disadvantage – a point to which
I will return below.
A more equitable
distribution of safeguards
and protection
The second type of recalibration is of a
distributive nature and has to do with
the categories requiring protection.
As underlined by widespread debate,
the European social model is to a
large extent characterised by a labour
market segmentation syndrome and a
split between insiders and outsiders.
In many European Welfare States there
is evidence of excessive insurance
benefits for ‘guaranteed’ workers, who
almost own their job (there are often
two or more such jobs per family), as
against the lack of adequate protection
for those employed in the weaker and
more peripheral sectors of the labour
market. The splits which are emerging
based on professional skills – linked
to the transition over to a knowledge
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economy – are accelerating and
strengthening these dynamics.
In some countries there are clear
marked distributive inequalities not
only between insiders and outsiders,
but also among insiders themselves,
that is between various categories
of insured; in particular, of the
differences in protection and
entitlements between workers in
the public and private sectors.
The distributive status quo then tends,
once again, to penalise women and
young people, quite apart from future
generations. Decisive distributive
rationalisation, aimed at reestablishing the balance of social
protection not so much among the
various risks, but rather among the
various recipients of benefits, is,
therefore, required as a matter of
urgency. Such a rationalisation
exercise would indeed involve a
number of important ameliorative
additions for those not covered,
but must also imply a number of
‘subtractive’ measures, that is
measures which would remove any
advantages of access to the welfare
system and treatment within the
welfare system which failed to pass
serious social equity tests.
Many steps on the distributive
recalibration front have already been
taken over the last decade; in
particular, the gradual levelling out in
terms of pension benefits between
workers in the public and private
sectors in such countries as Italy,
France or Austria. Much remains to
be done, however. During the long
phasing-in period of many recent
pension reforms, there are still
disparities of access and treatment in
various countries, purely linked to the
demographic lottery: for example, year
of birth, year of first entry into the
labour market and so on . In the
unemployment benefit sector there are
some categories which are overprotected while others are almost
devoid of any protection whatsoever.
Atypical jobs are inadequately
protected against risks such as
illness, maternity leave, temporary
unemployment, family commitments
and moreover are seriously penalised
when it comes to pension
entitlements. The 1995 Italian pension
reform is a symbolic example of this
issue. For decades, under the earningsrelated system, Italian pension
schemes have tended to pay individual
pensioners more than they had paid
in. In future, under the contributionrelated (NDC) scheme which has been
gradually introduced since 1995 –
a system which should guarantee
at least actuarial equality between
contributions and benefits – people
whose careers are interrupted instead
run the risk of losing substantial
quotas of the contribution paid.
This can accurately be described as
a distributive paradox, of particular
interest to young people, and which
should be rectified as soon as
possible.
Distributive recalibration thus
involves a significant intergenerational element. What
needs to be done is to ensure that
the costs of the demographic
transition (particularly retirement
pension costs) are distributed
equally across the generations,5
the main route to this objective
passing through policies for active
ageing, hinging on the raising of
the actual anagraphic threshold
for retirement, as well as on flexibility
of the official retirement age.
A dynamic welfare system
against the traps of social
disadvantage
Reference to equality and fairness
brings me to the third type of
recalibration, which is of a normative
nature and concerns symbols and
values. At the beginning of this essay
I maintained that the Welfare State is
one of the greatest achievements of
the twentieth century. Its development
has made it possible to do away with
many odious forms of oppression
against men (and women) by
other men and to put limits upon
‘uncontrolled’ (and on occasion even
dysfunctional) inequalities generated
by the market and competition.
The equalisation of resources and
opportunities in Europe is, in any
event, a process which has been well
documented by three or four decades
of empirical research.6 During the
course of the twentieth century an
ingenuously ‘emancipatory’ view has
been becoming steadily more and
more established in European political
culture: social rights as a positive
victory per se, to be defended always
and in whatever way, regardless of
their specific contents, their rules of
access, their counterpart in terms of
obligations. While still retaining an
abstract and general reference to the
principles of equality and justice, this
view has tended to formulate its own
strategies and evaluations in the
field of welfare provisions. This has
happened rather more on the basis of
a political theory of social rights as a
victory by the workers, than on the
basis of a rational ethical theory as
to the rights and duties of citizens –
a theory based on rules and criteria
of fairness. In this way, however,
the possibility has been limited to
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Progressive State Strategies – Maurizio Ferrera
pinpointing and shoring up the
many instances of ‘usurpative’
degeneration to which the welfare
system has fallen victim, the system
having in many cases ended up by
creating social rights in response to
the pressure brought to bear by the
strongest social groups instead of in
response to the needs of the most
vulnerable.7
Recalibration of the welfare system
from a normative standpoint would,
therefore, involve two separate
operations: first, anchoring social
policy strategies and evaluations to
specific theories of distributive justice,
instead of to obsolete political theories
about the class struggle; second,
assigning the greatest weight possible,
within the framework of these theories,
to the value of dynamic equality. The
new welfare system must be designed
in such a way as to sustain each
individual throughout his life, and
should concentrate its efforts wherever
empirical evidence shows that
persistent clots or traps of social
disadvantage are being generated. In
this connection, I find both convincing
and fascinating the idea recently
proposed by Esping Andersen,8 that
the primary objective to be identified
for the welfare system of the twentyfirst century should be that of
combating the social inheritance of
disadvantage: a normative objective
the functional implication of which is
to concentrate our efforts on policies
for the training and growth of human
capital, the distributive implication
being that of investing principally in
victims of child poverty.
As numerous empirical studies have
highlighted, in many European
countries social mobility is still closely
linked to the situation of the family to
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vol 3.3
which the individual belongs. By far
the greatest proportion of those
entering university, the professions
and acquiring top-flight jobs come
from prosperous homes. In contrast,
among low-income families the levels
of school leaving and even truancy are
relatively high. These data call for two
recommendations. The first, following
the route already mentioned here on
several occasions is the fight against
child poverty and investment in the
human capital of the most
disadvantaged individuals; the second
goes in the direction of recalibration of
the education system, transferring part
of the cost of university education to
its users while stepping up instead
public intervention in primary and
pre-primary school.9
The strengthening of a dynamic,
really effective Welfare State in the
fight against social disadvantage traps
calls for new and significant (political,
institutional and financial) investments
in the education sector. Such
investments would, however, be
entirely consistent with the transition
towards a new economy and with the
Lisbon agenda. The success of the
service and knowledge economy
depends crucially upon the
educational qualifications and
credentials of the average citizen, not –
as in the past – upon its own elites.10
It is not just a question of human
capital, but also of social and political
capital. A good level of education for
the average citizen not only facilitates
the transition towards a knowledgebased economy, but also promotes the
social cohesion and overall civic nature
of a given country.
The Nordic and Anglo-Saxon countries
have a long tradition of public (not only
financial) investment in the education
sector – a category of investment,
moreover, which is closely linked
to other forms of social policy
intervention. In the countries of
Continental and Southern Europe
‘school’ and ‘welfare’ have instead
followed separate paths – and welfare
has long meant primarily ‘pensions’.
Over the last 20 years in these
countries education expenditure has
stagnated, having indeed started from
levels lower than those of the AngloSaxon and Nordic countries. Without a
incisive (functional as well as
distributive and normative)
‘recalibration’ of their own public
spending model,11 which, moreover,
is able to integrate educational
policies within a more wide-ranging
social policy design, the countries
of Continental and Southern Europe
run the risk of being seriously late in
acquiring a knowledge-based economy
or of acquiring it under conditions of
marked social polarisation.
Recalibrating the welfare system is
certainly not an easy undertaking from
the political standpoint. It would call
for swimming against a tide of deepseated (even if no longer empirically
based) convictions, against
expectations which are firmlyestablished (even if not always
justified in terms of distributive
fairness), against a multitude of
organised groups interested in
defending the status quo. No reform
goes through without the backing of
social coalitions with an interest in
supporting it and without political lineups capable of reaching decisions
about it. However, the raw material
of any reform as ever remains some
ideal project or other for change:
what has been called the “software of
reformism”.12 A serious commitment
on the design front could remove
numerous obstacles, remodelling
preferences and interests and thus
smoothing the path towards change.
This is an abridged version of an essay
originally published in Economic Reform in
Europe: Priorities for the Next Five Years (Policy
Network, 2004) Edited by Roger Liddle and
Maria João Rodrigues.
1
Maurizio Ferrera is Professor of Social
Policy at the University of Milan,
Deputy Director of the Poleis Center
for Comparative Politics of Bocconi
University and Director of a Research
Unit on European Governance (URGE)
at the Collegio Carlo Alberto of
Moncalieri, Turin.
This metaphor was originally put forward
in Ferrera, Hemerijck and Rhodes, 2000,
and in Ferrera and Hemerijck, 2003.
2
For a more profound discussion of this
problem, see Esping Andersen, 2002.
3
See also . Vleminckx and Smeeding, 2001.
4
See Esping-Andersen, 2002.
5
For the original discussion of this point,
see Myles, 2002.
6
See Rainwater, 1997.
7
Ferrera, 1998.
8
‘Against Social Inheritance’, in Giddens, ed.,
The Progressive Manifesto, Polity, 2003.
9
Tony Blair’s government moved in this direction
in spring 2004.
10
See Allmendiger and Leibfried, 2003.
11
Room, 2002.
12
Salvati, 2004.
13
Zeitlin and Pochet, 2005.
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