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31/7/2006
PRESOM
WP 3: Concepts of the European Social Model
Welfare regimes and A. Sapir’s paper:
"Globalisation and the Reform of European Social Models"
Christine ANDRÉ
Senior Researcher at CNRS
Paris-Jourdan Sciences Economiques (PSE), UMR 8545 CNRS-EHESS-ENPC-ENS
CEPREMAP, 142 Rue du Chevaleret, 75013 Paris (France)
Tel: 33 (0)1 40 77 84 13
e-mail: [email protected]
Social policies are, with tax policies, a domain for which nation-states are still fully
responsible in the European Union. This contributes explaining why, in the debates about the
“European social model”, the comparison of the different social models receives so much
attention.
I – From Welfare States to Welfare regimes and Social Models
A – The concepts
The issues of the comparison of social policies, of the assessment of their similarities
and of their differences, and of a possible convergence of these policies, have drawn a
renewed attention since the fundamental study by Esping-Andersen (1990). This study mainly
focused on social protection, and more precisely on benefits which replace income when old,
sick, or unemployed. A lot of studies have been published later on, taking into account
different groups of countries and different benefits. In general, these studies are only based on
public social protection in a strict sense (i.e. protection through pension, sickness benefits,
disability benefits, unemployment benefits, family allowances, social assistance, and housing
allowances). Moreover, these studies focus only on cash benefits and only on some part of the
preceding risks. At last, criticism of these typologies has been made because they do not take
into account the gender problem (Lewis).
More recently, the increase of "new risks" against which people need to be protected
has led several authors to also include the protection of labour market and the active
employment policy1. The traditional concept of Welfare State is progressively replaced by
that of Welfare Regime or of Social Model which is associated with a larger field than social
protection and which takes into account actors other than the State. Nevertheless, there is not
1
See, in particular, (Boeri), (Ebbinghaus and Manow), (Huber and Stephens).
2
yet empirical studies including all the domains but, in general, studies focus on some part of
them.
B – A proposal for defining a social model from a theoretical viewpoint
A social model ought to be defined in a broad way for allowing international
comparisons2, and, in particular, for taking into account all the differences in concepts
associated with "risks". Consequently, for an "optimal" definition of a social model, the
domains covered should include: social protection in a wide sense (sickness, old age,
disability, unemployment, social assistance; family), housing, health care, education and
training, active policies of employment, labour market rights, and industrial relations.
Moreover, some aims of social policies, like income redistribution, can also be pursued
through fiscal policy and protection against unemployment is first obtained by an appropriate
macroeconomic policy. At last, actors other than the State (families, charities, associations,
etc.) may play also a major role in the social protection.
Considering a social model as a configuration allows taking into account the various
factors coming into play and their inter-relations. Policies, contexts, actors, existing
arrangements, identification of what constitutes "a problem" to solve, etc., are different and
differently articulated in a specific way for each country. The main point is that most of the
elements constituting and/or contributing to the evolution of the social State are
interconnected. Figure 1 proposes a representation of a configuration associated with a social
model. It is mainly inspired by the French "théorie de la régulation".
The analyses linked to the "théorie de la régulation" are generally based on the
distinction between five "formes institutionnelles"3 whose arrangement defines a
configuration. It seems more convenient for a study of the social state to group three of these
forms (Money-financing, Forms of competition, and Relation between national economy and
international economy) into only one sphere: the Economic sphere. The other two "formes
institutionnelles", named State and Wage-labour nexus, are respectively identified here with
what are referred to as the Politico-administrative sphere and the Social-domestic sphere. The
Politico-administrative sphere presents an asymmetry relatively to the other ones because it
includes the State which is both a peculiar actor and an "arena". So it is given an upper place
in Figure 1.
It seems also relevant to add another sphere which is not considered in the "théorie de
la régulation" and which has not the same "thickness" than the preceding ones but which
influences them in the same time: it corresponds to norms, traditions, influential ideas, etc.
For instance, the tradition of having to obtain a consensus for important decisions can reveal
essential in the Social-domestic sphere as well as in the Economic sphere or in the Politicoadministrative sphere. It strongly constrains the process of modifying any existing institution.
This fourth sphere is also important in the identification of what is perceived as being a
"problem" to solve (Merrien). As this sphere is "transversal" to the other ones, it is put at the
top of Figure 1.
2
3
See (André 2006b) for a complete treatment of this issue.
See (Boyer and Saillard).
3
FIGURE 1
What defines a configuration
Context of norms, traditions, ideas...
Actors for
norms,
traditions,
ideas
Politicoadministrative
context
Politicoadministrative
actors
Core of the
social model
Socialdomestic
context
Social
actors
Economic
actors
Economic
context
It proves appropriate to make, within each sphere, a distinction between the "context"
and the "actors". However, as it is not possible to take into account all the possible
characterizations, it is necessary to select the most significant ones relatively to the problem
dealt with. The main elements that have proved "significant" according to some first results,
obtained in a research in progress about social protection in European countries since one
century, are presented in (Annex Box A-1). Then, what is presented here does not correspond
to an a priori assessment but to results. These elements allow identifying some
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"configuration", i.e. an arrangement which stays stable for a long period. The relative
importance of the different elements and of their interconnections may vary not only between
countries but also between periods. The actors are not supposed to have an optimizing nor a
constant strategy. This can be particularly important when processes of reform last for long
periods, as in the case of pensions for instance. The way a question is perceived as being a
"problem to solve" can also vary depending on countries, and cognition issues ought to be
taken into account, especially in the long term.
A configuration of a social model is built around the "core of the social model",
defined in a wide sense for the domains noted at the beginning of I-B and including not only
public interventions but also private interventions. A configuration is associated with a
characterisation of this core, of the preceding spheres, and of the intensity and form of the
connections between these spheres, and between these spheres and the core. Figure 1 sums up
the interrelationships between contexts, between actors, and between contexts and actors, and
the way these relationships may affect the core of the social model and reciprocally. It is
sometimes possible finding a direct link between one element of the context and one actor,
but it is not always the case4. Several "circuits of interrelationships" can intricate. Inevitably,
things are simplified on Figure 1.
For the different "spheres", we assume that the contexts are interconnected, that the
actors are interconnected, and that the influence of the context of a given field on the actors of
another field is only indirect. There are some exceptions to this rule. For instance:
- For the sphere of norms-ideas, some authors think that it is not possible to separate ideas
(which belong to the "context" in this case) from actors, as some ideas would be effective
only if they are associated with some actor. However, as we define this sphere in a wide
sense, it seems more appropriate to keep a distinction between its context and its actors as
norms and traditions may be carried sometimes by very large groups of actors which are
difficult to identify. So it is assumed that, in this case, the context may have a direct influence
on the actors of the other spheres.
-There is another case where the context of a sphere can have a direct influence on the actors
of the other spheres: when there is a political shock (end of dictatorships in Spain or Portugal,
or unification of Germany for instance). Then, the change in the political context may have a
direct influence upon social and economic actors. One of the reasons for such a phenomenon
is that these changes have an immediate impact upon the new rights given to all the existing
actors and can give birth to new actors.
This general pattern allows taking into account the diversity of logics coexisting for a
same risk. For instance, the logics in the health policy may refer to economic rationality,
equity, public health. For family, the logics may refer to increase of the birth rate,
compensation of costs for raising children, help to poor families, incentives for women'
activity.
There are also, in Figure 1, arrows directly linking the block "core of the social model"
and the economic and social contexts. They correspond to some "automatic" variations: for
instance, an increase in social benefits (social protection) can induce an increase in the
households’ consumption (economic context), or the ageing of population (social context) can
induce an increased amount of pensions (social protection).
4
For instance, the poor have generally no representation group.
5
This pattern does not exclude the presence of contradictions within the "core of the
social model". Such a pattern can also allow "understanding" why some similar measures
have quite different objectives and why, for similar objectives, the adopted measures are
different depending on countries.
At last, the same Figure 1 may be used at a macro-, meso- or micro-level while
adapting the content of the indicators.
C – The usual typologies
The different studies interested in establishing typologies of welfare states or of
welfare regimes have focussed on narrower fields than the one considered in Figure 1. Due to
the variety of countries and of risks taken into account, several results have been obtained.
The main studies about Western and Southern Europe consider that there are three or four
clusters of welfare regimes, depending on the treatment of Southern countries. If we turn to
Central and Eastern Europe, the corresponding countries proves to be in a transitional state
with a wide diversity of situations, so it can be considered that these countries constitute a
separate cluster whose definitive characteristics are not yet known.
So, we will focus on the characterization of the different clusters for Western and
Southern Europe associated with a typology of the social protection (or of some parts of social
protection) in four groups, get from several studies5. The main characteristics of each group
are presented in Table 1.
5
There is a very large number of such typologies. The first one was by Titmuss, then several typologies of the
Welfare State have been proposed, in particular by Wilensky, Baldwin, Bonoli, Esping-Andersen, Castles and
Mitchell, several authors in (Daniel and Palier), Ferrera, Flora and Alber, Korpi and Palme, Leibfried. Then, the
issue of the labour market has been considered in particular by Boeri, Ebbinghaus and Manow, Huber and
Stephens.
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Table 1: Main characteristics of the social protection
Continental countries
Social-democratic/
Nordic countries
Free-market/ AngloSaxon countries
Southern countries
Principles
Deserts-Contribution
Equality-Universality
Need-Selectivity
Mix
Population
Workers and their
families
Citizens, residents
Poor people
Segmentation
Aims
Insurance against the
loss of income
Insurance and
redistribution
Avoiding poverty and
unemployment
Decommodification
Middle-high
High
Weak
Role of the Sate
Important
Major
Minimum
High increase since
the 1980s
Main financing
Contributions
Taxes and
contributions
Taxes
Contributions
Benefits
Eligibility linked to
contributions, rather
generous benefits
Universal eligibility,
generous benefits
Means-testing
benefits
Diversity,
fragmentation of
schemes
Linked to wages (but
in Netherlands).
Lump-sum, then
linked to wages in
Sweden.
Linked to wages
Weak to moderate
(but high in
Netherlands)
Moderate
UK: weak lump-sum
+ Pension linked to
wages (public or
private).
High
Contract or
Reimbursement
(France, Belgium)
National health
service
National health
service
National health
service
Main characteristics:
Main risks:
-Pension:
basic pension
pension funds
-Health care system
Rather weak
This Table confirms the validity of this typology but must be looked at with caution
as, indeed, there is also a large variety of situations within each cluster. Tables A-1 and A-2
(in Annex) about social spending in percent of GDP and about the growth rate of this
spending per capita at constant price tend to confirm the validity of the preceding typology in
four clusters and shows also the intra-group diversity when looking at expenditure.
A recent study (Gazier and Lechevalier) shows that a similar typology is obtained
when examining some important characteristics of the employment systems in Western
Europe, but Southern countries are not considered in this study (Table 2). Again, there is also
some variety of situations within each group. It seems quite likely that, if similar information
was available for Southern countries, they would appear as constituting a specific cluster6.
6
For instance: Unemployment compensation is rather low but families play an important role for helping their
members when they need it. The governments have not developed any active employment policy and the State
has a limited role as an employer. An other characteristic of these countries is that self-employment is quite
important.
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Table 2: Characteristics of employment systems
Continental countries
Degree of
centralisation
Middle
Social-democratic/
Nordic countries
High (but decreasing)
Co-ordination
Middle
High
Low
Wage determination
Collective agreement
(by field of activity)
Collective agreement
At the firm level (but
in Ireland: social pact)
Trade-unionism
Middle
High
Low
Unemployment
compensation
Middle-high
High
Low
Tax wedge
(difference between
wage costs and earned
income)
High
High
Low
Active employment
policy
Middle-high
High
Low
State as an employer
Diversity depending
Important
on countries
*Southern countries are not considered in the sources used here.
Sources: (Gazier and Lechevalier), (André 2006b).
Liberal/ Anglo-Saxon
countries
Low
Low
Again, the same typology results from the comparison of the evolutions of health care
systems in the contemporary period 7.
Moreover, from (Gazier and Lechevalier) and (Palier), when looking at the solutions
adopted by the different clusters for trying to solve the problems in the contemporary period,
each group presents its own specificities (Table 3). The sources do not allow taking the
Southern countries into account but we may presume that, as previously, if information was
available, they would form their own group.
Table 3: The solutions adopted for some contemporary problems
-Social protection/
employment
-Labour market
Continental countries
Ge, Au, Be, Fr, Ne
Recalibration, reduction of
the tax wedge and of the
cost of unskilled labour,
demand of a counterpart
from the beneficiaries.
Change in the mode of
calculation but not in the
underlying principle of
pension systems.
Larger coordination, wage
moderation, reduction of job
protection, development of
part-time work (women).
Nordic countries
Dk, Sw, Fi
Control of costs, tax reform,
generalised reduction in the
level of assistance benefits,
rationalisation.
Anglo-Saxon countries
UK, Ir
Recommodification,
targeting, negative income
tax, welfare to work.
Increasing role of market
rules.
Development of services to
the person, reduction of job
protection, active
employment policy.
Increase of flexibility in the
adjustments of work and of
wages, widening of the
wage hierarchy, unskilled
jobs in the sector of
services.
Sources: (Gazier and Lechevalier), (Palier).
7
A study by André (2006a) on the evolution of public interventions about health care systems, including
Southern countries, for twenty years, confirms the specificity of each group.
8
At last, the comparison of some indicators traditionally chosen as representing social
performances shows that this four-groups typology has always some relevance but that there
are large intra-group differences (Table 4).
Table 4: Some social performances
Continental countries
Nordic countries
Poverty rate in %
Fr, Ne : 12%
Au : 13%
(Ge : middle rate)
Dk : 12%
Fi, Sw : 11%
Unemployment rate
(July 2005)
Ge : 9,5%
Au : 5,1%
Be : 8,0%
Fr : 9,7%
Ne : 4,8%
Dk : 4,8%
Fi : 8,3%
Sw : 6,3%
Anglo-Saxon
countries
Ir : 21%
UK : 18%
Ir : 4,3%
UK : 4,7%
Southern countries
Sp, It, Po : 19%
Gr : 21%
Sp : 9,5%
Gr : 9 ,9%
It : 7,8%
Po : 7,2%
All in all, a same grouping can be associated with systems of social protection, with
important characteristics of employment systems, with the type of solutions adopted for some
contemporary problems, and with some social performances. The similarity of the typologies
associated with these different elements can be seen as a sign of the relevance of the concept
of configuration. Quite evidently, a lot of other comparisons would be necessary for
qualifying the content of one configuration. At last, it must not be forgotten that variations
within each group may be sometimes important and that such typologies must be looked at
with care even though they exhibit some "robustness".
D – So, what concept for a European social model?
What does the concept of "European social model" mean? We have seen above that
there seems to be five categories of European social models if we add Central and Eastern
Europe to the four previous clusters.
The concept of "European social model" has become widespread since 1986. It seems
that the necessity of developing a social Europe has, then, been advocated by some social
actors for counterbalancing the possible effects of the Single European Act. Indeed, the SEA
was considered as potentially threatening social rights and social democracies in the memberstates. The fear was that economic integration might contribute deregulating and liberalizing
labour market and of social protection.
The "European social model" is indeed defined in a loose way, rather by opposition to
the most free-market countries, especially the United States or New Zealand. Such a concept
has never been defined with precision and it presents rather blurred boundaries about what
constitutes its content. Nevertheless, some consensus seems to be reached about its
characterization by three main principles:
-a common commitment to social justice,
-the recognition that social justice can contribute to economic efficiency and to progress,
-high degrees of interest organizations and comprehensive negotiations.
II – The Sapir’s paper: "Globalisation and the Reform of European Social Models"
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A recent and influential paper on these problems has been written by A. Sapir:
"Globalisation and the Reform of European Social Models". It is about a comparison of
efficiency and equity of the different European social models as Sapir considers that, indeed,
there are several models.
A – The content of Sapir’s paper
Sapir puts the accent on three points:
-The biggest challenge today is to increase flexibility: "First, the global economy of the
twenty-first century is characterised by rapid changes which create both threats and
opportunities. The biggest challenge is to become sufficiently flexible so as to avail of the
opportunities and surmounts the threats. This requires, above all, reforming labour market and
social policies".
-There are different European social models with different performances: "Second, [...] there
are in reality different European social models, with different features and different
performance in terms of efficiency and equity. Models that are not efficient are not
sustainable and must be reformed. The combined GDP of countries with inefficient models
accounts for two-thirds of the entire EU and 90 per cent of the eurozone".
-Answering the previous challenge necessitates reforming labour market and social policies:
"Third, [...] labour market and social policy reforms are a matter for the Member States alone,
not for the European Union. Nonetheless, there are some benefits in coordinating these
reforms with other necessary reforms, especially for the countries in the eurozone which share
a common currency. A two-handed strategy combining reforms at EU and national levels
would be best. The Lisbon Agenda tried this but is rapidly failing. All EU efforts should now
be geared towards completing the Single Market among the 27+ members of the EU. For their
parts Member States should concentrate on reforming labour market and social policies".
1) Challenges
In a first part, Sapir points out to the challenges coming from the increasing share of
emerging economies, especially East Asia with China, in manufactured product markets
during the past 25 years. He underlines that "the emergence of developing countries as major
suppliers of products, both manufactures and services, which compete with European
producers, has only just started" and that "the trend is bound to accelerate". In this context, the
changes in global economy create opportunities and threats, and "the benefits associated with
the opportunities take time to materialise since they require new investment, while the costs
associated with the threats are incurred more rapidly since they derive from existing
investment". "The challenge to economic policy, therefore, is to conceive and implement, as
soon as possible, economic and social reforms aimed at greater economic flexibility and better
social protection". "In Europe, the needed [...] reforms concern above all labour market and
social policies" because "these policies have become increasingly dysfunctional".
Though changes of policies have been introduced in Europe, European performances
are poor. "Probably, the main reason for this poor performance is that changes at the EU level
have not been accompanied by necessary changes at the national level. Outdated labour
market and social policies simply do not allow the Single Market, public spending on R&D
and the currency union to unleash their full potential". So, the EU has either to "reform
national labour market and social policies, in which case globalisation turns into an
opportunity", or, if not reformed, these policies will "continue to hinder change", in which
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case globalisation becomes a threat, and the Single Market and the currency union are then
also perceived as threats.
Opportunities can be seized only "if national labour market and social policies become
more conducive to changes in specialisation, especially in "Old Europe", where those losing
their jobs in old activities have little chance of finding employment elsewhere". With this
view, enlargement is seen as a threat. "The key to turning the Single Market and globalisation
into opportunities is the capacity to reform labour market and social policies in the right
direction". For members of the eurozone, market-led flexibility is all the more important as it
is not possible "to use the exchange rate as an instrument of flexibility – albeit very
inadequate for responding to structural changes. The lack of appropriate market mechanisms
is bound to lead to attempts to use fiscal policy as a temporary remedy". But this would
conflict with the fiscal rules of the Stability and Growth Pact.
2) Four European social models
After having identified the problem in this way, Sapir looks at the performance of the
four European social models defined in a study by Boeri. So, he distinguishes:
-Nordic countries: Denmark, Finland and Sweden plus the Netherlands.
-Anglo-Saxon countries: United Kingdom and Ireland.
-Continental countries: Austria, Belgium, France, Germany and Luxembourg.
-Mediterranean countries: Greece, Italy, Portugal and Spain.
He relies on Boeri’s study for comparing the performance of these groups, but he
keeps only one part of it. The main conclusions he presents are the following ones.
1) For the reduction of income inequality and poverty:
-the extent of redistribution via taxes and transfers is highest in Nordic countries and
lowest in Southern countries; it is similar in Continental and in Anglo-Saxon countries, which
are in a middle position.
-however the ranking is somewhat different when it comes to the incidence of poverty
after taxes and transfers: it is the same as previously for the Nordic and the Southern groups;
Continental countries perform as the best ones; Anglo-Saxon countries perform as the worst
ones.
2) Protection against uninsurable labour market risk can be provided by employment
protection legislation (EPL) or by unemployment benefits (UB). Here, the generosity of UB is
relative to their coverage rate: it is defined by the percent of unemployed people receiving
benefits. There is a trade-off between these two indicators for some countries (Table 5):
-Southern countries: strict EPL, low coverage of UB.
-Nordic countries: low strictness of EPL, generous coverage of UB.
-Continental countries: strict EPL, generous coverage of UB.
-Anglo-Saxon countries: lowest strictness of EPL, generous coverage of UB.
The USA are also considered: they have also the lowest strictness of EPL but the coverage by
UB is low at the difference with the European Anglo-Saxon countries.
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Table 5 (Summary of Figure 2 of Sapir)
% of unemployment people reporting receipt of benefits:
Low
High
Strictness of employment
protection legislation: High
Southern countries
Continental countries
Low
Nordic countries
Lowest
USA
Anglo-Saxon countries
The designation by Low and High refers to the relative position compared to the average.
Sapir repeats the conclusion of Boeri: the European model, with its stricter EPL and
more generous UB, provides more social insurance than its American counterpart. On the
other hand, the American and Anglo-Saxon models would provide more labour market
insurance than other European models (lower long term unemployment).
3) Labour market participation differs depending on countries: employment rates are higher in
Nordic and Anglo-Saxon countries. Much of the difference with the other countries is due to
the young (aged 15-24), for which the unemployment rate is lower in these two groups, and to
the older people (aged 55-64), for which the employment rate is higher in these groups.
4) Then, a comparison of employment rate and of poverty rate is presented (Table 6).
Globally, the relative position of the four groups is as follows:
Table 6 (Summary of Figure 3 of Sapir)
Employment rate:
Low
High
Poverty rate**:
Low
Continental countries
Nordic countries
High
Southern countries
Anglo-Saxon countries
The designation by Low and High refers to the relative position compared to the average.
**Based on the probability of escaping poverty.
Sapir concludes that comparing these Tables "indicates a strong connection between
the employment rate generated by a social system and the instrument it uses to protect
workers from the vagaries of the labour market. The stricter is the employment protection
legislation of a model, the lower is its employment rate. By contrast, the generosity of
unemployment only plays a secondary role8. This means that protecting jobs with
employment legislation is definitely detrimental to employment, whereas protecting workers
with unemployment insurance is potentially useful for employment".
Considering poverty rate, it is lower in Continental and Nordic countries. "The extent
of redistribution (via taxes and transfers) cannot be the major explanatory sector since it is
fairly high in most countries with the exception of those in the Mediterranean group". In his
study, Boeri rather puts the accent on the opposite correlation between the secondary
education attainment and the risk of poverty.
At last, Sapir proposes the following ranking of countries with two criteria, efficiency
and equity, whose meaning is not defined. This ranking does not appear in the paper of Boeri
who is more cautious (Table 7).
8
Boeri adds: "Only the strictness of the EPL is taken into account, adding the UB has no impact on variations in
the overall employment rates across models or even countries. A regression of the overall employment rate on
EPL and UB for 14 countries and the US produces a significantly negative coefficient for EPL and a coefficient
not significantly different from zero for UB. This implies that EPL is the key explanation of employment rates".
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Table 7: The four European models: A typology (Table 1 of Sapir)
Efficiency:
Low
High
Low
Continental
Nordic
High
Mediterranean
Anglo-Saxon
Equity:
Sapir suggests that this Table can be read in terms of a trade-off between efficiency
and equity: there would be no such trade-off in Nordic and in Mediterranean countries but
such a trade-off would be present in Anglo-Saxon and in Continental countries.
Sapir considers also that another reading of this Table emphasises sustainability of
social models. Models that are not efficient would not be "sustainable in the face of growing
strains on public finances coming from globalisation, technological change and population
ageing". On the contrary, "models that are not equitable can perfectly be sustainable, provided
they are efficient. The reason is that, at least in Europe (but also obviously in America), the
degree of equity of a social model reflects a viable political choice". So, Sapir establishes a
hierarchy between efficiency and equity, efficiency being considered as the more important
concept.
Sapir concludes that only Nordic and Anglo-Saxon models are sustainable. The other
models should be reformed for reducing "disincentives to work and grow". He argues that
these reforms would not necessarily imply changes in equity, and that "it is perfectly possible
for the Continental model to become more like the Nordic one, and for the Mediterranean
model to become more like the Anglo-Saxon model". Nevertheless, he does not exclude the
possibility that reforms for enhancing efficiency could "unleash a change towards more or
less equity" if the political equilibrium was affected.
All in all, Sapir says that "there is a strong case for reforming European labour market
and social policies, especially in Continental and Mediterranean countries", with two other
reasons for focussing on these last groups:
-the high inefficiency of their welfare state systems, due in particular to the fact that they rely
on strict employment protection laws. For a long time, "median voters" would have been
spared from unemployment as it is mainly the young and the immigrants that are concerned
while the older workers retire early with early retirement schemes. Now, "median voters"
would be no more insulated from tensions.
-the high proportion of GDP of these two groups in the eurozone (90%) and in the entire EU25 (two-thirds), and so, the importance of the "economic and social health" of these two
groups for the whole Europe.
3) Policies
In a last part, Sapir studies possible ways for doing reforms.
First, he looks at the issue of coordinating labour market reforms among EU countries.
He suggests that the OECD Jobs Strategy would lead to better results than the European
Employment Strategy because:
-"the former focuses on efficiency whereas the latter tends to mix efficiency and equity
considerations".
-"the OECD documents clearly separate the analytics and the politics [...] while the EU
reports tend to mix the two".
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-"if the goal is simply benchmarking and peer review, the OECD is probably a better forum as
it brings together not only the EU member states but also other countries".
Then, he adds: "Beyond that, coordination of labour market and social policies is probably an
obstacle rather than a catalyst for reform because it tends to blur the responsibility between
national and EU authorities".
Second, Sapir looks at the problem of coordinating labour market and product market
reforms. He says that "Reforms of product and capital markets tend to increase the demand
for labour". He considers that "the Lisbon Agenda can be viewed as an attempt to solve the
'coordination failure' between EU and national reforms", relatively to these different markets.
But "unfortunately Lisbon has not delivered".
Third, Sapir considers the issue of coordinating structural reforms and macroeconomic
policy at the European level. He mentions that "coordinated structural reform by the main
players of the eurozone would be a powerful signal to the ECB. It is also essential for the
countries of the eurozone where progress with structural reforms has been particularly low".
Sapir concludes: "Europe cannot and should not have a strategy for reforming national
labour market and social policies. It is up to each national government to devise and
implement its own strategy". "Yet, a two-handed strategy combining product and capital
market reform at the EU level with labour market and social policy reform at the national
level would be superior to a strategy seeking to reform national labour market and social
policies alone, especially for the countries of the eurozone". But, "at this stage, the best
strategy would be to go back to basics and focus all efforts at the EU level on completing the
Single Market".
B – Comments on Sapir’s paper
The comments will be grouped below along some main opinions expressed by Sapir.
1) About the "good" and the "bad" models
a-The field covered by the criteria used for determining the typology: incomplete
As Sapir relies on a paper by Boeri, it seems relevant to consider the indicators
underlying the typology of Boeri. They mainly concern the cash benefits corresponding to
pensions, non-employment benefits (unemployment benefits, sickness benefits, disability
pensions and early retirement), family allowances, and social assistance. So, these indicators
concern only social protection in the usual sense. For instance, social services and health care
systems are excluded.
Then Boeri considers, in his original paper, the performance of models by looking
mainly at the extent of redistribution after taxes and transfers, the degree of targeting, the
degree of job protection (employment protection legislation), the satisfaction of people with
their job security. He also considers other indicators which can influence unemployment like
the influence of the informal sector. Sapir keeps only one part of this information, which
prevents him from qualifying his statements as much as Boeri.
However, even in the paper by Boeri, other indicators are not considered though they
would be a priori much relevant for examining the performance for unemployment and
14
though they can be considered as directly associated with social models, like the active
employment policy, the role of employment services, or the importance of training9.
So, the typology relies on an incomplete qualification of the field associated with
social models. Moreover, the performance of the four social models is assessed by
considering some criteria (unemployment rate for instance) for which some not considered
indicators play an important role.
b-The construction of the considered criteria: lacunas
Sapir focuses on a small number of criteria and draws incorrect conclusions from
some statistical regressions.
For Table 5 (Figure 2 of Sapir), the criteria are: strictness of employment legislation
and percent of people reporting receipts of benefits. Sapir says that there may be some tradeoff between them. He defines the generosity of unemployment benefits (UB) as being the
percent of people covered by UB. This is somewhat misleading. It would be more significant
to take into account not only the coverage of the unemployed by UB but also the level of such
benefits relatively to wages and the length of the period of their payment. The difference in
the generosity of unemployment insurance between American and Anglo-Saxon models and
the other European models would certainly be much more in favour of these last European
countries than what is considered by Sapir.
Sapir concludes also, from a regression of employment rate on EPL and UB, that the
significant coefficient for EPL (and a zero coefficient for UB) means that "EPL is the key
explanation of employment rates"10. But, a correlation between variables does not imply any
link of causality and, even if some causality may be present, then, nothing can be said about
its direction. (Etxezarreta, p.3) notes: "Might it not be that strict EPL is required because the
existence of low employment rates?"
In Table 6 (Figure 3 of Sapir), Sapir considers the poverty rate and the employment
rate:
-Considering the poverty rate after redistribution supposes to take also into account the
impact of tax policy, though tax policy is not recognized by Sapir as an element of social
policy. Indeed, a lot of studies show the major role of fiscal policy and not only of social
transfers for redistribution11. So, when Sapir looks at the performance of redistribution, he
never takes into account all the policies that have an impact on it.
Rather, he underlines that "The lower the level of secondary education attainment, the higher
the risk of poverty. By contrast, the extent of redistributive policy only plays a secondary
role". Again, for him, this results from the fact that "Once educational attainment is taken into
account, adding the income redistribution has no impact on variations in the risk of poverty
across models or even countries. [...] This implies that educational attainment is the key factor
driving poverty risk in the EU". As previously, correlation is not causality, and this question
ought to be more carefully studied.
-Moreover, an indicator probably more important than the poverty rate is the exclusion
rate12. Some studies show, for instance, that the exclusion rate in the Southern countries
9
Moreover, data are disposable for such indicators, so they could have been considered.
This is in the footnote linked to the quotation in II-A-2.4 here.
11
See Dumont.
12
See Paugam.
10
15
would not be as high as the poverty rate due to the role of families, of charities, etc. If
exclusion rates were chosen instead of poverty rates in Table 6 (Fig. 3 of Sapir), this would
modify the results. Such a change would suppose that Sapir admits that social performance
does not result only from public interventions but, rather, from the complex configuration of
contexts and actors as previously defined.
-The employment rate is not directly linked to the unemployment rate. The
employment rate is defined ad the percent of population with a job relatively to the population
in the age of working. Sapir does not mention here a remark by Boeri who says that it would
be necessary to have a policy aiming at increasing the labour force participation, and not only
at absorbing unemployment, for reaching the target of employment defined in Lisbon. This
type of policy (increasing participation) could be potentially important in the Southern
countries if it was implemented as the activity rate of women is generally lower (with the
exception of Portugal). So Sapir does not consider all the tools of employment policies though
one of his major indicators for ranking countries is unemployment. He considers that only a
larger flexibility of labour market could reduce unemployment.
In Table 7 (Table 1 of Sapir), which constitutes the key point for ranking the countries,
Sapir considers an equity index and an efficiency index. He does not define any of these two
indicators, which are not built nor considered by Boeri:
-The equity index seems to refer mainly at the poverty rate. So, Sapir gives the priority
to what is the main objective in the free-market social models (Table 1 in this paper).
Nevertheless, free-market countries perform badly for this criterion (Table 4 in this paper).
Sapir does not seem to consider other objectives often associated with equity, as reducing
inequalities, be they income inequalities or inequalities in the access to public social services
for instance. Quite evidently, he does not consider inequalities between wage earners and
shareholders.
-The efficiency index seems also to refer only to an employment rate or an
unemployment rate. Nothing is said about other indicators which could be also considered as
relevant for appraising economic efficiency (growth rate, investment, innovation for instance).
Moreover, he says that "Another reading of Table 1 [here: Table 7] emphasises
sustainability of social models", and he uses two indices of sustainability constraints: the level
of the public debt and the public perception of globalisation as a threat. But the value of the
last one (Eurobarometer Survey) is somewhat questionable, and, as to the first one, there are
also debates about the level which can be considered as really unsustainable.
At last, Sapir considers that models that are not equitable are sustainable provided they
are efficient, which is clearly an ideological and quite disputable choice.
So, all in all, the numerous lacunas do not allow drawing as simple conclusions as
Sapir does about the ranking of countries.
c-A judgement bearing on results which are not produced only by labour market and
social policies
A major insufficiency is also due to the fact that Sapir judges the "quality" of social
models, and of labour market and social policies, on the basis of indicators that are linked to
other policies, notably macroeconomic policies. For instance, he does not remark that the
Nordic countries (but Finland) and the Anglo-Saxon countries (but Ireland) are countries
16
which stay outside the eurozone and whose budgetary policies are not submitted to the
Maastricht constraints as to the public deficit and the public debt.
2) About the consideration that the only way to solve problems is to flexibilize labour market
and social policies
According to Sapir, the only possibility for solving the contemporary economic
problems, and in particular the unemployment problem, would be to increase the flexibility of
labour market and social policies. The problems raised by such an issue cannot be treated here
in a complete way. But a few remarks can be made.
For instance, (Kleinknecht and Naastepad) have recently shown, in a study about US
and the Netherlands, that the flexibility of the labour market was not always beneficial to
firms. In particular, flexibility seems to be detrimental for Schumpeterian II Innovation Model
(also called the “routinized” innovation model).
Several works by (Howell) and (Baker et al.) also show, on the basis of detailed
statistical studies, that the effect of a strict employment protection or of wage rigidity on
unemployment is quite uncertain.
(Boyer 2006) considers several types of flexibility: for instance of jobs, of wages, of
worked hours, of the nature of the work and of skills. He shows that the famous flexicurity of
the Danish model, which is associated with a high performance for unemployment, does not
result only from the low employment protection but from a combination of a lot of Danish
characteristics: generous unemployment benefits, a traditional search for compromise
between actors who develop a dense network of interactions, the importance of decentralised
authorities, the training policy, etc. Moreover, these different types of flexibility may have
different effects.
So, all these studies encourage thinking that the flexibility of labour market cannot be
THE solution which can solve all the problems. More studies would be necessary for defining
precisely if, and under what conditions, flexibility may have really positive effects.
3) About the consideration that the only solution for solving economic and social problems is
to reform labour market and social policies only
One of the main conclusions by Sapir is that the only solution for solving economic
and social problems is to reform labour market and social policies. A major problem is that he
presents some performances of the models as if they were resulting only from labour market
and social policies.
There are indeed numerous inter-relations between all the spheres (see Figure 1 here),
so it is generally not possible to disentangle the impact of one type of policies from the impact
of the other policies at the macroeconomic level. Several authors (for instance (Aghion et al.)
and (Fitoussi)) have put the accent on the necessity to use macroeconomic policies as a major
tool for reducing unemployment. The ranking of "good" and "bad" models by Sapir clearly
shows that the "good" models are developed in countries which stay outside the Eurozone.
The constraints associated with the Maastricht Treaty have certainly played in a detrimental
way for the economic evolutions of countries of the Eurozone, at least in some periods.
17
One can wonder if it would not be more necessary to flexibilize the Maastricht
constraints, so as to allow expansive monetary and fiscal policies, rather than to flexibilize the
labour market and social policies!
On another part, it is not at all evident that "reforms of product and capital markets
tend to increase the demand for labour", as Sapir says (see Etxezarreta p.5), and have as much
positive effects in a natural way. (Aghion et al.) show that the Single Act and the Eurozone
did not have the expected effects, and, among the reasons of this deficiency, they point out at
the lack of an European business law, the lack of a European patent, the lack of coordination
when energy and telecommunications have been liberalized. So, other reforms would be still
necessary for product and capital markets.
4) About the necessity of letting national governments manage labour market and social
policies without any coordination at the EU level
As to the fact that a coordination of labour market and social policies would be a
problem because it would blur the responsibility between states and the EU, (Etxezarreta)
rightly remarks that it has not been a problem "for economic policies and notably for the
establishment of the Euro".
5) Final remarks
a- Sapir suggests that "it would be perfectly possible for the continental model to
become more like the Nordic one, and for the Mediterranean model to become more like the
Anglo-Saxon model". But, first, it is not possible for a country to imitate another one, all the
more they are in different clusters: The complexity of the issue of social models (Figure 1
here) necessitates taking into account a lot of elements participating to what is identified as a
"good" policy, and also the inter-relations between these elements. Second, the Anglo-Saxon
model ought not to be considered as an aim to reach as it gives bad results from the viewpoint
of equity. In fact, only the Nordic model gives good results both for efficiency and equity if
we look at these two dimensions.
b- Nothing is said about the group of the new European countries and about their
specificities and their social model. The main conclusion of Sapir is "Completing the
integration of the 27+ economies of the European Union must be the utmost priority of efforts
at EU level to revitalise the European economy. [...] Only if reforms are implemented both at
EU and national levels will the European Union be able to reap the full benefits of the Single
Market and the monetary and be able to enjoy the opportunity of globalisation and
technological change". But, important differences exist between the old and the new
countries, and nothing is said on the issue of dealing with these differences, especially for the
labour market and social policies which are generally more free-market oriented in the new
countries.
c- At last, such a debate is all the more important as social policies not only play a
major role in economic and social evolutions, but have, since their origin, a crucial role for
legitimating the nation-states13. May be that, if some noticeable part (a larger one than what
exists) of these social policies was led at the European level, this would contribute to give a
13
See, in particular, (André 1995).
18
more legitimate status to the European Union in the public opinion of all the countries, which
is not a negligible goal.
References
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20
ANNEX
BOX A-1: Fields, contexts, actors. Main elements with a major influence
upon systems of social protection at a macro-level in the contemporary period 14.
Fields
Economics
Socialdomestic
Context
-Economic structure : sectors, firms size, exporting
industries/sheltered industries, informal economy.
Public enterprises (competitive or not competitive
sectors).
-Tax system.
-Financing system (firms financing, insurance
companies, etc.).
-Labour market : wage workers, independent workers,
partial time jobs, precarious jobs, women employment.
Qualified-non qualified workers.
Unemployment.
Wage costs. Types of payments for workers .
-Conjuncture and projections (forecasts).
-Adherence (and its degree) to European Union.
-Civil society.
-Place and role of family, of women.
-Educated people. Qualification.
-Place of the middle classes.
-Workers ; unemployed, people in precarious jobs.
-Self-employed (and familial firms).
-Place of young people.
-Place of retired people.
-Place of poor people.
Actors
-Employers unions and their structure (large or small firms ;
branch organizations, etc.).
-Other intermediary associations (regional organizations, etc.)
-Organizations of shareholders.
-Modes of governance.
-Unions and their structure (degree of representativity, degree
and way of legitimacy).
-Other forms of workers’ representation in firms.
-Professionals' organizations (physicians, medical professions,
social workers, etc.).
-Civil servants’ organizations.
-----------------------------------------------------------------------------Associations of users of public services.
-Retired people’ organizations.
-Charities.
-Women’ associations.
-Families’ associations.
-The whole population when general mobilization for a specific
theme.
-----------------------------------------------------------------------------Electorate (and place of public administrations employees).
-Government (majority or coalition ; political colour ; place of
Parliament ; centralized-decentralized ; bureaucratic capacity ;
sectorization).
Government as actor and as « arena ».
-Parties (relative importance ; degree of ideological
polarization ; place of some small parties for mediation).
Politicoadministrative
-Federation or centralized state. Regions’ importance.
-Political regime.
-Constitution (written or not ; referring to social risks
or not).
-Parliament with one or two Chambers.
-Voting system.
Norms,
traditions,
ideas
General modes of relations :
-Tradition of seaking consensus, or of conflict.
-Contractual tradition.
-Clientelism, paternalism.
-Subsidiarity principle.
Conceptions of society :
-Holism, communitarianism, individualism, etc.
-Equality-equity.
-Equality men-women.
-Place let to family, and conception of familial domains as
entirely or partially private.
-Definition of populations towards which the society is
« indebted » (deserving/undeserving : poor, retired,
unemployed).
Imported conceptions :
-Influence of international organizations.
(More specialized conceptions :
-Conceptions in the social field, in the economic field, in the
political field.)
-Medias.
-« Elites ».
-Experts.
-Church.
-Some types of associations (human rights, etc.).
14
Choices must be made as some elements could a priori be classified according to two fields. It is especially the case for some social actors.
For instance, it has been chosen to get together in the social category all the actors associated with persons and population in general under
their different dimensions: workers, family, electorate, for the reason that they concern the same individuals. In several cases, a social
movement on a specific social actor's initiative may extend to or may be actively backed up by a much larger part of the population than that
directly linked to this actor. In Box 1, social actors are classed according to their proximity with the other fields. On an other part, the fact
that all the actors of a determined field are grouped in a same block on the figure does not imply that they are homogeneous nor that they
don't have any conflictual relations.
21
TABLE A-1 : Social expenditure in % of GDP
1980
1990
1993
2001
Belgium
24,1
26,9
29,9
27,2
Variation
1980-2001
3,1
Netherlands
26,9
27,6
28,6
21,8
-5,1
Germany
23*
22,8*
26,9
27,4
France
21,1
26,6
29,5
28,5
7,4
Austria
22,5
24,1
26,6
26
3,5
Denmark
29,1
29,3
32,3
29,2
0,1
Sweden
28,8
30,8
36,8
28,9
0,1
Finland
18,5
24,8
33,9
24,8
6,3
United
Kingdom
Ireland
18,4
19,8
24
22,1
3,7
17
18,6
20,3
13,8
-3,2
Italy
18,4
23,3
24,7
24,5
6,1
Spain
15,9
19,5
22,5
19,6
3,7
Portugal
10,9
13,9
17,2
21,1
10,2
Greece
11,5
20,9
21,1
24,3
12,8
*West Germany
TABLE A-2 : Average growth rate of social expenditure per capita at constant price, in %
1980/2001
1980/90
1990/93
1993/2001
Variation:
(1990/93)(1980/90)
1,57
Variation:
(1993/2001)(1990/93)
-2,89
Variation:
(1993/2001)(1980/90)
-1,32
-3,39
Belgium
2,37
2,36
3,93
1,04
Netherlands
0,92
2,74
1,94
-0,65
-0,8
-2,59
Germany
2,05
2,04
3,11
1,65
1,07
-1,46
-0,39
France
3,06
4,11
3,55
1,59
-0,56
-1,96
-2,52
-1,24
Austria
2,79
2,93
4,26
1,69
1,33
-2,57
Denmark
2,02
1,74
0,37
0,64
-1,37
0,27
-1,1
Sweden
1,75
2,6
4,14
-0,14
1,54
-4,28
-2,74
Finland
3,5
5,62
6,24
-0,52
0,62
-6,76
-6,14
United
Kingdom
Ireland
2,9
2,95
6,8
1,49
3,85
-5,31
-1,46
3,76
4,52
5,11
2,11
0,59
-3
-2,41
Italy
2,95
3,99
2,42
1,87
-1,57
-0,55
-2,12
Spain
3,72
4,13
5,32
1,17
1,19
-4,15
-2,96
Portugal
6,63
4,82
7,59
5,7
2,77
-1,89
0,88
Greece
3,8
4,11
0,42
4,79
-3,69
4,37
0,68