Supply Side Model in Selected Social Policy Fields

The description above provides a picture of expansion and convergence of expenditure and the shift towards services in overall welfare effort. To give a more nuanced picture on substantial changes, one needs to look

Total public social expenditure in kind, 1980-2014. Note

Fig. 2.3 Total public social expenditure in kind, 1980-2014. Note: As a percentage of total public social expenditure (left axis) and coefficient of variation (right axis). Source: OECD Social Expenditure Database, OECD.stats at qualitative information regarding specific policy fields. In the development towards the supply side model, we find some major trends across OECD countries: activating and dualized labour market policy, multipillar pension policy as well as a stronger state involvement in childcare services and parental leave regulation within family policy. Furthermore, we argue that education policy and health policy need to be addressed as important pillars in supply side social policy, as they are at the core of social investment strategies.

The trend towards supply side orientation is most apparent in labour market policy. Against the backdrop of rising long-term unemployment, activation has evolved to become the major player in European labour market policy in particular, even though it comes with different combinations of enabling and workfare elements (Dingeldey 2007; see also Eichhorst et al. 2008 for the varieties of activation policy). The Swedish Rehn-Meidner model of the 1950s is generally cited to show that active labour market policy has been around for more than half a century, yet most scholars agree that its widespread implementation across several OECD countries developed from the mid-1990s onwards. Although often used synonymously with active labour market policy, the term ‘activation’ refers both to a stronger reliance on active labour market policy and to less generous and more conditional passive labour market policy. Furthermore, benefit receipt can be explicitly tied to participation in active labour market programmes, so that activation involves a comprehensive linkage between the different instruments of labour market policy in order to increase employment. Regarding passive labour market policy, ‘eligibility criteria have been tightened, benefit levels have been reduced, benefits have been made conditional on employment, and the duration of receipt has been shortened’ (Kenworthy 2010, 438). Bearing in mind the financial sustainability of unemployment insurance, this passive element of activation is mainly driven by neoliberal concerns about the disincentive effect of generous transfers (see Tatsiramos and van Ours 2014). The common aim of passive elements of activation strategies is the quick reintegration of the unemployed into the labour market, with quality and sustainability of reintegration being at best a secondary concern (for the negative effect of ungenerous unemployment benefits on sustainability of reintegration see Wulfgramm and Fervers 2015).

Apart from providing cash transfers and in-kind benefits, the welfare state structures market-based activities through a regulatory framework. In the absence of general data on overall welfare regulation, it is informative to analyze employment protection legislation as the driving force of the institutional dualism that is heavily discussed in the debate about the dualization between labour market insiders and outsiders (see Schwander as well as Dingeldey in this volume; Emmenegger et al. 2012). As shown by Fig. 9.1 in Hanna Schwander’s contribution to this volume, regulation of regular employment has been held rather constant in most OECD countries (with the exception of Spain), while employment protection for temporary workers has been heavily dismantled virtually everywhere. In line with overall public social expenditure and the share of in-kind benefits, there is a clear pattern of convergence in the overall strictness of employment protection legislation across OECD countries.

In the field of retirement policy, supply side orientation can most clearly be seen in the attempts of many countries to increase the average retirement age by limiting early retirement options and raising the statutory retirement age, and in the shift from defined-benefit pensions towards defined-contribution plans (see Heisig in this volume). This shift towards defined-contribution plans is to a large extent driven by the transformation of both Beveridgean and Bismarckian systems (see Hinrichs and Lynch 2010) towards multi-pillar pension systems (Clark et al. 2006; Immergut et al. 2007; Ebbinghaus 2011; OECD 2011). Although Beveridgean countries in particular already had earnings-related schemes in place as early as the 1960s, the most prominent example of the spread of global social policy ideas (see Kaasch in this volume) by a supranational actor occurred when the World Bank (1994) heavily advocated for the extension of single pay-as-you-go public pension systems into three pillars. Such multi-pillar systems ideal-typically consist of (1) a tax- based basic pension scheme, (2) compulsory occupational pensions and (3) voluntary private pension savings plans. Today, even Bismarckian countries with a strong reliance on public pay-as-you-go pensions, such as Germany, extensively subsidize and regulate private pension savings plans. Given the choice between transfers, in-kind benefits and regulation as welfare state instruments, we see a gradual shift towards increasingly regulating private provision rather than being limited to public provision. While regulating the general rules for private pension savings providers, defined-contribution plans shift the responsibility for welfare outcomes from the public onto the individual.

Supply side orientation also becomes apparent in family policy, but it manifests itself with an extension of and partial shift in direct state responsibility for welfare provision rather than a retreat thereof. Although still an example of a mixed-objectives policy field, the framing and instruments of family policy in many countries have undergone a clear paradigm shift. Family policy has gone from being a pure social policy in the sense of income compensation and poverty alleviation to now being understood as part of a broader activation, education and partly gender equality framework (Lewis 2009; see Ahrens 2012, 87, on examples of family policy framing)—albeit on very different levels. Stronger reliance on public childcare has at least two mechanisms by which it contributes towards the supply side model. First, it frees parents from their care responsibilities and particularly fosters female labour market supply, thus being activating in nature. Second, in the long run, high quality public childcare can fulfil an important social investment function, fostering equality of chances particularly benefitting children from lower socioeconomic backgrounds (Esping-Andersen et al. 2002; OECD 2007). The extent to which public childcare is truly comprehensive, however, still differs between the pioneering Scandinavian countries and conservative and liberal countries. Furthermore, tax splitting systems and passive transfers send contradictory incentives that limit the emergence of dual earner/dual carer families, with single (male) breadwinner or extended breadwinner models still dominant in Southern and continental countries (Dingeldey in this volume; Gornick and Meyers 2006; Ciccia and Verloo 2012). Overall, we see an expansion of family policy in the direction of social investment, with OECD countries now spending an average of 2.5 per cent of GDP, but there is not as clear a trend of convergence as in other policy fields.

Although not part of what many European scholars have traditionally regarded as social policy, education policy represents a focal area of the paradigm shift towards the social investment state and the supply oriented welfare state. This view is by no means new, as education policy has been understood as lying at the core of providing welfare and equalizing chances, particularly in Anglo-Saxon countries (Allmendinger and Leibfried 2003). Large expansions of enrolment rates in higher education (see Fulge in this volume) aim at increasing the high-skilled labour supply. At the same time, the Bologna process not only intends to improve mobility between European higher education institutions but also aims at a more structured study progress as well as greater employability with a bachelor degree (Schomburg and Teichler 2011). Therefore, the Bologna process can be both accredited with and criticized for contributing to the supply side model, by aligning university studies with labour market requirements rather than with Humboldtian education principles.

Healthcare is among those policy fields in which functional pressure in the form of technological and medical progress, demographic change and consequences of ‘Baumol’s cost disease’ (Freeman and Rothgang 2010) have led to a clear upward convergence of expenditure (Starke et al. 2008). Regulatory and structural reforms aiming at efficiency and cost- containment have been implemented across countries (see, for example, Freeman and Moran 2000; Rothgang et al. 2010). Privatization and individualization of healthcare financing peaked in the late 1990s, with co-payments representing the lowest level of risk and income solidarity (see Schmid et al. in this volume). The acknowledgement of healthcare as part of social investment strategies has contributed to a reversal of this trend. The supply orientation of healthcare reform is apparent, for instance, in the EU health strategy: ‘investing in people’s health as human capital helps improve the health of the population in general and reinforces employability, thus making active employment policies more effective, helping to secure adequate livelihoods and contributing to growth’ (European Commission 2013, 2).

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