Classifying welfare states in the expanded EU

The welfare states of the EU display substantial differences in development, policy design, and institutional make-up. The rich literature on 'worlds' or 'families' of welfare, dating back to the 1980s, has revealed how key policy and institutional variables are systematically related to one another, producing distinctive clusters of 'social Europes', pioneered by the work of Gosta Esping- Andersen (Esping-Andersen, 1990; Castles and Mitchell, 1993; Korpi and Palme, 1998; Ferrera, Hemerijck, and Rhodes, 2000; Scharpf and Schmidt, 2000a, b; Ebbinghaus and Manow, 2001; Arts and Gelissen, 2002, 2010; Ferrera and Hemerijck, 2003; Hicks and Kenworthy, 2003; Hemerijck and Ferrera, 2004; Schmidt, 2006; Castles and Obinger, 2008). Although the boundaries between complementary policy areas and institutional arrangements are not wholly clear cut, we are heuristically able to distinguish four types of welfare regimes, including a Nordic, a Continental, a southern European, and an Anglo-Irish welfare system (see Tables 6.1 and 6.2 for summary overview on terms of on the one hand core principles, and on the other hand policy legacies, institutions, and instruments).

In the Nordic welfare states (Denmark, Finland, and Sweden), social protection is a citizen's right, coverage is fully universal, and all are entitled to the same basic guarantees (Kautto, 2010). Besides generous replacement rates, these systems offer a wide array of public social services beyond health and education, together with active labour market programmes to promote equality between the sexes while sustaining high levels of both male and female participation in the labour market, also in old age. Public employment is also extensive. The various functions of social protection are highly integrated and the provision of benefits and services is mainly under the responsibility of (central and local) public authorities. The only sector that remains substantially outside this integrated organizational framework is unemployment insurance, which is directly managed by the trade unions. Historically, the Nordic countries have presided over highly centralized systems of industrial relations, with pay agreements being negotiated between national employers' organizations and federations of trade unions (Crouch, 1993). Public social services free women from unpaid caring tasks and give them the opportunity to participate in the labour market. The strong emphasis on social services not only provides employment opportunities for highly trained professionals but also a large number of decently paid jobs for persons with modest levels of formal education and training (Daly and Lewis, 2000; Kautto, 2002). High levels of female employment go hand-in-hand with the large numbers of (often low-skilled, but well-paid) public sector jobs (Lundberg et al., 2008). General taxation plays a dominant, though not exclusive, role in financing the welfare state, making taxing and spending levels high by international standards.

Nordic welfare regimes have their ideological roots in Lutheranism and twentieth-century social democracy, the latter in close cooperation with power trade union movements, based on the core values of full employment, earnings equality, and equality of opportunity (Stephens, 1979; Korpi, 1980). It combines a strong egalitarian ethos of (local) public responsibility with a strong work ethic that emphasizes employment for everyone as a form of collective identity and pride (Kildal and Kuhnle, 2005). Although Nordic social democracy gained political sway with the growth of a predominately male blue-collar workforce, as early as the 1960s the Scandinavian labour movements came round to recognize women as fully equal (Iversen and Wren 1998: 515; Korpi and Palme, 1998, 2003).

The anglophone countries of Ireland and the United Kingdom have a system of social protection that is highly inclusive though not fully universal. Benefits—which are flat rate—are modest, and social protection reflects an emphasis on targeted, needs-based, entitlements with low replacement rates (Castles, 2010). Unemployment benefits are low and of short duration, taxes are relatively low, wage dispersion is high, labour markets are highly deregulated, and social assistance is means-tested. The main characteristic of anglophone welfare states is the reliance on market mechanism for welfare production, a tax and transfer system that does little to promote equality, together with strong 'poor relief' orientation (Titmuss, 1974; Esping-Ander- sen, 1985; Castles and Merrill, 1989; Castles and Mitchell, 1993). Citizens are supposed to sell their manpower in the labour market in exchange for income. Persons without sufficient income have to try to reach a certain level of welfare through self-help or through support within the family. Transfers and social services are in principle only provided on a means-tested basis for the most disadvantaged citizens (Seeleib-Kaiser, van Dyk, and Roggenkamp, 2005: 7). Family care and servicing is largely perceived as a private matter. The traditional Beveridgean welfare state is founded on the principle of providing minimum income protection as a basic right of citizenship, based on state- provided poverty relief and equality of opportunity. In the United Kingdom healthcare and social services are financed through general taxation, but contributions play an important role in financing cash benefits, especially pensions. Social assistance plays an important role in both English-speaking countries, because social insurance benefits are too low or because this is the only form of income support available (Daly and Yeates, 2002). Tax and expenditure levels have remained relatively low (at least compared to Nordic and continental Europe), and the same is true for public sector employment. As in Scandinavia the organization of the welfare state (including unemployment insurance) is highly integrated and entirely managed by the public administration. Originally, the Anglo-Irish regimes presided over a highly deregulated labour market and relatively fragmented systems of labour relations, with pay bargaining taking place mainly at company level (Crouch, 1993). While this is still the case for the UK, Ireland has over the past two decades moved towards 'corporatist' wage agreements, set by the social partners.

Ideologically, the Anglo-Irish welfare state is based on the core of equality of opportunity and self-reliant individualism, grounded in the belief that freely operating markets are inherently welfare maximizing and 'that policies interfering with the free operation of markets, with the exception of a few important public goods such as law and order, threaten the pursuit of individual liberty' (Iversen and Wren, 1998: 514). With its roots in classical liberalism, an ethic of self-reliance and individual responsibility, descended from Puritan Protestantism, is the social norm. Social questions should consequently be treated primarily at the individual level, with a strong focus on those in dire need.

Equality of opportunity and a strong work ethic underscore an ethos of selfreliance through active labour market participation in the private sector. Although the Irish welfare state shares important institutional traits with its British counterpart, especially their colonial legacy up to 1922, a few important differences need mention (Daly and Yeates, 2002). Especially, the imprint of Catholicism and corporatism has made the Irish welfare state more gendered, privileging stay-at-home motherhood, and less statist, with a strong preference of (Catholic) voluntary (charity) organizations, with a strong tradition of poverty relief, based on the Catholic principle of subsidiarity, in order to pre-empt heavy state intervention. In addition, the prevalence of proportional representation has made the Irish political system rather consensual, as compared to the more adversarial nature of the British 'first-past-the-post' Westminister political system.

The Continental group includes Austria, Germany, France, and the Benelux countries. Here the Bismarckian tradition of social insurance, based on a tight link between work position and/or family status and social entitlements, stands out. Occupationally distinct, employment-related social insurance, moreover, is underpinned by traditional (single-breadwinner) family values (van Kersbergen, 1995; Palier, 2010a, b). Only the Netherlands has modified this tradition by providing a basic public pension together with tax financed minimum social assistance. Benefit formulae (proportional to earnings) and financing (through social security contributions) largely reflect insurance logics—even if not in a strict actuarial sense—often with different rules for different professional groups (Titmuss, 1974). Replacement rates, in proportion to previous earnings and linked to family status, are generous and benefit duration tends to be long. Social security coverage is highly inclusive (although fragmented): thus spending and taxing levels are high. Bismarckian social insurance assumed that men work full time and that they have long and uninterrupted careers. In terms of labour market regulation, a rather strong emphasis on job security and employment status guarantees, and seniority pay, prevails (Palier, 2010b: 608). The occupation-oriented approach manifests itself quite clearly in the institutional structure of Bismarckian welfare states. Trade unions and employers associations actively participate in governing the insurance schemes, thus maintaining some marginal autonomy vis-a-vis public officials, with state authorities setting the framework rules, such as the mandatory retirement age, and the scope for sectoral selfregulation of PAYGO pension schemes. Insurance obligations come into effect automatically at the beginning of a paid job—though in Germany and Austria a minimum earning threshold is required. Whoever falls through the insurance net in these countries can rely on a network of local social assistance support. With respect to wage formation, the emphasis is on the sectoral bargaining, though an important exception to this general rule is France, which has a highly decentralized pay formation system, embedded in a strongly politicized system of industrial relations (Crouch, 1993). Social services are provided by the family, through the informal care of female homemakers.

Bismarckian continental welfare regimes have their political origins in Christian democracy (Huber, Ragin, and Stephens, 1993; Kersbergen, 1995; Kersbergen and Manow, 2009, 2010). Its core values include status maintenance and the support of traditional male-breadwinner nuclear family structures. It is important to distinguish critical differences in Christian social thought between Catholicism, Lutheranism, and Calvinism (Hemerijck, Manow, and Kersbergen, 2000; Hemerijck and Manow, 2001). Catholicism, Lutheranism, and Calvinism reflect different values concerning work, poverty, charity, and public authority or state responsibility in welfare provision with important consequences for the evolution of the modern welfare state across Europe. In Catholic social thought almsgiving is a normative imperative. The Catholic has a religious duty to give to the poor; the obligation to work is rather weak. By contrast, in Calvinism work is an almost absolute duty, as we know from Max Weber (1958), a religious end in itself. The Calvinist is not compelled to work in order to survive; rather success in hard work through self-discipline and self-improvement could be viewed as ex ante evidence of individual salvation. The Calvinist emphasis on individual responsibility makes Calvinism rather suspicious of establishing poor relief programmes without enforcing work discipline, in line with classical liberalism. Calvinism, on the other hand, shares with Catholicism, a fairly strong anti-statist tradition in important areas of social policy and education. The Lutheran position is more ambiguous with respect to both work and public poor relief, as the Lutheran Christian has to rely on faith alone for individual salvation. In the Lutheran more communitarianist tradition, as compared to Calvinism, providing for the poor is a societal responsibility, which also requires everybody who is able to work to contribute to common welfare. Historically, therefore, the Lutheran state church in Scandinavian countries had few reservations against the national state taking on a prominent role in the development of the welfare state in the Nordic countries (Kahl, 2009). An institutional commitment to full employment, which is so central to Scandinavian social democracy, is therefore at odds with the important tenets of 'subsidiarity' and 'self-responsibility' (van Kersbergen 1995: 181, in Seeleib-Kaiser, van Dyk, and Roggenkamp, 2005). The Bismarckian system, in which the breadwinner principle plays such a key role, (married) women are traditionally discouraged from participating in the labour market, with France and Belgium as exceptions (Lewis, 1992; Esping-Andersen 1996; Iversen and Wren 1998: 515; Seeleib-Kaiser, van Dyk, and Roggenkamp, 2005: 7). Women and children thus obtain indirect social protection through derived male-breadwinner stable employment, social insurance, and passive family benefits (Hauser- mann, 2010a).

The Southern European group of Italy, Spain, Portugal, and Greece first came to be perceived as a distinct 'world of welfare', characterized by common institutional traits, in the first half of the 1990s. The southern cluster bears a family resemblance to the Continental regime, but with specific institutional traits (Ferrera, 1996). Benefit coverage reflects a mixed orientation: Bismarck- ian in income transfers, with especially generous pensions, but Beveridgean in healthcare, with fully universal national health services in both Italy and Spain. The social safety net of basic benefits is not well developed. Social charges (i.e. taxes on employers and employees) are widely used, but general taxation has become more important in financing social services.

Families are the primary location of welfare production. The extended family is a highly significant source of care and support, to make up for deficits in the social welfare system. It is also the private sphere where finances are redistributed, within and between generations (Ferrera, 1996; Trifiletti, 1999). In recent decades, this has had particularly adverse implications for the position of women in the household and the labour market (Esping-Andersen, 1999). Because social care is primarily provided informally by women, southern European welfare states suffer from a low level of female participation in the labour force. Moreover, the labour market is highly regulated and there is a strong, politically polarized system of labour relations (Crouch, 1993). Pay bargaining generally takes place at company level. Public pension schemes are fragmented, generous only for former public servants and 'core' industrial workers, thus covering fairly limited sections of the working population. Inadequate administrative capacities reinforce poor social policy implementation and, in some cases, patronage and clientelism.

Politically, state- and nation-building processes in southern Europe were accompanied by strong 'familism' and low 'stateness', owing to the encumbering role of the Catholic church in Italy, Portugal, and Spain (Castles, 1994). The twentieth century also brought long spells of authoritarianism: two decades of Fascism in Italy, four decades of Francoism in Spain, half a century of dictatorship in Salazar's Portugal and recurring periods of autocratic rule in Greece. Late and compressed modernization seems to have contributed to a pronounced insider/outsider cleavage between those in the 'core/regular' and 'peripheral/irregular' sectors versus those in the 'underground' sectors (Perez- Diaz and Rodriguez, 1994; Ferrera, 1996; Moreno, 2000).

The eight new Central and Eastern Europe Member States (NMS), who joined the EU in 2004, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, and the three Baltic states, Estonia, Latvia, and Lithuania, together with Bulgaria and Romania, which entered the EU in 2007, occupy a special place (Kornai, 1992; Fenger, 2007). As they have gone through two radical changes in the past sixty-five years—the shift from capitalism to state-socialism in the 1940s and from state-socialism back to capitalism after 1989, it is impossible to capture them in terms of a number of stable institutional characteristics, on a par with the four West European welfare regimes, as portrayed in Tables 6.1 and 6.2. Before World War II, Central and Eastern European welfare provision was Bismarckian in character, dating back to the Austro-Hungarian Empire. Social insurance was linked to employment and occupation. Next, state socialist social policy became particularly 'service heavy' and 'transfer lean', owing to the communist commitment to state-guaranteed full employment for all, mobilizing high levels of both male and female labourforce participation (Inglot, 2003, 2008; Manning, 2004; Cerami, 2006; Haggard and Kaufman, 2008; Cerami and Vanhuysse, 2009). Healthcare and education were run by the central state, equalizing income support was handled by trade unions, and the majority of housing was allocated by industrial enterprises to their own favoured workers and families. Social insurance, pensions, and family services, including extended maternity leave and subsidized childcare, was heavily institutionalized. Since the government controlled almost all domestic production, taxation was unnecessary. The state-socialist era saw the universalization of the employment-based welfare system through full (and largely obligatory) employment. However, the bureaucratic-socialist welfare state

Table 6.1. Core principles of welfare regimes

Table 6.2. Policy legacies, institutions, and instruments of welfare regimes

suffered from low-quality services, queues, underemployment, limited choice, and generally low standards of living, even if it was also able to abolish deep poverty, create more equality, offer universal and free health and education services, and facilitate female employment by providing childcare, extended maternity leave, and child benefits. After the post-socialist transition to capitalism and democracy, the legacy of egalitarianism remained strong in that social expenditures in the candidate countries remained high in relation to their level of economic development (Haggard and Kaufman, 2008; Inglot, 2008). Because of multiple economic, social, and political changes since 1989 it is impossible to place the NMS in a single group. Reforms since 1989, marking a completely new stage in welfare state development across Central and Eastern Europe seem to be making these systems 'hybrids' rather than thoroughbred members of existing welfare regime clusters (Cerami, 2006; Cerami and Vanhuysse, 2009; Cook, 2010).

It is important to emphasize that not a single real national welfare state corresponds completely with these theoretically constructed ideal typical welfare regimes. Rather, the reality is an array of idiosyncratic hybrid forms of institutions and inherited policies which have grown historically from a variety of welfare state traditions. The key theoretical claim of welfare regime analysis is that social reform and institutional change is conditioned not only by external economic pressures and emerging social policy needs, but equally by variations in endogenous complementary policy design and institutional capabilities, including systems of political decisionmaking and interest mediation, leading to distinctive patterns of policy continuity and change (Castles, 1993; Ferrera, Hemerijck, and Rhodes, 2000; Scharpf and Schmidt, 2000a, b). Policymakers are prone to work with the institutional capabilities and within the policy architecture of each regime. The different policy provisions that make up the national welfare state are best considered as path-dependent complementary packages of institutional arrangements and programmatic features. Below I render a stylized sketch of the recalibration agendas since the 1990s across the different regimes and discuss their underlying political dynamics. For each constituent country grouping, I address, step by step, the welfare recalibration agendas in response to changes in the world economy, European politics (most spectacularly, the demise of communism in Eastern Europe), labour markets, and family and demographic structures, which posed serious questions about welfare regime continuity and change. After examining the Nordic countries, I turn to the Anglo-Irish, Continental, and Mediterranean groupings, and, finally, the Central and Eastern European countries. The conclusion highlights key similarities and differences and the relative coherence in the recalibration agendas across the different welfare regimes under examination since the 1990s.