Nordic 'dual-earner' post-industrialism

Thanks to their overall institutional coherence, the Nordic welfare systems have proved to be relatively well equipped for the challenges of economic internationalization, ageing societies, gender equality, and transition to the post-industrial economy (Andersen etal., 1999; Kristensen and Lilja, 2011). The most conspicuous characteristic of the Nordic regime has been its combination of generous income maintenance benefits, well-developed public social services, and active labour market policies, which sustains high participation rates for both men and women, and, in turn, alleviates the financial strains on pensions. The cost, of course, is a very high tax rate.

In response to the oil shocks of the 1970s and 1980s, the Nordic countries expanded employment by increasing it in the public sector. The strong commitment to gender equality already resulted in the late 1940s in the introduction of child allowances. Public elderly care saw an increase in the 1960s and grew further in the 1970s. Public childcare started to expand in the 1970s. These early family social policy innovations made it easier later on to expand new child- and elder-care services further and catalyse the dual-earner family- friendly welfare state across the region (Hernes, 1987; Kuhnle, 2000; Kautto, 2010). Today all Nordic countries have evolved towards dual-earner social policy models, in which women and men, at least formally, have the same rights and obligations both in the labour market and at home. In particular the expansion of social services improved women's opportunities to balance paid work and domestic care, while at the same time providing service sector employment.

Given also the high popular support for inclusive welfare provision (rooted in the folkhemmet culture and tradition: the welfare state is the house of the people), politically, the social reform agenda has been shaped by a pragmatic, problem-solving approach mainly centred around the issue of cost containment, with no 'grand controversy' over alternative views and scenarios (Palme, 1999; Eitrheim and Kuhnle, 2000; Kuhnle, 2000). As a result, the principles of universalism have not been significantly questioned, even if this meant cuts across the board in replacement rates (e.g. in sickness benefits) or transfer payments and significant steps in the field of pensions, where the links between contributions and benefits have been significantly strengthened, with a view to containing the relative weight of the pension sector within the overall repertoire of social protection.

Over the 1980s and 1990s, all the three Nordic Member States of the EU successfully rebounded from severe economic crises in the 1980s (for Denmark), late 1980s and early 1990s (Sweden), and the early 1990s (Finland). They surprised their ideological critics by restoring balanced budgets and economic dynamism with relative ease, while maintaining high employment levels and low poverty rates (Lundberg et al., 2008). Besides cost containment, the most important leitmotiv of the Nordic welfare reform agenda in the 1990s has been 'activation', i.e. the modification of social security programmes in a direction that gives actual and potential beneficiaries incentives to find gainful employment (Kautto et al., 2001). This trend can be interpreted in terms of functional recalibration from passive compensation of the risk of unemployment to the promotion of employability through active labour market policy and social security activation, distributive recalibration with more investment in youth training to ease the transition from education to work and to prevent occupational segregation, and normative recalibration in terms of a stronger emphasis on gender equality, 'productivism', and the work ethic.

In Denmark, a series of labour market reforms in 1994,1996, and 1998 gradually implemented both a right and a duty to activation, including mandatory individual action plans that activated the unemployed within three to five months (Andersen, 2007, 2011; Larsen and Andersen, 2009). Accordingly, policymakers abolished the previously 'rigid system, where the unemployed had to wait almost until the end of the two-and-a-half-year unemployment benefit period before qualifying for a job offer or further education and training measures' (Albrechtsen, 2004: 224). The repertoire of active labour market policies (ALMPs) was expanded and jobseekers received earlier and better access to publicly subsidized employment opportunities, education and training measures, and rehabilitation courses, together with (temporary) expansions of leave possibilities for employed workers, as well as sheltered employment for people with permanently reduced working capacities (Andersen and Svarer, 2007). The 'active' turn in the Danish welfare state ultimately gave rise to the now famous 'flexicurity' model that triangulates 'flexible labour markets, generous unemployment benefits, and active labour market policies—all coordinated to reduce unemployment and improve the quality and supply of workers to the labour market' (Campbell and Hall, 2006: 30; see also Madsen, 2006; Erhel and Gazier, 2007). Over the 1990s, compulsory activation measures were gradually expanded to reach practically all social assistance recipients. The duration of unemployment benefits was gradually reduced from nine to four years in Denmark in 1999. However, with the exception of young people with no qualifying education, the levels of benefits remained high (Kvist et al., 2008: 227).

Throughout the 1990s several Danish governments implemented several institutional reforms that gave municipalities a financial interest in minimizing the number of disability pensions. In successive steps, central government social assistance reimbursement was cut back from 100 to 35 per cent, leaving the rest to be financed by municipalities, which were also granted the full right to award benefits (Green-Pedersen 2002: 81). Furthermore, in 1994, Danish labour market policy was decentralized with the establishment of fourteen regional councils composed of representatives of the social partners and local authorities. The underlying objectives were not only to tailor active measures to regional labour market conditions but also to foster stronger links between enterprises, educational institutions, social services, and employment centres, as well as to encourage cooperative behaviour by all stakeholders. In order to make activation more comprehensive and uniform, the responsibility for ALMPs for insured and uninsured jobseekers was delegated to national labour market authorities in 2002. This change effectively streamlined all rules and regulations so that both groups are now subject to identical procedures and have access to the same instruments (Dingeldey, 2005: 20). Meanwhile, job placement spread to about 160 recognized activation providers, two-thirds of which were private companies, by 2005 (Weishaupt, 2011a).

In 2007, the liberal-conservative coalition government once again restructured the Danish PES system. The responsibility for all labour market measures for insured and uninsured jobseekers were streamlined under one National Labour Market Authority. The number of regional councils was reduced from fourteen to four 'employment regions', while seventy-seven newly established one-stop job centres were developed to deliver placement, benefits, and training referrals all under one roof (Lindsay and McQuaid, 2008). In addition, fourteen 'pilot' job centres under full municipal responsibility were created. In the process, the regional councils have lost much of their steering capacity to municipal policymaking and implementation (Kvist et al., 2008: 244; Weishaupt, 2011a). From the perspective of institutional recalibration, these changes correspond to a general trend of decorporatization, i.e. the erosion of social partnership participation in labour market policy design and implementation (Anthonsen, Lindvall, and Schmidt Hansen, 2005).

After decades of more or less unbroken expansion, by the early 1990 the Swedish welfare state was hard hit by a home-grown financial crisis. The Swedish government responded to the economic downturn in the early 1990s by increased spending on ALMPs, but 'supply reducing' public early retirement and disability schemes were not expanded, quickly followed by substantial retrenchments after the peak of the recession. Unemployment benefit levels were revised several times during the decade: from 90 per cent of income to 80 per cent in 1993 to 75 per cent in 1996. In addition, the benefit ceiling lagged behind wage growth.

Early retirement for labour market reasons or with special age considerations for those above 60 was abolished, sick pay reduced to 80 per cent after twenty days, and employers were required to provide the first two weeks of sick pay. The revised Social Services Act of 1998 reduced the generosity of social assistance. The nominal value of universal child benefits was reduced in 1996 and 'advance maintenance allowances' for single parents (without income or means testing) were no longer indexed after 1995 (Palme etal., 2003). In this more difficult period for Sweden, the quality (if not the quantity) of active labour market policy was diluted, and the focus of social reform discussions turned to reducing the length and generosity of unemployment benefits. Following an economic upturn in the late 1990s, most benefits were readjusted upwards, but not to previous levels of generosity. More stringent qualifying conditions, including waiting periods, largely remained intact. After 1994, to compensate for benefit and active labour market policy retrenchments, more resources were directed to the development of human capital, including training, adult education, and higher education to raise the skill level of the active population and to raise employment rates (Huber and Stephens, 2001: 244-9).

Inspired by the Danish approach, Swedish policymakers institutionalized a variety of activation measures, including a youth guarantee in 1998 and an activation guarantee in 2000. Both measures include 'active periods' that require drawing up individual action plans, close collaboration with supervisors, and participation in a variety of job coaching and/or ALMP programmes. In contrast to Denmark, Sweden retained separate approaches to insured jobseekers claiming unemployment benefits and uninsured claimants of social assistance (Kohler, Thoren, and Ulmestig, 2008: 278-9; Sjoberg, 2011). Nevertheless, since 1998, Swedish social assistance claimants— especially the young—were progressively required actively to seek work.

A particularly strong feature of Swedish welfare reform in the 2000s has been the reinforced commitment, under more stringent budgetary constraints, to active family support by the enhancement of early childhood education and care, while enabling parents to combine parenthood with employment or studies. Over the 1990s, the proportion of children attending pre-school and day centres for school-age children increased sharply. On the other hand, staff size and costs per child declined and children's group size grew. Thus the decade was characterized by greater universalism but also by resource depletion. Reforms in 2001 and 2003 further improved childcare service affordability and access. Local authorities are required to provide preschool or family daycare to children aged 1-5 even when the parents are studying, unemployed, or taking parental leave to look after a sibling. The reforms also introduced a system of maximum childcare fees. At pre-school facilities, the fee charged is subject to a maximum capped to a fairly low level. In addition, the new system is topped up with a range of family/child benefits and parental leaves in connection with childbirth or adoption. Paid parental leave is granted for a period of up to well over a year (480 days). Nearly all parents take advantage of the days available. The proportion of parental cash benefit days used by men has markedly increased from 3 per cent since 1974 to

23.1 per cent in 2010 following the introduction of first one and later two 'daddy months'. Finally, fathers of new-born children are entitled to ten days' temporary parental benefit after childbirth. Practically all new fathers make use of these days.

A very important dimension of institutional recalibration across the Nordic countries, especially Sweden, concerns the enlarged role of private provision of public social services. Although privatization of social services remained modest in some services and in some geographical areas, publicly financed service provision by private actors has increased substantially, in areas such as childcare, school education, medical care, and old-age care. Market-oriented administrative practices also became more widespread. For Sweden, the 1990s was a decade of greater user financing and municipal decentralization in social service provision, a trend politically pushed by the 'freedom of choice' campaign of the conservative Moderate Party (Palme et al., 2003). Ultimately, the Social Democrats were voted out of power in 2006. In the election campaign, the centre-right Moderates were able to portray the Social Democrats as having become disloyal to their active 'work line' social policy commitment.

Finnish policymakers, like their Danish and Swedish counterparts, have also intensified their activation policies. The economic crash of the early 1990s was as catastrophic as it was rapid, and coincided with Finnish preparations for membership in the Economic and Monetary Union. As unemployment increased rapidly during the three worst years of the recession (1991-4), welfare reforms were guided not only by the necessity of cutting costs, but also by the need to improve work incentives. The changes culminated in new unemployment, sickness, and disability schemes, which embedded, above all, stricter activation measures than their predecessors. Furthermore, early retirement schemes were retrenched, and the obligation to find work for the young and long-term unemployed was shifted from the state to the unemployed themselves. Moreover, the young were entitled to unemployment benefits only if they completed vocational training courses. Simultaneously, many reforms increased obligations on social assistance recipients, and encouraged jobseekers to participate in ALMPs with financial incentives and by temporarily abolishing the means test for participants (van Gerven, 2008).

Finnish unemployment declined slowly from 1995 onwards, but unemployment benefits were further tightened in 1996. Since 1999, welfare benefits have been adjusted annually to account for inflation, and the means test for sickness benefits has been abolished, but in essence the implemented changes underscore both a right and a duty to activation. Numerous reforms have largely closed down early-exit routes, while simultaneously increasing the benefits for unemployed and disabled ALMP participants. Also in the sphere of Finnish social assistance, a distinctive work-first approach prevailed. Since the early

2000s, every claimant between 17 and 64 has had to register at the employment office as an unemployed jobseeker, make an activation plan in conjunction with the office, and look for work. If a beneficiary fails to do so, entitlements can be reduced by 40 per cent. These measures have been complemented by expanded ALMPs (van Gerven, 2008).

In a display of institutional recalibration in the sphere of unemployment policy, Finnish municipalities, like the Danish, have gradually taken over the implementation of the new 'right and duty to activation' strategy. Previously, the state was responsible for the costs of basic unemployment benefits, and the municipalities were responsible for livelihood costs, for which they received state subsidy. As of 2006, the state and the municipalities split the financing of basic benefits for the long-term unemployed (van Gerven, 2008: 227; van Gerven and Ossewaarde, 2011), thereby creating an incentive to award as few basic unemployment benefits as possible. In effect, the unlimited duration of unemployment provision was abolished for those who do not participate in measures to improve their employability.

Far-reaching pension reforms have been undertaken to strengthen the links between contributions and benefits in Sweden and Finland (Anderson, 2001; Palme, 2005; Kangas, Lundberg, and Ploug, 2006). In order to keep older workers in the workforce, Finland has developed policy approaches to improve the occupational health, work ability, and well-being of ageing workers. The most important trend is towards the development of multi-pillar systems that combine existing pensions financed from payroll taxes with new funding methods that involve a tight actuarial link between pension benefits and contributions. Sweden undoubtedly went furthest by switching in 1999 its pay-as-you-go public pension systems from defined-benefit schemes to 'notional' defined-contribution schemes. In a notional defined-contribution model, each insured employee's contributions are recorded in an individual account that will earn interest, typically at a rate tied to the growth of 'pensionable income' (mostly wages). At retirement, the balance in the account is converted into a life annuity based on estimates of the cohort's expected lifespan (Schludi, 2005). The Swedish reform has thus made its pension system approximately actuarially neutral. It also introduced a small funded defined- contribution component into the system. The Swedish pension reform was achieved through a broad political consensus between the Social Democrats in government and conservative parties in the opposition. Rather than depending on a tripartite pact (an approach that failed in the 1980s), the centre-right government created a pensions working-group composed of all political parties, in order to depoliticize reforms. The social partners were nevertheless consulted and the position of the largest union confederation was close to that of the Social Democratic Party. Although pension reform initially divided the unions, the social partners did grant their support in the end. The deep recession in the first half of the 1990s strengthened a common understanding across the political spectrum over the need for fiscal sustainability of the Swedish welfare state, including the pension system. By 2002, Finland followed suit, and their pension provisions are now also based on the entire career of the retiree and linked to increased life expectancy. Finland modernized its pension system gradually, by involving the social partners more actively than any other Nordic state. In fact, the major reforms of 2002 and 2004 were initiated and formulated almost entirely by the social partners, with little formal governmental involvement. According to the Social-Democrat-led cabinet, the reforms concerned a win-win proposal. It gave employees the option of earning larger pensions than before, took gender into consideration, and, by postponing retirement, reduced the need for increased pension contributions (Lassila, 2005; Kangas, 2007). This ultimately led to 'big' pension reform of 2005, as a direct result of tripartite agreement between the social partners and the government, which included incentives to lengthen work careers, fortify actuarial principles, and make the pension system more resilient to demographic pressures. In Denmark, where a substantial share of existing occupational pensions was based on individual contributions, such adjustments were not needed. Last but not least, there is a general trend towards introducing disincentives for early retirement and bonuses for working longer. A Swedish reform in 1994 has increased the statutory retirement age from 65 to 67, while making retirement flexible between age 61 and 67. A 1999 reform in Denmark introduced various incentives for retirement at 65, but complemented this with a lowering of the retirement age from 67 to 65. In 2002, Finnish policymakers left the statutory retirement age of 65 untouched, whilst enabling flexible retirement from age 63 to 68. As a consequence of these reforms, pensions are now perceived as financially sustainable and fair, both within and across generations (Anderson and Immergut, 2007; Green-Pedersen, 2007a; Kangas, 2007).

The Nordic countries, and especially Finland, have pushed for deliberate human capital strategies, so as to secure a productive workforce, to meet the challenges of economic internationalization and post-industrial social change. The Finnish success can be traced back to a public education system that provides highly skilled people and a culture of innovation (Sabel et al., 2010). Coordinating public and private efforts, the Finnish government has deliberately invested in research and development. The idea that sustaining the welfare of an ageing population requires a highly productive labour force is much more widespread in Nordic countries than in any of the other welfare clusters. Cognitive inequalities are substantially lower in the Nordic countries and the diminishing impact of social origin on educational performance coincides with the expansion of universal day care.

The performance of the Nordic regimes in spite of considerable economic turmoil over the 1980s and 1990s is remarkable (see Chapter 7). Not only were the Nordic countries capable of recovering from monetary and economic crises, they also managed to restore balanced budgets and economic dynamism and maintain high employment levels and low poverty rates, with the help of highly resilient interdependent welfare policy repertoires (cf. Ryner, 2007: 66). The Scandinavian tradition of universal coverage provided an effective safeguard against poverty and exclusion, spells out of work, and broken or changing career trajectories, with low transaction costs. Moreover, the incentive structure of nationwide social insurance and active labour market policy implied portability, which promotes labour mobility while avoiding poverty traps. Spurred by the recession in the early 1990s, most reforms were based on a strong consensus among the social democratic governments and conservative parties as well as employers and trade unions, which all agreed on the need for modernization (Schludi, 2005). These fortunate programmatic and political conditions allowed the Nordic welfare states to be recalibrated in a proactive manner.

In terms of functional recalibration, the Nordic welfare regimes moved much earlier than other social policy regimes towards dual-earner economies, with extensive public service provisions, parental leave opportunities, and activation programmes for mothers returning to work. In terms of normative recalibration, throughout the Nordic EU Member States, competitiveness pressures, ageing, and changing gender roles all seem to have reinforced broad political support for the 'work-first' approach, supported by activation obligations, tighter benefit control, availability tests, and job guidance, emphasizing citizenship duties alongside universal rights (Kvist, 2003). Coming to redistributive recalibration, structural socio-economic change did produce, over the 1990s, higher levels of income inequality, increased poverty, and worsening living conditions for single mothers, migrants, and families with children. Successive economic crises and intensified competitiveness pressures also brought about reductions in benefits and tightened eligibility for social assistance. While the hallmarks of universalism, generosity, and high-quality public servicing were retained, duration of unemployment benefits was gradually reduced, but capacitating activation measures expanded. Another important dimension of redistributive recalibration was the expansion in private co-payments and user charges and increases in revenue from insurance contributions (Benner and Vad, 2000). Finally, in terms of institutional recalibration, Denmark and Sweden have seen the influence of the social partners weakened (Lindvall and Sebring, 2005; Lindvall and Rothstein, 2006), but Finland has strengthened corporatist encounters between the social partners and the state (Pestoff, 2002: 295). In addition there has been a strong turn to the introduction of quasi-markets—in public services

(childcare, elder care, health, and education) under the strong influence of New Public Management ideas, especially in Sweden.