State, market and civil society Lecture 3

Welfare Triangle State Market Civil socitey

Roles? Financing Delivery Impact on degree of solidarity Logics and rationality behind Change in welfare mix, the combination of state, market and civil society, over time – not a static issue. Care of children as an example – historically civil society – today often either market and/or state

Routes to welfare Public Fiscal Occupational They can be used independently or in various combinations Analysis often looks at one aspect – and data often mainly public welfare through direct public sector spending In most welfare state public spending also imply sales of goods and services from the private sector and employment of people

Two case examples: Housing and pension Housing: Public support for construction and/or renovation of building, housing benefit, tax-rebate on housing loans Pension: State pension, indirect support through the tax-system (lower payment of tax) for savings to pension purposes

From gross to net social spending

Market-failure Monopoly/duopoly Risk of a limited supply if limited demand ( for example, services to people with disabilities) Unemployment – and historically inflation Externalities – pollution (negative), vaccination (positive) Market failure is an argument for public sector intervention, but not necessarily public sector delivery Intervention also in order to ensure efficiency – care of elderly as an example Moral limits to what a market can provide – for example organs

Types of regulations Public delivery Use of taxes and duties Ministerial order Other types of regulation Recommendation, best practices Control

Marketization of welfare states Different degree in the different welfare regimes – highest in Liberal, least in Nordic welfare states When can market be used to provide welfare without negative implications for users?: Many providers – be able to reduce or avoid cream-skimming Reduced transaction costs Complete transparence and full information

When is private market solutions cheaper than state solutions? This might be due to one or several of the following reasons: Wage level for the employed are lower than in the public sector More effective ways of working Management is better Quality of services is reduced Working environment with more worn-out employees – implies a risk for higher public sector spending at a later time

Government -failure If the size of the public sector is greater than what is from a welfare perspective is efficient Bureaucracy Interest, pressure or lobby groups influence The difficulty in steering and managing the public sector – the principal-agent problem

Relation between the public and private sector Private sector delivers goods and services to the public sector Income transfers are often used to buy products in the private sector Demand from public sector helps to develops new products –for example – welfare technology Delimitation public private is therefore not simple and clear

Civil society – and the risk of Voluntary failure A question being: Is voluntary work supplementary or areplacement for public welfare Risk in differences in who has access to and options for receiving welfare services if provided by civil society Supply might be limited – and can quickly vanish Transaction cost might arise Welfare states demand for documentation – implies a conflict between professionals and voluntary workers A need therefore to define where possible and where it is not Number of voluntary people differs among welfare states

Role of the family Supply care and economy among a group of people Historically many welfare issues regarding care and income transfers has been solved in the family A new risk being the splitting up of families – and also that some might be in risk of not having anyone to discuss intimate matters with – especially for elderly people loneliness might also be a problem

Labour market Has a special role and function in welfare societies They often are the main access to income and consumption possibilities Social contact and relations can also be influenced hereby Work is seen as an important element in order to have a high level of welfare (measured by GDP) in many countries There is many and different types of labour market, divided due to geography, education and experience, and also different types of unemployment ( for example: season, business cycle, search)

Relation between unemployment and growth in GDP in the EU27 since 2000

Nordic welfare states and labour market High employment rate - also for women Historical a focus on reduction of unemployment – including through a reduction in unemployment also by public sector intervention Women are to a larger degree than men working part-time Gender divided labour market – and difference in wage income Focus on active labour market policy – but to a larger degree than earlier on work-first

Labour market and welfare regimes – a comparison Labour Market Policy / Welfare Regime Coverage unemployment benefit Focus on ALMP Goal of labour market policy Ideological approach Nordic Comprehensive –although replacement rate has been reduced Yes - central Integration, full employment Equality, Keynesian intervention, however increased focus on work-first Corporatist/Continental European Less Strong – lower replacement rate Relatively important Reduce pressure public sector spending State with corporatist inclusion labour market partner Liberal Weak Only limited If, then focus on business Efficiency, liberal non-intervention Southern/Eastern Europe Very incomplete Only weak developed To reduce use of benefit system Emphasis on civil society  

High replacement in Nordic – low in Liberal – also some convergence Country Single Two earner married couple Czech Republic 65 84 Denmark 57 74 France 66 80 Germany 59 83 Hungary 54 73 Italy 55 Spain 58 75 Sweden 46 68 UK 13 49

Public welfare and the labour market Day –care for children Maternity and paternity leave Education However, also often either at the work place or in collective agreements possibilities and discussion on how to combine work and family life

Summing -up State, market and civil society has different and changing roles and it differs among the different welfare state regimes Consequences hereof can be difficult – and needs to be analysed empirical in the different countries The balance between the three sectors can influence the degree of equality in a society – including inequality in access to welfare