Scandinavian welfare regime in crisis Sweden. Introduction Political dominance of Social Democrats...
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Transcript of Scandinavian welfare regime in crisis Sweden. Introduction Political dominance of Social Democrats...
Introduction
• Political dominance of Social Democrats• Institution full employment policy on Keynesian
principles: new industrial economy– Public investment in R+D & infrastructure– 1938 LO/SAF pact (central negotiation)– 1940 Labour Market Board – active labour market
policy (training and mobility)• Social Policy:
– compulsory sickness insurance– State pensions– Extensive .social services
Post-war growth (1950s and 1960s)
• 1940s: citizenship pension & sickness benefits raised
• TU voluntary unemployment benefits extended and reinforced (Labour Market Board).
• Basic rates topped up by earnings-related supplements (pensions and sickness and TU unemployment insurance)
• Sickness benefits cover child care for 4 years • Local state social services and social assistance
Swedish welfare state at zenith (1980s) I
• 90% income replacement ratios for sick, unemployed or absence through child care
• 70% replacement rate for pensioners
• Social security costs rise:– 1965 = 13.5% GNP– 1980 = 32% GNP
Swedish welfare state at zenith (1980) II
• Expansion of local social services– Comprehensive health care– Housing (owner occupation and publicly provided
rental)– Residential facilities for elderly, children and
handicapped– Compulsory care for children and alcoholics
(1982: institutionalisation made voluntary)
• Professional expertise, state management + high taxation
Early Crisis: 1980s
• 1976: welfare costs raised by economic downturn (SDP loses power)
• 1982: SDP re-elected:– Krona devalued– Wage restraint introduced (welfare protected)– New public investment in Swedish firms– New training programmes: – Collective bargaining strengthened
• 1980s: Swedish unemployment low and inflation steady– 80% women in workforce at 85% male wage rate
Crisis 1990s: collapse of Soviet block
• 10% inflation and rising unemployment– Government applies for EU membership– Krona devalued against DM– Welfare cuts: SDP loses 1991 election
• 1992 currency crisis (interest rates – 500% & unemployment = 11%): – welfare cuts– full employment policy abandoned– unemployment insurance made compulsory
• 1994 SDP re-elected (but welfare reforms stay)
Restructuring Nordic Model(s) 1990s
• Economic ‘modernisation’ policies aim at low inflation– Severe budget cuts, fiscal austerity (Euro links)– Tax cuts and reduced benefits
• Negotiated wage constraints: labour market regulation retained: flexible work sharing schemes negotiated.
• Social policy: reinvigoration of duty to work– LMA programmes / education – Multi-pillar pensions restructured: early retirement closed
down– Measures to reconcile work-family & raise female labour
market participation– Targeted policy for immigrant / posted workers
• Danish ‘flexicurity’: unemployment + high protection.
Welfare changes post 1990s
• Higher charges for child/ elderly care
• Health care competition: private provision, internal market, higher charges
• Labour Market Board: employment policy– Training: allowances cut– Employment protection amended– Employers promote flexibility
• Education: competition between ‘free’ and state schools
Influence of EU
• 1994: entry into EU reinforces constraints on public expenditure
• Amsterdam Treaty (1997).– Chapter on employment– Birth of active labour market policies reflect
Swedish experience
• Refusal to join the Euro. – Damaging to welfare state (opposite to UK)– Swedish standards of welfare are higher
Pension reform (1998-2005)
• 1998: Pension Reform introduced (implemented 2001)– 2.5% of contribution to earnings-related state pension
converted into personal ‘pot’.– Contributors may determine whether to invest
personally, or to allow state to do so
• 2001-2003: market downturn: all lose savings (but state investors lose less)– Result: more contributors return ‘pot’ to state for
investment– State responsibility re-enters by the back door.
Nordic Models in Turbulent Times
‘The crux of the Nordic model has been the actors’ capacity for co-ordinated, concerted policy adjustment – facilitated by relatively balanced power relations and trust – which has enabled coherence and complementarity between policies in key areas’
Denmark, Sweden, Norway and Finland 1990-2008 (and after)
Conclusion
• Economic convergence with EU = social policy convergence with EU?– Will current crash push Sweden to joint the Eurozone
• Women anti-EU: this represents principle threat to their jobs
• ‘Liberalisation’– Watering down of alcohol policy– Higher unemployment
• But Swedish welfare still most generous in Europe – even after following similar path.