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KULeuven_Summer_School_EU_social_policy_6.6.2016
The impact of the EU on social
policy
Frank Vandenbroucke
KU Leuven Summer School
6 June 2016
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
• A European Social Union
The diversity of EU welfare states
Input: expenditure on social protection, gross, in % of GDP (2010)
00
05
10
15
20
25
30
35
RO LV BG EE SK PL LT MT CZ CY LU HU SI ES PT UK GR IE IT BE AT SE FI GE NL DK FR
old age & survivors Sickness/Health Care Unemployment
Disability Family/children Housing & Social Inclusion n.e.c.
Other & adm. costs
The diversity of EU welfare states
Outcome: a two-dimensional map of outcomes
The diversity of EU welfare states: poverty
Poverty risk and poverty threshold: “national” conception (SILC 2010)
,0
2000,0
4000,0
6000,0
8000,0
10000,0
12000,0
14000,0
16000,0
18000,0
,0
5,0
10,0
15,0
20,0
25,0
CZ NL SK AT HU SI SE FI DK FR LU BE MT CY GE EE IE UK PL PT IT GR LT BG ES RO LV
AROP total population, SILC 2010 Poverty threshold PPP
The performance of European welfare states
EU28
BE
BG
CZ
DK
DE
EE
IE
GR
ES
FR
CR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SI SK FI
SE
UK
8,0
10,0
12,0
14,0
16,0
18,0
20,0
22,0
24,0
26,0
50,0 55,0 60,0 65,0 70,0 75,0 80,0
At-risk-of-poverty rate total population, SILC
2012 (IE=SILC 2011)
Low poverty
High employment
High poverty
High employment
Low poverty
Low employment
High poverty
Low employment
Employment rate 15-64, LFS 2012
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
• A European Social Union
The social dimension of the European project according to the
founding fathers: a belief in convergence
• European integration would support the simultaneous pursuit of economic
progress and of social cohesion, both within countries (through the gradual
development of the welfare states) and between countries (through upward
convergence across the Union)
• Division of labour:
– economic development: supranational
– coordination of social security rights & anti-discrimination: supranational
– social development: national sovereignty (in theory)
• “European solidarity” ≈
– fair access to the dynamics of upward economic convergence (market integration + limited
solidarity transfers, in the context of the ‘cohesion policy’)
– economic freedoms, but also social rights for mobile citizens => a pan-European ‘social space’
– solidarity within Member States, to redistribute the produce of economic growth
• The convergence machine worked… more or less… until 2004/2008.
‘Semi-sovereign welfare states’ in the EU (Leibfried)
• De jure: a legislative impact that is far from trivial
– Technical coordination of social security rights
– Specific legislative initiatives (e.g. health and safety)
– Anti-discrimination procedures
– Market compatibility requirements
• De facto: pressures generated by…
– Increased competition in the internal market
– Budgetary surveillance (SGP)
– European Semester
• ‘Open coordination’ (employment & social policy)
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
The end of the ‘convergence machine’
Changes in poverty rates and changes in median income
BE
BG CZ
DK
DE
EE
IE
EL
ES
FR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL PT
RO
SI SK
FI
SE
UK
-7
-5
-3
-1
1
3
-40% -30% -20% -10% 0% 10% 20% 30%
Percentage point change in AROP
Real change in median income, in %
Relative income poverty in the population 65+
,0
10,0
20,0
30,0
40,0
50,0
60,0
Armoede (65+) 2007 Armoede (65+) 2012
Bron: Eurostat website, SILC 2008 en SILC 2013
Relative income poverty in the population 65+ (anchored)
,0
10,0
20,0
30,0
40,0
50,0
60,0
Armoede (65+) 2007 Armoede (65+) 2012, armoedegrens 2007 Armoede (65+) 2012
Long term trend
Pensions as buffer
Relative income poverty in the population < 18
,0
10,0
20,0
30,0
40,0
50,0
60,0
At-risk-of-poverty rate
Poverty (<18) 2007 Poverty (<18) 2012
Relative income poverty in the population < 18 (anchored)
,0
10,0
20,0
30,0
40,0
50,0
60,0
At-risk-of-poverty rate
Poverty (<18) 2007 Poverty (<18) 2012, threshold 2007 Poverty (<18) 2012
Relative income poverty in the population < 18 (anchored)
,0
10,0
20,0
30,0
40,0
50,0
60,0
At-risk-of-poverty rate
Poverty (<18) 2007 Poverty (<18) 2012, threshold 2007 Poverty (<18) 2012
Increasing inequality within MS
Increasing inequality across MS
A risk of vicious circles
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
• A European Social Union
Poverty risks in the population < 60, by work intensity of the
household
0
10
20
30
40
50
60
Very high work
intensity
High work
intensity
Medium Low work
intensity
Very low work
intensity
At-risk-of-poverty rate (< 60)
Work intensity of the household
2004-06 2012
Bron: Eurostat, SILC 2005-2007; SILC 2013
Poverty risks in the population < 60, by work intensity of the
household
0
10
20
30
40
50
60
Very high work
intensity
High work
intensity
Medium Low work
intensity
Very low work
intensity
At-risk-of-poverty rate (< 60)
Work intensity of the household
2004-06 2012
Erosion of welfare states?
Changing composition of households?
More precarious jobs?
Migration?
Bron: Eurostat, SILC 2005-2007; SILC 2013
The contribution of transfers (not pensions) in the reduction of
poverty
0
5
10
15
20
25
30
2004-06 2012
Inefficient ‘pension-heavy’ welfare states
Erosion of mature welfare states ?
Source: Eurostat, own calculation of ‘poverty reduction by transfers (excl. pensions)’, total population, SILC
2005-2007 en SILC 2013
What governments can do: net disposable income of couple
with 2 children, one minimum-wage earner
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
LU IE AT FI UK DE FR NL DK BE IT SI EL CZ ES SK EE PL HU LT PT LV RO BG
Net disposable income with 2 children Gross wage income
Bron: CSB/MIPI
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
• A European Social Union
The consequences of monetary unification
Transfers might mitigate the symmetry/flexibility trade-off
The EU’s way: more symmetry, more flexibility
Flexibility determines social order
EMU’s fragility
No lender of last resort
(=> Draghi)
Intensification of national
booms and busts &
divergence in competitiveness
Institutional advantage of coordinated bargaining
Competitiveness:
symmetrical
approach
necessary
=> convergence
Defining the EMU’s social objective is a necessity rather than a
luxury
• EMU forces upon the member states a shared conception of
flexibility
• A basic consensus on the functioning of the social model is
necessary for the long-term sustainability of EMU
– short term: stabilisation
– mid term: a symmetric guideline on wage cost competitiveness
& institutions that can deliver
– long term: sustainability of pensions
• Just ‘symmetry’? Legitimacy => convergence in prosperity
The human capital asymmetry: employment and formal
educational attainment
EU28
BE
BG
CZ
DE DK
EE
IE
GR
ES
FR
CR
IT
CY
LV LT
LU
HU
MT
NL
AT
PL
PT
RO
SI
SK
FI
SE
UK
45,0
50,0
55,0
60,0
65,0
70,0
75,0
80,0
85,0
,0 10,0 20,0 30,0 40,0 50,0 60,0
Employment rate 15-64, 2012
% of population (15-64) with lower secondary education attainment, 2012
Many low-skilled
Low employment rate
Few low-skilled
High employment rate
Few low-skilled
Low employment rate
Structure
• The diversity of EU welfare states
• The founding fathers’ inspiration
• Growing inequalities within and between EU Member States
• Erosion of welfare states? A tragic dilemma?
• Design flaws in EMU
• A European Social Union
Main argument
• A basic consensus on the European Social Model and the role
the European Union has to play (and not to play) in the
domain of social policy…
– … is not a luxury.
– … but an existential necessity.
• The need for conceptual clarification: a European Social Union
Why is a basic consensus on the social dimension a necessity?
• an inevitability of European Monetary Union;
• Freedom of movement and national social cohesion in EU28:
‘a balancing act’
– Social dumping?
– Economic freedoms right to strike (Viking, Laval)
• Two dimensions of solidarity: domestic (national) and panEuropean
A European Social Union
A Social Union would
• support national welfare states on a systemic level in some of their
key functions
• guide the substantive development of national welfare states – via
general social standards and objectives, leaving ways and means of
social policy to Member States – on the basis of an operational
definition of ‘the European social model’.
⇒ European countries would cooperate in a union with an explicit
social purpose, pursuing both national and pan-European social
cohesion
The case for a European Social Union
• support national welfare states on a systemic level in key functions
(e.g. stabilization)
• guide the substantive development of national welfare states
– via general social standards and objectives
⇒symmetric w.r.t. to competiveness (wage policy & capacity to deliver)
⇒social investment
⇒minimum wages and minimum income protection
⇒solidarity in reform
– leaving ways and means of social policy to Member States
The case for a European Social Union
• support national welfare states on a systemic level in key functions
(e.g. stabilization)
• guide the substantive development of national welfare states
– via general social standards and objectives
⇒symmetric w.r.t. to competiveness (wage policy & capacity to deliver)
⇒social investment
⇒solidarity in reform
⇒minimum wages and minimum income protection
⇒solidarity in reform
– leaving ways and means of social policy to Member States
The case for a European Social Union
• support national welfare states on a systemic level in key functions
(e.g. stabilization)
• guide the substantive development of national welfare states
– via general social standards and objectives
⇒symmetric w.r.t. to competiveness (wage policy & capacity to deliver)
⇒social investment
⇒solidarity in reform
⇒minimum wages and minimum income protection
⇒solidarity in reform
– leaving ways and means of social policy to Member States
Thank you
1) Vandenbroucke and Rinaldi, Social inequalities in Europe – The challenge of convergence and
cohesion. In: Vision Europe Summit Consortium (eds.): Redesigning European welfare states – Ways
forward, Gütersloh (http://www.vision-europe-summit.eu/)
2) Vandenbroucke, The Case for a European Social Union. From Muddling through to a Sense of
Common Purpose, in Marin, B. (Ed.), The Future of Welfare in a Global Europe, Ashgate: Aldershot
UK, 2015, pp. 489-520.
3) Vandenbroucke, A European Social Union: Unduly Idealistic or Inevitable?, European Debates, 7,
European Investment Bank Institute, September 2015 (http://institute.eib.org/wpcontent/uploads/2015/09/A-European-Social-Union-Unduly-Idealistic-or-Inevitable.pdf)
4) Vandenbroucke, with B. Vanhercke, A European Social Union. 10 Tough nuts to crack, Friends of
Europe, Spring 2014
http://www.friendsofeurope.org/Portals/13/Events/WorkingGroups/Social_Europe/03_03_14_Rep
ort_SocialUnion_FINAL_V.pdf