Basic Concepts and Definitions

Definitions: European Welfare State/Policy - Social Policy

What is social policy? A well-known definition of social policy is that given by T.H. Marshall: "Social policy is the use of political power to supersede, supplant, supplement, or modify operations of the economic system in order to achieve results which the economic system would not achieve on its own."

A similar definition characterizes social policies as those "modifying market outcomes to facilitate transitions, to correct market failures, and to carry out regional, interclass and inter-generational redistribution of resources." Differently put, social policies are programs and measures undertaken by governments with the intention to "correct" the result of what the "invisible hand" of the market can achieve on its own. Social policies form the core of public policy in all western nations. In industrialized countries (OECD countries) public expenditure in 1990 amounted to 39.1% of the GDP and social expenditure amounted to 21.5% of GDP (cf. OECD 1993 Economic Outlook no.54 December: Paris).

What is a welfare state?A common textbook definition is that the welfare state involves state responsibility for securing some basic modicum of welfare for its citizen (SEE BIBL.: Esping-Andersen 1992).
What is a welfare state? These are states which are primarily concerned (OR: which spend the lion share of their public expenditures on) with dispensing welfare.
What is a welfare state? Welfare States embrace government activity in the field of poverty relief, education, individual retirement, housing, and health care (SEE BIBL. Barr & Whynes 1993).

What is social citizenship? According to T.H. Marshall, the concept of social citizenship lies at the core of the welfare state because the granting of social rights is the sole criteria by which to justify welfare states. According to Gosta Esping-Andersen (1992; SEE BIBL), social rights are granted based on citizenship and not performance in the market. In a state where social services are available as a matter or right and not as a matter of performance, the individuals are no longer dependent on the cash nexus and are therefore no longer "commodified" (a commodity). Decommodification is an important concept when we want to understand certain types of welfare states. If the level of decommodification is high, the well-being of individuals is no longer entirely dependent on the market and the cash nexus. Wherever social rights are guaranteed by the state, the commodity status of individuals is reduced and benefits are made available as a matter of need. Welfare states vary in their level of decommodification. While in some countries (Sweden) services are more likely to be rendered as a matter of rights, in others (USA) benefits will depend more heavily on the quality of an individual's performance in the market.

What are the Objectives of Social Policy?

Europeans often prefer the term social policy to that of welfare policy because the former reflects more appropriately the broad spectrum of policies, areas and objectives commonly associated with the welfare state. Americans, especially, tend to think that the concept of "welfare" is somehow exclusively linked to "poverty" and "poor relief" when, in fact, many welfare states perform poorly in relieving poverty within their borders.

Social policy goals include all of the following:

  1. Redistribution of wealth
  2. Income and standard of living maintenance
  3. Helping particulary disadvantaged social groups, regions, etc.
  4. Public safty net
  5. Economic governance
  6. Poor relief

1. Redistribution of welth

By various means of taxation and the subsequent reallocation of public money, resources are shifted to poorer segments in society to achieve a more balanced and stable society. Progressive taxes are a staple feature of modern welfare states.

2. Income and standard of living maintenance

As people may become either too old, too sick or, for some other reason, temporarily unable to work and to provide adequately for themselves and their families, welfare system are designed to allow individuals to maintain in part the life style to which they have become accustomed. This not only makes economic sense, as individuals can continue to participate in the market, but it also strengthens the political stability and social fabric of a society. In many European countries this is achieved through a variety of public insurance schemes. Mandatory deductions from an employee's salary, augmented by the contributions of employers and often the government, are paid into an insurance fund. Based on the level and the number of years of contributing, an individual earns credits (claims) entitling him or her to a certain level of benefits. Typically, such social insurance schemes cover unemployment, sick pay and old age pensions.

3. Helping particularly disadvantaged social groups, regions etc.

Certain occupational groups, minorities, or entire regions may face structural problem that make them, as a group, consistently worse off than average members in their society. In many nations targeted programs exist in order to address these inadequacies. For instance, European countries have taken specific measures to combat rural poverty; support families with children; provide for re-training and early retirement in industrial problem regions; assist especially those with structural employment problems (the long-term and older unemployed; youth unemployment).

4. Public safety net

Welfare states can serve as a means of last resort allowing individuals a minimal level of decent human existence if no other resources are available. In every society, there are people who have no income, eventually reach a point when they have exhausted their own resources and are incapable of supporting themselves and their dependents. Providing for these individuals is the traditional function of public welfare, dating back to pre-industrial days when local charities, communities, noblesse oblige, and the churches played a similar role on a much smaller scale.

5. Economic governance

The economies of continental Europe, often called organized market economies, are characterized by a more pronounced role for the government in the economy and by the collaboration, rather then the competition, of economic actors. Powerful (centralized) interest associations, such as unions and employer groups, engage in large scale collective bargaining to set wage levels or to determine sick leave, overtime pay, the length of the work week, retirement provisions and many other work-related issues. Often, the government's social policies are expected to complement and facilitate these negotiations, and thus contribute to the overall economic organization and stability. For example, if job losses become unavoidable, unions are more likely to agree whenever complementary government measures facilitate early retirement or re-training programs to relieve the pressure in the job market. Austria and Germany are well-known examples of countries that use their social policies as a form of economic governance.

6. Poor relief

These are policies which are directed at alleviating poverty. In most cases, this includes the use of so-called means tests where the applicant's need must be clearly demonstrated before benefits are delivered. Programs such as Medicaid or Aid to Families with Dependent Children (AFDC) in the US are classic examples. However, since poor relief programs tend to serve marginal and, usually, politically powerless groups, they retain little overall support from the general public. As a result of the unpopularity of these programs among voters, legislators frequently cut or eliminated them outright (e.g., AFDC).

Myths and Misconceptions about Social Policy

Myth 1: A classic myth about social or welfare policy is that they concern only the poor. Public education, unemployment and pension benefits are frequently perceived as something entirely different. In fact, the lion's share of public expenditures in western nations is spent on welfare policies ( see What is social policy?). Most people assume that programs like social security are different from welfare because the former are paid through mandatory payroll deductions. However, programs for health care and retirement pensions often require services and benefits that far exceed the actual monetary contributions of individuals paying into such public insurance schemes. Social trust funds remain solvent only through government transfers from tax revenues and inter-generational contracts. In short, people drawing social benefits today are supported by the contributions of people currently working (this is called a pay-as-you-go system). In fact, despite the complexity and extensiveness of many modern welfare states, many of them perform poorly in alleviating poverty. In Germany, for example, social policies are geared toward work performance and reward life-long contribution. As a result, people who are not in traditional employment situations may fall through the cracks of the otherwise dense German welfare system.

Myth 2: The US has only a rudimentary welfare state while Europeans enjoy cradle-to-the-grave welfare. While it is true that the American welfare state is not as extensive as many European ones and that in the US private provisions and insurance schemes (in health care and old age pensions) are often substituted for government schemes, the differences between the US and Europe on social spending are less pronounced than many think. On the other hand, it must be emphasized that European welfare states differ a great deal more than people commonly realize. In addition to varying levels of social spending, also the goals and organization of European welfare states tend to show significant differences (see Welfare Regimes).

Myth 3: Welfare states are the creation of left-leaning democracies where poor people voted to redistribute from the haves to the have-nots. By all accounts, democracies were not at the forefront of the modern welfare state. While the center-leftist control of government was responsible for the expansion of welfare systems in Europe after World War II, the first welfare regimes were created by authoritarian, conservative and paternalistic governments for a variety of reasons. While Germany, under Bismarck, is credited with creating the blueprint for the modern social insurance-based welfare state in Europe, it was, in reality, more concerned with combating the spread of socialism than with the redistribution of wealth. Similarly, Britan's Lord Beveride, who was concerned mainly with the fitness of military age men, set up public social programs that were designed to provide a (minimal) universal benefit system. Also, the French government in its efforts to establish welfare policies were animated by fears stemming from a decline in population. Moreover, in much of continental Europe, early welfare state development has been profoundly shaped by the influence of the Catholic church, its views on the family and the natural order in society.