European social model

The European social model is a common vision many European countries have a society that combines economic growth with high living standards and good working conditions . Historian Tony Judt has argued that the European social model „binds Europe together“ in contrast to the “ American way of life „. ^[1]

European states do not use a single social model , but welfare states in Europe. These include a commitment to full employment , social protections for all citizens, social inclusion , and democracy. Examples common among European countries include universal health care , free higher education, strong labor protections and regulations, and generous welfare programs in areas such as unemployment insurance, retirement pensions, and public housing. The Treaty of the European Community set out several social objectives:promotion of employment, improved living and working conditions … good social protection, dialogue between management and labor, the development of human resources with a view to lasting high employment and the combating of exclusion. ^[2] Because different European states focus on different aspects of the model, it has been argued that there are distinct social models in Europe – the Nordic, the British, the Mediterranean and the Continental. ^[3] [4]

The general outlines of a European social model emerged during the post-war boom . Tony Judt lists a number of causes: the abandonment of protectionism , the baby boom , cheap energy, and a desire to catch up with living standards enjoyed in the United States. The European Social Model also enjoyed a low degree of external competition in the Soviet bloc, China and India were not yet integrated into the global economy. ^[5] In recent years, it has become common to question whether the European social model is sustainable in the face of low birthrates, globalization , Europeanization and an aging population .^[6] [7]

Welfare state in Europe

Some of the European welfare states have been described as the most well developed and extensive. ^[8] A unique „European social model“ is described in contrast with the existing social model in the US. Although each European country has its own singularities, identified in Europe: ^{[9] [10] [11]}

• The Nordic model, in Denmark, Finland, Norway, Sweden and the Netherlands
• The Continental ( Christian democratic ) ^[11] model, in Austria, Belgium, Czech Republic, France, Germany, Hungary, Luxembourg, Poland, Slovenia ^[11]
• The Anglo-Saxon model, in Ireland and the United Kingdom
• The Mediterranean model, in Greece, Italy, Portugal and Spain

Nordic model

The Nordic Model holds the highest level of social insurance . Its main feature is its universal provision nature which is based on the principle of „citizenship“. Therefore, there is more generalized access, with lower conditionability, to the social provisions.

As regards labor market, countries are caractérisé thesis by significant expenditures in active labor market policies Whose aim is a rapid reintegration of the unemployed into the labor market. These countries are also characterized by a high share of public employment . Trade unions have a high membership and an important decision-making power.

The Nordic model is also characterized by a high tax wedge .

Continental model

The Continental model has some similarities with the Nordic model. Nevertheless, it has a higher share of its pensions. The model is based on the principle of „security“ and a system of subsidies which are not conditioned to employability (for example in the case of France or Belgium, there exist

As regards the labor market, the policies are less important than in the Nordic model and in spite of a low membership rate, trade unions have important decision-making powers in collective agreements .

Another important aspect of the Continental model is the disability pensions .

Anglo-Saxon model

The Anglo-Saxon model features a lower level of expenditure than the previous ones. Its particularity is its social assistance of last resort. Subsidies are directed to a greater extent to the working age and to a greater extent to pensions. Access to subsidies is (more) conditioned to employability (for instance, they are conditioned on having worked previously).

Active labor market policies are important. Instead, trade unions have smaller decision-making powers than in the previous models, which is one of the reasons explaining their higher income dispersion and their higher number of low-wage employments.

Mediterranean model

The Mediterranean model corresponds to southern European countries which developed their welfare state later than the previous ones (during the 1970s and 1980s). It is the model with the highest share of spending and is strongly based on pensions and a low level of social assistance. There exists in these countries a higher segmentation of rights and conditions of access to social goods.

The main characteristic of labor market policies is a rigid employment protection legislation and a frequent resort to early retirement policies. Trade unions tend to have an important membership which is still one of the explanations behind a lower income dispersion than in the Anglo-Saxon model.

Evaluating the different social models

To evaluate the different social models, we follow the criteria used in Boeri (2002) and Sapir (2005) which considers that a social model should satisfy the following:

1. Reduction in poverty.
2. Protection against labor market risks.
3. Rewards for plowing participation.

Reduction in poverty

Gini indexes de la charge de la charge de la charge de l’inequality et de la charge des taxes et transferts transfers. The level of social expenditure is an indicator of the capacity of each model to reduce poverty: a larger share of expenditures is in general associated with a higher reduction in poverty. Nevertheless, another aspect that should be taken into account is the efficiency in this poverty reduction. By this is meant that it is possible to obtain a better result. ^[12]

In this case, the graph shows that the Anglosaxon and Nordic models are more efficient than the Continental or Mediterranean ones. The Continental model appears to be the least efficient. Given its high level of social expenditure, one would expect a higher poverty reduction than that attained by this model. Remark how the Anglosaxon is one of the following.

Protection against labor market risks

Protection against labor market is assured by two means:

1. Regulation of the labor market by means clustering of employment protection legislation qui Basically Increases firing costs and severance payments for the Employers. This is providing for „employment“ protection.
2. Unemployment benefits qui are Commonly financement with gold tax public mandatory insurances to the employees and Employers. This product is providing protection to the „worker“ as opposed to „employment“.

As can be seen in the graph, there is a clear trade-off between these two types of labor market instruments. Once again different European countries have chosen a different position in their use of these two mechanisms of labor market protection. These differences can be summarized as follows:

• The Mediterranean countries have chosen a higher „employment“ protection while a very low share of their unemployed workers receives unemployment benefits.
• The Nordic countries have a greater responsibility for employment and employment.
• The continental countries have a higher level of both mechanisms than the European average, though by a small margin.
• The Anglo-Saxon countries base their protection on unemployment benefits and a low level of employment protection.

Evaluating the different choices is a hard task. In general there exists a consensus among economists on the fact that employment protection and generics inefficiencies inside firms. Instead, there is no such consensus as regards the question of whether employment protection is higher.

Rewards for plowing participation

Sapir (2005) and Boeri (2002) provide an overview of the employment-to-population ratio and the role of the employer in the social and economic sectors. The Lisbon Strategy initiated in 2001 should reach 70% employment rate by 2010.

In this case, the graph shows that the countries in the Nordic and Anglosaxon model are the ones with the highest employment rates of the Continental and Mediterranean countries have not attained the Lisbon Strategy target.

Conclusion

Sapir (2005) proposes a general mean to evaluate the different social models, the following two criteria:

1. Efficiency , that is, whether the model provides the incentives to the largest number of employees, that is, the highest employment rate .
2. Equity, that is, whether the social model achieves a relatively low poverty risk.

Can be seen in the graph, according to these two criteria, the best performance is achieved by the Nordic model. The Continental model should improve its efficiency and the Anglosaxon model its equity. The Mediterranean model under-performs in both criteria.

Some economists consider that between the Continental model and the Anglo-Saxon, the latter should be preferred to its best results in employment, which makes it more sustainable in the long term, 2005). Other economists argue that the Continental model can not be considered worse than the Anglosaxon given that it is also the result of the preferences of those countries that support it (Fitoussi et al., 2000, Blanchard, 2004). This last argument can be used to justify any policy.

See also

• Disability pension
• Social insurance
• Social protection
• Social security
• Social welfare provision
• Welfare state

Location-specific:

• Tax rates of Europe
• US welfare state

References