Growth to Limits: Vol 1 Sweden, Norway, Finland, Denmark [Reprint 2014 ed.] 9783110876475, 9783110111309

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EUI - Series C - 6.1 Flora (Ed.), Growth to Limits

European University Institute Institut Universitaire Européen Europäisches Hochschulinstitut Istituto Universitario Europeo

Series C Political and Social Sciences Sciences Politiques et Sociales Politik- und Sozialwissenschaften Scienze Politiche e Sociali 6.1

Badia Fiesolana — Firenze

Growth to Limits The Western European Welfare States Since World War II Volume 1 Sweden, Norway, Finland, Denmark

Edited by

Peter Flora

w DE

G 1986 Walter de Gruyter · Berlin · New York

Library of Congress Cataloging-in-Publication

Data

Growth to limits. Contents: v. 1. Sweden, Norway, Finland, Denmark — v. 2. Germany, United Kingdom, Ireland, Italy. 1. Europe—Social conditions—20th century. 2. Welfare state. 3. Europe—Politics and government—19454. Europe—Economic conditions—1945. I. Flora, Peter, 1944H N 3 7 7 . G 7 6 1986 306.7Ό94 86-19938 ISBN 0-89925-266-4 (U.S. : v. 1)

CIP-Kurztitelaufnahme

der Deutschen

Bibliothek

Growth to limits : the Western European welfare states since World W a r II / ed. by Peter Flora. - Berlin ; N e w York : de Gruyter (European University Institute : Ser. C, Political and social sciences ; 6) N E : Flora, Peter [Hrsg.]; Istituto Universitario Europeo (Fiesole): European University Institute / C Vol. 1. Sweden, Norway, Finland, Denmark. - 1986. ISBN 3-11-011130-6

© Copyright 1986 by Walter de Gruyter & Co., Berlin. All rights reserved, including those of translation into foreign languages. N o part of this book may be reproduced in any form - by photoprint, microfilm, or any other means - nor transmitted nor translated into a machine language without written permission from the publisher. Dust Cover Design: Rudolf Hübler, Berlin. - Setting: Satz-Rechen-Zentrum, Berlin. Printing: H . Heenemann G m b H & Co., Berlin. Binding: Verlagsbuchbinderei Dieter Mikolai, Berlin. Printed in Germany.

Preface The five volumes Growth to Limits - The Western European Welfare States Since World War II represent only one stretch of a longer road. To understand the destination, it may be useful to get a picture of the whole distance. At the beginning stood an encounter with one of the leading social scientists of the postwar period, the late Stein Rokkan. I first met him in 1971 at the Lausanne 'Workshop on Indicators of National Development' which he had organized under the auspices of the International Social Science Council. The conference was one of his manifold efforts to advance comparative research in the social sciences. This as well as later encounters have had a great impact on my work, in giving my own predilections a more specific meaning and above all providing continuing encouragement in times of uncertainty. Rokkan's message was simple: -

Most of the 'big old questions' referring to the evolution and future of the industrial society and the modern state, of capitalism and mass democracy, of war and peace, are still essential for the social sciences.

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The progress already made in the development of new techniques and organizations of social research must be further advanced and made productive for an analysis of the development of global societies.

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Comparison, over time and across countries, is the essential method in this kind of analysis, linking theory and empirical research at a conceptual level which is not too remote from everyday language and experience. Europe is the ideal place for this comparative research, as the laboratory of the modern world with basic concepts and models deriving from its experiences, as well as because of its persisting diversity.

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Europe, however, is more than a testing ground for scientific hypotheses, its study more than an academic concern. Its development will be relevant not only for the Europeans, but for the future of the entire world.

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Comparative research, the study of Europe, must be a collective endeavour, an enterprise of the scientific community, requiring large-scale organization as well as networks of friendship among social scientists across national borders.

More than any other social scientist I have known, the Norwegian Stein Rokkan has embodied this philosophy: a classical scholar and promoter of new research methods, an ingenious inventer of complex models and scrupulous student of national experiences, a true European from the Northern periphery, an eminent organizer and father-figure for younger social scientists. Sometimes personality is more important than arguments, even in science, or should it be said that personality is the argument? Apart from this general view, Rokkan provided me with two more concrete stimuli which have had an impact on my life. First, I made the crazy decision to produce a huge historical data handbook on Western Europe since the early nineteenth century in order to - as Rokkan expressed it - 'pin down numbers on the European vari-

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ations'. Second, I decided that his studies on the long-term development of the European mass democracies and nation states should be supplemented by analyses of the development of the European welfare states. Both purposes were served through the HIWED Project (Historical Indicators of the Western European Democracies), which I began with Wolfgang Zapf in 1973 in Mannheim and took with me to Cologne in 1977. Through its entire duration from 1973 to 1979, this project received generous financial support from the Volkswagenwerk Foundation. We began the work on the data handbook with much enthusiasm - which everyone knows is only another word for naïveté. First, the sources for European statistics had to be determined. In this connection I published in 1977 a bibliography along with an institutional history of official statistics (Quantitative Historical Sociology. Current Sociology 23.2. Paris, Mouton). Later a bibliography of all census publications was added. Throughout the good ten-year period in which we worked on the completion of the handbook, our naïveté gradually faded and with it our enthusiasm. Finally in 1983 we published the first volume (subtitle: The Growth of Mass Democracies and Welfare States) of our data handbook entitled State, Economy and Society in Western Europe 1815-1975 (Frankfurt, Campus; London, Macmillan, 1983). The second and concluding volume followed in 1986 (subtitle: The Growth of Industrial Societies and Capitalist Economies). As a by-product of our work on the data handbook, the West-European-Data-Archive (WEDA) was formed, consisting of a combination of an old-fashioned collection of data sources and a new-fashioned collection of computer tapes. Winfried Pfenning was responsible for the set-up of this archive from 1979 to 1984, and since then Franz Kraus has taken charge. Today WEDA is a part of the Institute of the Social Sciences at the University of Mannheim and should serve as an important instrument for this Institute's future research on Western Europe. Concurrent with our work on the data handbook, we began with the analysis of certain aspects of the long-term development of the West European welfare states since the end of the nineteenth century. First results were published in a book- which I edited together with Arnold J. Heidenheimer ( T h e Development of Welfare States in Europe and America. New Brunswick and London, Transaction Books, 1981). The most important in the series of comparative studies were the works of Jens Alber on the development of social insurance ( Vom Armenhaus zum Wohlfahrtsstaat. Frankfurt, Campus, 1982) which won him the Stein Rokkan Prize of the International Social Science Council, Jürgen Kohl on the development of public expenditure (Staatsausgaben in Westeuropa. Frankfurt, Campus, 1985), and finally Franz Kraus on the development of income inequality (Income Distribution in Western Europe 1900-1980. Forthcoming). When I moved from Cologne to the European University Institute in Florence in Autumn 1979, it was also swith the intention of deepening our studies of the long-term development of the European welfare states (today I think perhaps I should have devoted myself more to the study of Renaissance art and Italian cooking). In Spring 1980, with the financial support of the European Community, I launched a comparative project on the growth of the European welfare states (Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Ireland, Italy, Netherlands, Norway, Sweden, Switzerland) since World War II, along with a group of social scientists from these countries. I would like to thank at this point Hans Daalder most warmly. He had the courage to recruit me, then a rather young and unknown sociologist, for the European University Institute. And he encouraged the kind of comparative research which I then

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VII

started in Florence. Having grown up myself in a slightly cynical Catholic culture, I have always admired his Protestant Prinzipientreue. By the first project meeting in 1980 I had been successful (with Austria, Switzerland, and Belgium as exceptions) in recruiting social scientists from these countries who were prepared to collaborate on this extensive project. T h e majority were younger scientists, some old friends, and some only known to me through the literature. As in real life, so in scientific projects: you lose some people and win others. Competent contributors were found for the three remaining countries. On the other hand, new teams had to be formed subsequently for Austria and the Netherlands, and it was unfortunately impossible to replace our French colleagues who left the project after two years. Thus 12 countries remained and were researched by the following persons or teams: Austria

Anton A m a n n / Wolfgang Weigel

University of Vienna

Belgium

Jos Berghman/ Jan Vranken

Univ. of Antwerp/Univ. of Tilburg University of Antwerp

Denmark

Lars N. Johansen

University of Odense

Finland

Matti Alestalo/ H a n n u Uusitalo

University of Helsinki Helsinki School of Economics

Germany

Jens Alber

European Univ. Institute, Florence/ Univ. of Cologne

Ireland

Maria Maguire

European Univ. Institute, Florence/ O E C D Paris

Italy

Maurizio Ferrera

European Univ. Institute, Florence/ Univ. of Pavia

Netherlands

T h e o Berben/ Joop Roebroek/ Goran Therborn

University of Nijmegen

Norway

Stein Kuhnle

University of Bergen

Sweden

Sven Olson

University of Stockholm

Switzerland

Peter Gross

University of Bamberg (FRG)

United Kingdom

Richard Parry

University of Edinburgh

In Spring 1980 my old friend and colleague Jens Alber joined the project as additional support for the project coordination. At the same time I had the good fortune of acquiring a Swiss secretary, Ursula Nocentini, who proved to me that the old saying that the Swiss even 'sweep the fields clean' is no myth. In the true style of the Swiss, she was able to put some order into our multi-national chaos. In respect to the goal setting of the project, my ideas were simple. It was not my intention to examine a specific hypothesis or study a particular limited area. Much more than that, I wanted to initiate broadly based studies on the postwar development of the welfare states in a number of European countries. These studies were to be based on the same questions, work with comparable data, and utilize the same methods. I thought that it would then be possible to draw a picture of the major variations between the European welfare states, thus laying the groundwork for further research.

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Naturally I knew that the way to hell is paved with good intentions. In order to get started on the right track, I employed two means: first, sections of the entire studies were written step-by-step for one or two countries and, after discussion in subsequent meetings, served as models for the other countries. Secondly, I met with the project members on a regular basis in order to work on the text and data 'on location' and to attain a greater cohesion and comparability (in a sometimes viscious battle sentence by sentence). Some years of my life were spent on this, and therefore I keep telling myself that the work must have been somehow meaningful. As is well-known, several languages are spoken in Western Europe. Thus, a common language had to be found, and this was pidgin English. And as I am only familiar with the Austrian version of pidgin English, it was necessary to recruit the services of native English speakers. Often up to five different versions of a text (which grew to a country average of almost 150 pages) were being worked on. The reader may thus understand that even the old myth of Sisyphos was of little consolation. I am sure that my periodic despair was shared by Clare Gardiner, who worked in Florence on the numerous versions of the various chapters, as well as by Margaret Herden, who took on this work in Mannheim with refreshing American optimism. Scientific work is certainly not unimportant in the production of such books, and editorial work may also be useful. Conditio sine qua non, however, is the actual typing of the manuscripts, not to mention the patience and creativity necessary for the production of the hundreds of tables and graphs which embellish these volumes. Computer readable texts and tables were done with passionate devotion by the two Ursulas (Ursula Nocentini in Florence and Ursula Rossi in Mannheim) and the graphs were produced reluctantly but meticulously by our artist in residence, Siegbert Sussek. The completed manuscripts would never have gone to print without the Publication Officer of the European University Institute, Brigitte Schwab. Our common BavarianTyrolian view of the world has certainly facilitated our collaboration. I would also wish to thank President Maihofer, who not only followed the endless progress with fatherly understanding, but also offered his energetic support. The monumental product of our multi-phase cross-national chaos consists of five volumes which, following the tradition of the publishing house de Gruyter, are at least aesthetically pleasing and thus convey a respectable impression: three volumes (I-III) with four country studies each, one Appendix volume (IV) containing for each country an institutional synopsis, an annotated bibliography and a collection of documented time-series data, and finally a comparative study (V) by the editor. The first three volumes contain the following country studies: Sweden, Norway, Finland, Denmark (I); Germany, United Kingdom, Ireland, Italy (II); Austria, Switzerland, Netherlands, Belgium (III). Volumes I, II and IV are being published in 1986; the two remaining volumes III and V are scheduled for 1987. I both fear and hope that with the completion of these volumes only a 'stop-over' point is reached. On the occasion of the twentieth anniversary of the Mannheim Institute of Social Sciences, a symposium on 'Western Europe in Transition' was organized in Autumn 1985, the contributions of which will be published in German in 1986 (Peter Flora (ed.), Westeuropa im Wandel. Frankfurt, Campus) and in English in 1987 (Europe in Transition. London, Macmillan). With this symposium the Mannheim Faculty of Social Sciences has documented its intention to develop a new research centre on Western Europe in order to expand and systematize its previous research, a n d t o a s s u r e a g r e a t e r c o n t i n u i t y of r e s e a r c h in this i m p o r t a n t field.

Mannheim, July 1986

Peter Flora

Table of Contents Preface Introduction (PETER FLORA) Sweden (SVEN OLSON) I II III IV V

Historical synopsis Resources and clienteles: descriptions Achievements and shortcomings: evaluations Correlates and causes: explanations The crisis of and prospects for the welfare state

N o r w a y (STEIN KUHNLE) I II III IV V

Historical synopsis Resources and clienteles: descriptions Achievements and shortcomings: evaluations Correlates and causes: explanations Recent developments and policy options : towards a new format of the welfare state

Finland (MATTI ALESTALO AND HANNU UUSITALO) I II III IV V

Historical synopsis Resources and clienteles: descriptions Achievements and shortcomings: evaluations Correlates and causes: explanations Present problems and policy choices: the welfare state at the crossroads

D e n m a r k (LARS N0RBY JOHANSEN) I II III IV V

Historical synopsis Resources and clienteles: descriptions Achievements and shortcomings: evaluations Correlates and causes: explanations Recent developments and policy choices: adjustment or crisis of the welfare state?

Authors' biographical sketches

V XI 1 4 12 41 65 84 117 120 125 147 161 178 197 200 205 228 246 266 293 296 305 325 341 361 382

Introduction P E T E R FLORA

Contents 1. C o m m o n origins of the European welfare state 2. Early sources of diversity 3. Growth to limits 4. System disintegration without class conflict 5. The structure of the country chapters

XII XVI XXI XXV XXIX

XII

Introduction

Since the Second World War, Western European societies have undergone changes which deserve to be called revolutionary, even though they were accomplished without a mounting of barricades. Europe did not rise like a phoenix from the ashes of the war, but it recovered much faster than most observers had anticipated, reaching a fairly high degree of economic and political stability as early as the 1950s. From this foundation, the long-term process of modernization of Western Europe was able to accelerate, deeply transforming these societies. T h e development of the welfare state was an essential element of this modernization process, most obvious in the expansion of public services and transfer schemes, and with far-reaching consequences for the class structures, the functioning of the economy, and political stability. T h e origins of the Western European welfare states reach back to the nineteenth century, some of their present institutional features predating the First World War. Their present format, however, is mainly a product of the 'golden age of the welfare state' from the early 1960s to the mid-1970s, when the world-wide economic crisis put an end to this historically unprecedented expansion. Today, though with great variations, the Western European welfare states seem to have approached their limits of expansion. Persistent high rates of unemployment and public deficits set economic limits; tax resistance and a neo-liberal mood set political limits; and a new arms race and increased technological competition set external limits. Furthermore, the welfare states have matured to such a degree that a repetition of past growth rates appears unnecessary. T h e primary task has become the economic and political stabilization of the welfare states. Large welfare clienteles will prevent that stabilization necessarily implies a dismantling. T h e ageing of the population, the changing division of labour between the sexes and a more general change of values will require instead that stabilization involves reorganization, above all a more flexible harmonization of different life domains (in particular work and family) and different stages of the life cycle (in particular education, employment, and retirement). In the project, our concern was not primarily an investigation of the most recent problems and changes, but rather an analysis of the long-term development of the European welfare states which has been characterized by common growth tendencies and similar developmental problems as well as persisting institutional variations. We were convinced, however, that such a study would also teach us something about the solutions to be found for the present and future challenges. This introduction can only try to sketch the broader context of the project (a more comprehensive comparative analysis is provided in Volume V). It starts with some reflections on the common heritage of the European welfare states and on the early origins of their institutional variations. A brief account follows of the long-term growth to limits of the welfare state. Then an attempt is made to characterize its present situation by problems of institutional adjustment without clear-cut political cleavages. The introduction concludes with a description of the common structure of the twelve country chapters.

1. Common origins of the European welfare state T h e modern welfare state is a European invention - in the same way as the nation state, mass democracy, and industrial capitalism. It was born as an answer to problems created by capitalist industrialization; it was driven by the democratic class struggle; and it followed in the footsteps of the nation state. Thus, we should understand the development of the European welfare state as an essential element in the transfor-

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mation of European societies which started with the Industrial and the French Revolution. In a stricter sense, however, the 'take-off' of the modern welfare state occurred in the late nineteenth century, in the period extending roughly from the Italian and German unification to the First World War. In retrospect, this development did not come as a surprise. T h e period witnessed the general breakthrough of industrialism, the decisive steps in the evolution of mass democracy and the culmination of the European nation state. Industrial breakthrough meant above all an unprecedented increase in both productivity and production, surpassing a population growth which was then the most rapid in European history. From around 1870 to World War I, the growth of European populations averaged somewhat more than 40 percent; it was the climax of their 'demographic transition'. T h e national product increased much faster in the same period; it quadrupled in some countries and tripled in most others This growth led to massive population shifts from agriculture to industry, from country to town. While around 1870 only one in six West Europeans lived in towns of 20,000 or more inhabitants, by 1910 this figure was one in three; the population in cities of 100,000 and more inhabitants tripled in these decades to almost 50 million. Industrialization spread from the core areas to other regions and even to the peripheries in the N o r t h , South and West, transforming employment and class structures everywhere. In the more industrialized countries such as Great Britain, Belgium, Switzerland and Germany, 40 percent or more of the labour force was working in the secondary sector at the eve of World W a r I, and in the more peripheral countries the figure was at least one fifth to one fourth. Population shifts of such unknown dimension and speed must inevitably create immense social problems. Furthermore, these problems were shaped and intensified by the capitalist structure of the European economies and by the increasing impact of the business cycle. It is not difficult, therefore, to understand that this was a period of intensified class conflict, of the mobilization of the new working class and its organization in trade unions and labour parties. While the establishment of trade unions was facilitated by freedom of association, which most European countries had granted even prior to 1870, the development of workers' parties usually came about later, with the introduction of male suffrage. Such parties were established everywhere in Europe before the turn of the century and became the prototype of the modern mass party. Although the franchise was achieved much earlier, this period saw the greatest extensions of suffrage, and voting turn-outs reached high levels well before World W a r I. Parliamentary control of government was also introduced in this period, with the exception of Austria and Germany. T h e mobilization of anti-system forces was moderated and mediated to some extent by an (at least rudimentary) institutionalization of industrial conflict, the more general 'institutionalization of class conflict' through the evolving parliamentary institutions, and finally by an increasing state intervention and the creation of new public institutions. Buoyed by economic growth, state revenues rose remarkably in absolute terms, and slowly the E u r o p e a n states took a larger share of the national product. As this was a period of relative peace and only minor wars, the new resources could be used for development of the economic infrastructure, for internal order - and for social welfare. T h e fact that the modern welfare state originated in the late nineteenth century in E u r o p e may thus be simply explained by the comparatively high levels of industrialization and democratization achieved in this region of the world. In this sense, European

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Introduction

developments indicated the direction in which the rest of the world would move once the process of modernization got started, just in the way Marx had thought that industrial England would mirror the future of the other countries. And indeed, with the spread of the industrial mode of production, and the diffusion of the nation state as the predominant form of political organization, the creation of public education, health and social security systems has become a world-wide phenomenon. In this respect, the evolution of the welfare state clearly represents a universal aspect of modernization. In a Durkheimian perspective, it is the increasing division of labour and the growing complexity and interdependence which require both a strengthening of the state as steering centre and a strengthening of individual rights as normative basis. However, even if one is convinced that the evolution of the European welfare states exhibits some universal traits, three qualifications seem appropriate: (1) In Europe, the close relationships with the development of the capitalist market economy and the democratic nation state have produced a specific type of liberal welfare state. (2) European societies have some distinct common historical preconditions: above all, old nation states, specific family structures and strong industrial working classes, which have left their mark on the development of the European welfare states. (3) On the basis of common historical preconditions and within the broad limits of the liberal model, the European welfare states display a gamut of institutional variations which make generalized statements about the European welfare state often rather méaningless. When industrialization started to transform the European societies and create problems of a completely new kind and order of magnitude, solutions were sought within a well-established form of political organization, the nation state. This form had already become predominant in Europe long before and differed from alternative forms (such as empires or trading networks) through its territorial consolidation, the degree of centralization, its differentiation from other organizations and the monopolization of the means of coercion 2 . Most important perhaps, was the development of relatively direct and close relationships between the political centre and the population, in long-term processes of subjection and counter-mobilization. These relationships became institutionalized in the form of obligations and rights, crystallizing in the concept of citizenship. T h e extension of rights as claims on the state was often preceded or accompanied, however, by the restriction of rights previously vested in other organizations such as manors, guilds, communities or estates. T h e early development of nation states was probably facilitated by the weakness of corporate structures in Europe, especially those linked to kinship. T h e later development of welfare states was probably furthered by the specific European family structures. As we know today from historical research 3 , pre-industrial E u r o p e was quite unique for its relative predominance of simple family households. T h e nuclear family was less a product than a precondition of industrialization in this world area. And it was probably less adapted to cushion the impact of capitalist industrialization, which called for other collective forms of social security, above all state intervention, once the protective mechanisms of the manor and the guild had been destroyed. Industrialization generally implies the emergence of an industrial working class. Only in E u r o p e , however, was this class the dominant social category for a longer period of time. In this narrow sense, it is only in E u r o p e that something like an 'industrial society' d e v e l o p e d 4 . It is not surprising therefore that the modern welfare state

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started in Europe with an attempt to tackle the problems common to this new social class: loss of income through accident, sickness, invalidity, unemployment, and in old age. The solution was found in a new institution which broke with the principles of the century old European poor law: social insurance. As a consequence of this early development, the social security system still dominates the welfare state. This distinguishes Europe from America, the 'first new nation', which developed much later what is still a rudimentary system of social security, seeking instead to strengthen social citizenship much earlier and with greater enthusiasm than the Europeans, through an extension of education opportunities 5 . But the emergence of the European welfare state cannot be fully understood as a reaction to problems of the industrial working class. Its close connection with the evolution of mass democracy puts it into a much broader perspective in which the extension of political rights led to a democratic struggle for a more equitable share in the material wealth and cultural heritage of a nation 6 . In this perspective, the welfare state may be seen as a 'completion' of the nation state, to the extent that individual social rights become an essential element of citizenship as the main basis of political legitimacy. However, it usually is a very imperfect completion. Only few social rights are citizen rights in a stricter sense. They are related much more often to employment status than to political status, and frequently welfare policies are not based on individual entitlements at all. The institutionalization of social rights is not only imperfect, but there are also principal limits to their extension. They derive from civil liberties connected with basic institutions such as the family or private property as well as from the imperatives of a society based on differentiation by achievement. With all these limitations, the essence of the liberal European welfare state lies nevertheless in the idea of basic rights of individuals to state-provided benefits as principle elements of their life chances. Security and equality are the welfare state's central objectives, i.e. the attempt to stabilize the life chances of, in principle, the entire population and to make their distribution more equal. The concept of 'life chances' was introduced by Max Weber in his analysis of class structures which he defined as specific structures of inequality in which the life chances of individuals are contingent upon their market position 7. By the extent to which the welfare state influences the life chances of individuals and social groups independent of their market position, it reduces the 'class structuration' of society 8 or rather introduces a new dimension of structuration 9. Which life chances are referred to here? Max Weber speaks of Güterversorgung (procuring goods), äußere Lebenstellung (gaining a position in life), and inneres Lebensschicksal (gaining inner satisfaction), but without further exploring the latter aspects. It may thus be more useful to start with a somewhat different distinction made by Erik Allardt in his pioneer study, the Scandinavian Welfare Survey l0 . He differentiates three dimensions of life chances: having which basically refers to the 'level of living', being which points to the potential of 'self-actualization', and loving which is related to 'solidarity' and 'belongingness'. In his understanding, having, being, and loving represent opposite poles to poverty, alienation, and anomie. The importance of different elements of individual life chances may of course vary greatly. The public guarantee of basic food supply, for instance, plays a role in developing countries today which it has lost in Europe since the early nineteenth century. Another example is the problem of housing supply which varied greatly in different phases of industrialization and population growth, and following war destruction. It

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seems reasonable to assume that with economic growth and increasing social security, the aspect of having becomes relatively less important and aspects of being and loving relatively more important. With regard to these aspects of welfare or life chances, however, the modern bureaucratic welfare state rapidly approaches its inherent limits. As different aspects of life chances may gain or lose in significance, the boundaries of the welfare state can also shift, but its historical core - the system of income maintenance and the public provision of certain services, especially in health and educationis very unlikely to change substantially. The nationalization of industry or other sectors of the economy has not become a constitutive element of the liberal welfare state which derives its basic character precisely through its close relationships with the capitalist market economy and mass democracy. The liberal welfare state is based on the economic surplus produced in the market economy, and its structure must be adapted to the basic laws governing this economic system. At the same time it is also based on the political consensus produced in the democratic mass polity, and its structure must reflect the basic nature of this consensus. Principle limits to the development of the welfare state lie only where it would begin to undermine these foundations. Thusfar, such principal tendencies have not become evident, despite predictions to the contrary 12 . The liberal welfare state has remained an essential element in the reconciliation of capitalism and democracy. As a basic type, the liberal welfare state can also be found outside of Europe, but the Western European welfare states have developed in addition some specific characteristics. These originate from the early state formation and from the weight of the industrial working class, reflected above all in the salience of bureaucratic organization and social rights. However, one must not exaggerate the common origins and characteristics and thereby overlook the obvious differences among the West European welfare states which are related, among others, to differences in the processes of state and class formation across Europe. 2.

Early sources of diversity

If one tries to map major variations among the European welfare states and search for the origins of this diversity, Stein Rokkan's work on a macro-model of European political development is the most obvious starting point. N o one else among social scientists has contributed more to our understanding of the systematic and enduring character of the structural and cultural variations across Europe , 3 . Rokkan made a distinction between four basic processes of development which to some extent formed distinct time phases: (1) state formation: the process of political, economic, and cultural unification at the elite level, and the establishment of institutions for the mobilization of resources, external defence, and internal order; (2) nation-building: the process of bringing larger population groups into the system by means of conscript armies, compulsory education and mass media, strengthening the contacts between the population and the central elite; (3) participation·, the process of a growing active participation of the subject masses in the working of the territorial system, the establishment of political citizenship, the evolution of mass democracy; (4) redistribution: the process of growth in public welfare services and social security systems for the equalization of economic conditions, the establishment of social rights, the evolution of welfare states.

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Rokkan was mainly interested in explaining the differences between the European mass democracies and did not aim at studying the variations among the European welfare states. Nevertheless, he can teach us several lessons: (1) To an important extent institutional variations among the European welfare states should be understood as offsprings of other - often much older - structural differences: above all the varying experiences and results of the early state formation and nation-building processes, which usually preceded the emergence of modern welfare institutions, but also the differences in the later evolution of mass democracies. (2) Equally important, the diversity among the welfare states may be understood as a result of the different 'timing' in the creation of major institutions, 'time' defined not in chronological but in developmental terms. This is true above all with respect to the process of industrialization, where different levels were usually related to different problem pressures and varying constellations of collective actors. (3) Many of the major institutional variations date back to early phases in the development of the European welfare states, often to the period prior to World War I. Once crucial decisions were taken, it became difficult to reverse them, and this often happened only under exceptional circumstances, e.g. in times of war and economic crisis. For a long time the European welfare states have demonstrated an almost irresistible growth tendency, but this has not reduced their institutional variations. To some extent the persistence of diversity may simply be explained by the stability of other underlying differences such as more centralist or federalist political institutions or varying party systems. It is also explained by the fact that welfare institutions usually create new - often powerful - vested interests and reinforce underlying values. When one speaks of a persistence of diversity, which diversity do we mean among the myriad of variations? Obviously, one has to look for basic principles persisting amidst institutional change. Furthermore, one should try to find those structural variations which may be relevant for the future institutional adaptation of the European welfare states to new challenges which will be discussed further below. I believe that at least two basic dimensions of the institutional infrastructure will be relevant: (1) the degree to which the (central) state has 'penetrated' the welfare institutions, i.e. the stateness of the welfare state which defines the Spielraum (room for manoeuvre) for intermediary structures; (2) the degree to which the welfare institutions reflect social differentiations, i.e. the fragmentation of the welfare state which defines the potential of conflict and change. 'Stateness' as defined by J.P. Netti 1 4 means the degree to which the instruments of government are differentiated from other organizations, centralized, autonomous, and formally coordinated with each other. State penetration in this sense corresponds negatively with the Spielraum offered for the development of the various non-state 'intermediary structures' ranging from e.g. highly organized churches to loosely knit social networks. If one foresees a future trend towards a greater variety of more flexible institutions of a mixed private-public character, then the existing differences in the intermediary structures may be decisive. These differences reflect variations in state penetration with roots reaching far back into history.

XVIII

Introduction

A first and m a j o r r o o t can be f q u n d in the diverse relationships between C h u r c h and S t a t e since the R e f o r m a t i o n . T h e C h u r c h of R o m e had traditionally a s s u m e d responsibility f o r the care of the p o o r and sick and f o r education. With the onset of the R e f o r m a t i o n , divergent patterns evolved a c r o s s E u r o p e . T h e break with the R o m a n C h u r c h b r o u g h t a b o u t a certain fusion of secular and religious p o w e r s in the N o r t h e r n states, particularly in the Lutheran monarchies. T h e property of the C h u r c h and the religious o r d e r s w a s confiscated and the clergy w a s incorporated into the b u r e a u c r a c y of the territorial state. T h u s , a concept of public welfare provisions w a s able to develop relatively early in the N o r t h , at least partially legitimized by the P r o testant Churches. T h e s a m e m a y be a s s u m e d f o r the development of a c o n c e p t of corr e s p o n d i n g citizens' obligations t o w a r d s the state, probably still an important factor in mobilizing the necessary resources without excessive state pressure. In the Catholic S o u t h , the C h u r c h instead maintained separate welfare o r g a n i z a t i o n s (schools, hospitals, etc.) well into the twentieth century, thus impeding the development of a national w e l f a r e state, of an idea of legitimate public welfare provisions and c o r r e s p o n d i n g citizens' obligations. Important f o r the socialization and social control of the population, these C a t h o l i c institutions were contested by secularizing nationbuilders, but with quite varying success. O f t e n they b e c a m e subsidized by the state with little public control. If their a u t o n o m y survived the first stages of d e m o c r a t i z a tion, the welfare institutions b e c a m e easily exploited by political parties seeking to secure the loyalty of their clienteles. A s y n d r o m e of political clientelism e m e r g e d as a result of the division of C h u r c h and State. T h e r e is of c o u r s e n o clear d i c h o t o m y betwen C a t h o l i c and Protestant countries with respect to the 'stateness' of the welfare state. T h e r e are early variations a m o n g the C a t h o l i c countries with respect to the 'nationalization' of welfare institutions (schools in particular); there are differences with respect to the p r o - or anti-state attitudes a m o n g the Protestant churches and sects, and finally there is the special c a t e g o r y of the religiously mixed countries where the competition between the denominations seems to have p r o m o t e d the development of welfare institutions, at the s a m e time preventing their t r a n s f o r m a t i o n into public institutions. T h e most interesting case is certainly the N e t h e r l a n d s where denominational welfare institutions b e c a m e an essential element in state subsidized cultural segmentation - the f a m o u s verzuHing. T h e varying state-church relationships had different effects in the various policy fields. T h e y were perhaps most important in education where the C a t h o l i c C h u r c h has succeeded to this d a y (at least in s o m e countries) to control a relevant part of the school system, especially in s e c o n d a r y education 15 . In general the C a t h o l i c C h u r c h continued to stress the principle of Subsidiarität which implies that smaller g r o u p s and voluntary o r g a n i z a t i o n s should be given priority over the state wherever possible. T h u s , it is not surprising that in m o s t C a t h o l i c countries the development of public p o o r relief was delayed much longer than in other countries 16 . O n the other hand, the early attempts to develop a family income policy were mainly limited to the C a t h o l i c countries 17 . O n l y in the a r e a of hospital health care are the differences s o m e what less clear-cut, as t h r o u g h o u t E u r o p e the state (mainly the local communities) a s s u m e d responsibility f o r the p o o r sick very early on 18 . In addition to the state-church relationships, the characteristics of the state f o r m a t i o n p r o c e s s stricto sensu are relevant in explaining the varying 'stateness' of w e l f a r e institutions. T h i s refers primarily to two dimensions: the establishment of a m o r e centralized or decentralized political structure, and the survival or destruction of civil liberties and representative institutions during the absolutist period which created different

Introduction

XIX

opportunities f o r the development of m o r e decentralized and associative f o r m s of welfare organizations. With respect to the first dimension, the two cases w h e r e city-confederations develo p e d into federal political systems, Switzerland and the N e t h e r l a n d s , are the most interesting, also f o r an analysis of possible future developments. In both countries, the 'stateness' of the w e l f a r e institutions has been rather low, but this long-standing structural similarity w a s related to very different growth patterns in the p o s t w a r period. In Switzerland, political decentralization, the r e f e r e n d u m , local citizen participation, associative self-help, and finally the pervasive impact of the military reserve system culminated in a structure which slowed the development of the national welfare state to an extraordinary degree. A c o m p a r i s o n with the N e t h e r l a n d s is instructive. In n o other W e s t E u r o p e a n country has the w e l f a r e state e x p a n d e d to such an extent after W o r l d W a r II. An explanation f o r this striking d i f f e r e n c e a p p e a r s to lie in the f o r m s of f u n d i n g and control of services in both countries. Financing and control at local and associative levels a p p e a r s to result in a much slower and better b a l a n c e d expansion than in the case of control by o r g a n i z a t i o n s which d o not raise their o w n f u n d i n g . T h i s may be especially true when they are in competition with each other and use the institutions f o r clientelistic purposes. T h e early f o r m a t i o n of decentralized political structures m a y largely explain a relatively low level of 'welfare stateness' which o f f e r e d opportunities f o r the development of 'intermediary structures' in the o r g a n i z a t i o n of welfare. Equally important f o r such opportunities w a s probably the extent to which civil liberties survived the a g e of absolutist state f o r m a t i o n and were strengthened in the nineteenth century. T h e s e differences defined the Spielraum f o r the unfolding of o r g a n i z e d b o u r g e o i s philanthropy as well as w o r k i n g class self-help which varied greatly across E u r o p e Mutual benefit societies and other f o r m s of voluntary o r g a n i z a t i o n assumed a p r o m i nent role in the late nineteenth century, especially in sickness and unemployment insurance, and thereby influenced the structure and extension of the later developing public institutions, in s o m e cases to this day. D i f f e r e n t preconditions and experiences in the processes of state f o r m a t i o n and nation-building explain m a n y of the f u n d a m e n t a l and long-lasting variations in the structure of 'social services' (education, health, p o o r relief) at the time of the ' t a k e - o f f of the m o d e r n w e l f a r e state and thereafter. T h e y tell us much less, however, a b o u t the variations in the structure of 'social transfers', the social insurance o r income maintenance system. Social insurance schemes differ of c o u r s e in manifold w a y s , but there is o n e dimension mentioned above which m a y be crucial in the mastering of current and future p r o b l e m s : the type and d e g r e e of institutional f r a g m e n t a t i o n a l o n g lines of social differentiation. T w o questions m a y be distinguished in this context: (1) the extent to which claims f o r social transfers are b a s e d on citizen rights as o p p o s e d to e m p l o y m e n t and contribution records, and (2) the d e g r e e to which schemes are differentiated a m o n g occupational g r o u p s and social classes. M o s t of the f u n d a m e n t a l decisions o n this subject were taken relatively early, m a n y prior to the First W o r l d W a r . T o d a y , a distinction is usually d r a w n between the S c a n dinavian-British w e l f a r e state with its relatively strong elements of social citizenship and relatively u n i f o r m and integrated institutions, and the continental w e l f a r e state with its much m o r e f r a g m e n t e d institutions and smaller citizenship c o m p o n e n t . H o w -

XX

Introduction

ever, this is only a first and very crude distinction, the actual variations being more complex. For an insight into the origins of these persistent differences, one must leave behind the framework of Rokkan's political development theory and turn to an analysis of the variations in class structure in the Western European countries. Three elements should be emphasized here: the homogeneity or heterogeneity of the blue-collar workers in manufacturing, their ties to the farmers, and their relationship to the white-collar employees. Throughout Western Europe, as stated above, the modern welfare state originated as an answer to specific problems of the new industrial working class. T h e more homogeneous this class, i.e. the weaker the craft or anarchic-syndicalist traditions and the more influential big industry and centralized the trade union movement, the greater -ceteris paribus - were the chances for the development of a uniform system of income maintenance, at least for the industrial workers. Bismarck cannot be credited with the invention of such a system, but he was the first to implement it. For long the dominant model, the German system was entirely centred around the industrial worker. N o one considered including the farmers or agricultural workers. After the turn of the century a separate insurance was created for white-collar employees which effectively blocked the way to a uniform national system. This remains the case up to the present. The opposite was the case in Scandinavia, where the introduction of a uniform and egalitarian national system can be traced to a class compromise between the industrial workers and the small farmers. It appears that these two groups were less remote from each other than on the continent and that they drew closer together through their fight for the extension of voting rights. Thus, the element of class compromise in the development of the Scandinavian type of welfare state is evident from the first Swedish pension system in 1913 to the Finnish sickness insurance scheme of 1964. This proves how productive it could be to examine the implications of different agrarian structures for the development of welfare states, as Barrington Moore has done for the more general process of political modernization 20 . It also shows that the time point at which systems were introduced, the 'developmental time', is relevant in explaining characteristics of these systems. In comparison to most other European countries, in Scandinavia the percentage of the labour force working in the agricultural sector was relatively high when the first social insurance schemes were established. Around 1910, it varied from 39 percent in N o r w a y to 43 percent in Denmark and 46 percent in Sweden, whereas only around 25 percent of the labour force in these three countries was employed in industry. Given an agricultural structure dominated by small farmers, this sectoral distribution required and facilitated a class compromise in the creation of welfare schemes. Moving to the other major example of a uniform and egalitarian system of income maintenance - to Beveridge England, the argument of 'time' reappears at a different stage of development. Usually, the groundbreaking reforms during World W a r II and immediately thereafter have been explained by a combination of factors: the war situation and national consensus building, the antiquated structure of British welfare institutions, and not least the influence of Lord Beveridge. However, it must also be taken into consideration that at that time already around 90 percent of the labour force were dependent blue-collar workers or white-collar employees with much less institutionalized status distinctions than in Germany, offering a social basis for the creation of a uniform national system.

Introduction

XXI

Institutional unification or f r a g m e n t a t i o n and 'stateness' have been defined here as the two m a j o r dimensions of variation a m o n g the Western E u r o p e a n w e l f a r e states. H o w are these related to a t y p o l o g y of the welfare state? M o s t typologies start with the distinction m a d e by Richard M . T i t m u s between three 'models of social p o l i c y ' 2 1 : (A)

the residual welfare model in which social w e l f a r e institutions c o m e into play only after the b r e a k d o w n of the private market and the family as the 'natural' channels f o r the fulfilment of social n e e d s ;

(B)

the industrial achievement-performance model in which social welfare institutions are adjuncts of the e c o n o m y , and social needs are met on the basis of merit, w o r k p e r f o r m a n c e and productivity;

(C)

the institutional redistributive model in which social welfare institutions are an integral part of society, providing universalist services outside the market on the principle of need.

T h e s e m a y be u n d e r s t o o d as normative models or Weberian ideal types, but they have been frequently used as empirical classifications and even interpreted in a developmental perspective. In this second use, the t y p o l o g y poses at least two p r o b lems, even if o n e accepts that any t y p o l o g y neglects m a n y of the variations a c r o s s welf a r e p r o g r a m m e s within a country and thus greatly reduces the complexity of national cases. T h e first problem is that 'stateness' (underlying the distinction of model A versus Β and C ) and 'institutional f r a g m e n t a t i o n ' (differentiating models Β and C ) are not conceived as two clearly independent dimensions of variation. T h u s , we can find relatively unified but limited w e l f a r e states on the o n e side and highly developed but f r a g m e n t e d w e l f a r e states on the other, with strongly differing developmental p r o b lems and opportunities. T h e second problem is that the 'residual' model or m o r e general low 'stateness' is defined only in terms of a priority given to the family and the market, largely neglecting the variety of intermediary structures with important w e l f a r e functions, i.e. of non-public or semi-public subsidized f o r m s of charity, cultural segmentation or self-organization. V a r i a t i o n s in these structures persist to the present and will also play a definite role in shaping future developments. 3.

G r o w t h to limits

T h e m o d e r n E u r o p e a n w e l f a r e states thus started out f r o m very different preconditions and with a greatly varying institutional heritage. Y e t most of them originated in the s a m e period prior to W o r l d W a r I, and all of them demonstrated a similar g r o w t h m o m e n t u m . T h e initial variations did not really subside in the general process of g r o w t h , but rather, old differences were t r a n s f o r m e d into new ones. If w e neglect the variations f o r a m o m e n t and take social insurance as the m a j o r new institution, w e can then characterize the (in a literal empirical sense) a v e r a g e E u r o p e a n development f r o m the turn of the century to the m i d - 1 9 7 0 s as having very m o d e s t beginnings, surprisingly continuous e x p a n s i o n , and extraordinary acceleration in the last 15 years 2 2 . T h e beginnings of the w e l f a r e state were limited indeed. A r o u n d the turn of the century, 12 countries had accident insurance covering an average of 20 percent of the employed p o p u l a t i o n ; 7 had a sickness insurance covering an a v e r a g e of 17 percent of the e m p l o y e d ; a c o m p u l s o r y insurance f o r old a g e and invalidity existed only in G e r m a n y ; 4 other countries had m o r e limited systems; and none of the W e s t E u r o p e a n countries had u n e m p l o y m e n t insurance.

XXII

Introduction

Since then the expansion has been surprisingly continuous with respect to the coverage of risks as well as to the inclusion of population groups. Neither the world wars nor the economic crisis of the 1930s stood in the way of this process. In the early 1930s, about half of the labour force on average was protected by accident, sickness, invalidity and old age insurances, but still not more than 20 percent by unemployment insurance; of course, this says little about the extent of protection. By the mid-1970s over 90 percent of the labour force was covered against income loss due to old age, invalidity, and sickness; over 80 percent was covered in case of accident, and 60 percent for unemployment 23. Generally speaking, one can assume that the extension of social insurance schemes throughout Europe was connected with an absolute and relative growth of expenditure, even though detailed and comparative figures are largely lacking for the interwar period. Around 1930 average expenditure on social insurance amounted to probably less than 3 percent of G D P . By 1950 it had increased to 5 percent, by 1960 to 7 percent and by 1974 to 13 percent. If one takes the broader concept of social security expenditure (including all income maintenance programmes and public health), the relative growth becomes even more marked and one can see a clear acceleration of growth. At the same time, a persistence of different expenditure levels due to continuing institutional variations is evident. In 1950 social security expenditure in Western Europe averaged 9.3 percent of G N P , ranging from 5.9 percent in Switzerland to 14.8 percent in West Germany; in 1965 the average was 13.4 percent, from 8.8 percent in Switzerland to 17.6 percent in Austria, and by 1974 the average had risen to 19.2 percent, ranging from 13.9 percent in Switzerland to 24.8 percent in the Netherlands. Measured in terms of percentage points, the average growth accelerated from 0.9 in 1950-55 and 1.4 in 1955-60 to over 1.8 in 1960-65 and 2.4 in 1965-70 to 3.4 in 1970-74. Most of the relative growth and its acceleration was due to the increased spending on pensions and health, which raised their respective shares in total social security spending from approximately one fourth in 1954 to around one third in 1974 (while spending on family transfers was halved in the same period from around 12 to 6 percent). Finally, if one takes an all-embracive concept of social expenditure (including spending on education and housing), the growth of the welfare state is most obvious and impressive. Whereas in the early 1950s the share of social expenditure varied between more than 10 and less than 20 percent of G N P , it had grown by the mid-1970s to between one fourth and one third of G N P , and in some countries to considerably more than one third. This growth of social expenditure explains almost completely the increase of the 'state share' (measured by total public expenditure as a percentage of the national product). This share had started to increase in the late nineteenth century after a long period of stagnation. The increase was most pronounced during the First World W a r (to a lesser extent, during the Second World War), producing the so-called 'displacement effect' 24. In 1950 the average share in Western Europe was around 25 percent and by the mid-1970s it had almost doubled to more than 45 percent. As a result of the first and second oil crises and their consequences for continuing high levels of unemployment and public deficits, and enduring distortions of the world economy, the situation has changed substantially. At least one thing seems clear: the late 1970s witnessed the end of the 'golden age' of the European welfare state. But beyond this statement, the diagnosis of what happened and what will follow is much less clear.

Introduction

XXIII

Most probably the tremendous growth of the welfare state from the early 1950s to the mid-1970s cannot be repeated in the future; indeed this may not even be necessary. Has the 'golden age' come to an end because external conditions underlying the past growth have changed so dramatically, a n d / o r because more inherent growth impulses have become exhausted? But has growth really ceased at all - can one even speak of a 'dismantling' or 'regression' of the European welfare state? Even if the objective is only a stabilization of the welfare state at present levels, will this be possible without far-reaching institutional changes? Questions on top of questions which are not easily answered. Before one tries to explain changes in the long-term development of the European welfare states, one should first attempt to assess their concrete form. Although systematic data for more recent years are not yet available, the country studies contain some basic information on expenditure trends and institutional changes since the mid-1970s. The picture they offer is somewhat bewildering. The strong growth trend of the past is broken, but at the same time growth continues, and the differences across countries have widened. This makes a general assessment more difficult. One should first distinguish between expenditure growth in absolute terms (total social expenditure at constant prices) and relative terms (expenditure as a percentage of GDP). In some countries the social expenditure ratio stagnated from the late 1970s to the early 1980s; in some it declined; in many it rose further (in some cases even rapidly), and all this in the face of persistent high levels of public deficit in most European countries. If one considers instead social expenditure in absolute real terms, an impression of slow but uninterrupted growth results. The same observation can be made with respect to average benefits (at constant prices) which in general have further increased, major exceptions being family allowances (mainly due to a lack of indexation), and unemployment benefits (mainly due to a longer duration and changing structure of unemployment). From this one could conclude that forces exist, which will also be at work in the future, for a further expansion of the welfare state, especially when the currently unfavourable conditions once again improve. In this view only severe economic and political crises would be capable of halting a further expansion. I do not share this view. Rather I believe that as welfare states mature there will be a 'natural' tendency in their expansion to slow down or stagnate without such crises - similar to the slowdown of population growth in the course of the demographic transition and to the deceleration of the sectoral change of employment from an industrial towards a service society. Considering the long distance the welfare state has come, its major advances are most certainly behind it. The spread of social security schemes throughout the entire population, the significant absolute and relative increases of the major social transfer payments, the enormous expansion in the areas of health and education services - all this makes the growth rates of the past seem unnecessary. However, this is a more evolutionary view which may contribute to our understanding of the long-term development of the welfare state in nuce, but less to an explanation of the concrete developments in the last decade or to reasonable guesses about changes in the near future. For this purpose one has to combine the evolutionary view with an analysis of the historical constellaton of forces which have supported the postwar growth of the welfare states, and which may have dissolved in the 1970s. This constellation consisted of a comparatively stable international system, a high level of internal consensus and institutional stability, and a historically unique economic growth.

XXIV

Introduction

As a by-product of the American leadership and as a result of the relatively peaceful conditions, defence expenditure as a proportion of G N P declined almost everywhere in Europe since the Korean War. This has precluded major conflicts over trade-offs between defence and social expenditure. A further decline, however, cannot be expected, given the increased tensions and arms race between the super powers and the pressures within N A T O to redistribute defence expenditure towards Europe. If one includes the international transfers to developing countries under a broader category of security expenditure, it seems very likely that from this side the conditions for the future development of the welfare state will be less favourable than in the past. T h e second crucial element in the favourable constellation was the outstanding internal political stability since World W a r II, which has successfully passed the test of the economic crisis from the mid-1970s. Despite everything said to the contrary, the overall legitimacy of the fundamental democratic institutions is not threatened: voting turn-outs do not signalize any large-scale alienation from the political process; the party systems on average demonstrate a mixture of stability and adaptability, and anxieties about a trend towards instable coalition cabinets or minority governments have not been confirmed. T o some extent, the relatively high level of political consensus may be seen as a precondition for as well as a result of the expansion of the welfare state. In his comparative study of the historical evolution of social security systems in Europe, Jens Alber has shown that up to 1900 these systems first developed in the more authoritarian states; from the turn of the century to World War I, the parliamentary democracies with liberal governments took the lead, and in the interwar period, the extension of these systems seems to have been linked to an increasing strength of socialist political forces. After 1945, however, these differences became blurred and the building of welfare institutions was carried forward by all relevant political forces 25 . Social policy is of course not an area without conflicts. W e find cases of severe political confrontations well before the 1970s, but on the whole there was a broad political consensus. In the early 1970s, however, to the surprise of many observers, tax protest flared up in some countries, most prominently in Denmark. Social scientists 2 6 started to speak of a 'welfare backlash', although it was primarily a protest against taxation and bureauracy and much less against social benefits and public services. As a phenomenon of a certain period, leaving aside the important variations across countries, the protest may be understood as a result of the most rapid increase of the tax ratio in modern European history, with World War I as the only exception. As an indicator of the most 'visible taxes', the average ratio of income taxes and social security contributions to G N P almost doubled in Europe between 1960 and 1975, from 15 to more than 27 percent 1 7 . But tax protest in its manifest form has proved to be an ephemeral phenomenon. It has largely disappeared or perhaps has been replaced by other forms such as tax evasion and a black labour market. With growing difficulties in the financing of welfare programmes since the mid-1970s, distributional conflicts have increased, but nothing similar to a 'cleavage' of larger population groups pro- and anti-welfare state has appeared. Survey results across Europe cited in our country studies - incomplete as they may be - create the image of a still vast and often overwhelming support for the welfare state, even if this support has somewhat declined over the years. This may be explained by the fundamental changes in the social structure and the electorate which will be discussed in the following section.

Introduction

XXV

There seems to be a certain change in the political climate since the 1970s: a neo-liberal economic philosophy, a conservative interpretation of the state's role, and an anti-modernist critique of large-scale institutions have gained some ground. However, the articulated enemies of the modern welfare state have remained in the minority, with a chance of taking over government responsibility only under very specific conditions of the electoral system and party constellation. The third and perhaps most important element of the favourable historical constellation was the unprecedented economic growth of the postwar period. The years from the Korean War to the first oil shock were, according to Angus Maddison, the 'golden age' of capitalism, characterized by rapid and stable growth 28. The absolute growth of the national product formed the basis for the relative growth of the welfare state. Whereas on average the European economies grew between 1950 and 1980 by about 4 percent, the average growth rate of social expenditure was around 6.5 percent. However, the relationships between economic growth and social expenditure growth changed over time. If one classifies the years as to whether economic and/or social expenditure growth rates lay below or above the average of the entire period, a relatively uniform picture emerges, despite all cross-national variations shown in the country studies. Whereas in the 1950s social expenditure growth was consistently below average even in years with very strong economic growth, the decade from the early 1960s to the early 1970s is seen as the high season of the postwar welfare state with real growth rates of the economy as well as of social expenditure far above the average. In these 10 to 12 years the European welfare states took on their modern shape. The two years following the first oil shock, 1974 and 1975, were then characterized by a combination of very high social expenditure growth rates and very low or even negative economic growth rates, indicating that the European governments were not able or not willing to respond immediately to the economic crisis by reducing social expenditure. Only afterwards did social expenditure growth rates start to fall, sinking below the level of the 1950s. Thus the changing relationship between economic growth and social expenditure growth formed a kind of 'postwar spiral'. 4. System disintegration without class conflict The crisis of the world economy of the 1970s had two obvious consequences for the welfare states: it reduced revenues and increased expenditure, creating a structural deficit of the public households. These deficits accumulated to large public debts as most governments only started to respond to the financial problems after the second 011 shock in the late 1970s. However, the current difficulties of the welfare states cannot be explained as a simple result of the economic crisis only. Rather they should be understood as the product of a historical coincidence of this economic crisis with the preceding extraordinary expansion of the public sector and with a demographic wave originating from the relatively high European birth rates between the late 1950s and mid-1960s. Yielded by the demographic wave and pushed by the European revolution in higher education and an increasing female mobilization from the 1960s, more young people, highly educated people, and highly motivated women started to enter the labour market. This happened under increasing unemployment, in a situation in which European industry lost many jobs and in which the public deficits prevented a further extension of public employment. Thus in contrast to the 1930s, the situation today is characterized by above average unemployment rates of younger people and women.

XXVI

Introduction

This may explain why solutions are frequently sought in a greater flexibility of working and family life, and in an extension of the service sector. On the one hand, the rationalization effects of an intensified international competition in the industrial sector and the stagnation of the public sector with lower turn over rates as a result of its previous rapid expansion do not allow much optimism for the immediate future. On the other hand, however, assuming a continuation of present economic growth and a further success in the consolidation of the public households, the strong decline in birth rates since the mid-1960s will ease the current problems considerably in the medium future. This will also be necessary because the welfare states must then be free for the solution of a future problem which is the opposite side of the declining birth rates: the pension systems. It is not unlikely that by the early 1990s the European welfare states will have overcome the specific problems created by a historical coincidence of unfavourable developments. However, I believe that the troubles of the past ten years have also brought to the surface some more basic challenges which will require long and complex processes of institutional adaptation - which have already started. I would like to point to three challenges: (1) the ageing of the population and the necessity of a new contract between the generations; (2) the changing sexual division of labour and the necessity of a new contract between the sexes; (3) the change of values and the necessity of a new contract between the state and the citizens. Today European populations have entered the last phase of their 'demographic transition* which started in the nineteenth century. Essentially, this long-term process has represented a transition from limited population growth at high birth and death rates to low or zero population growth at low birth and death rates, after a longer period of accelerated population growth resulting from an interval in the decline of the death and birth rates. In principle a uniform process, this transition was superimposed in Europe by erratic demographic movements as a consequence of war losses and several violent oscillations of birth rates, both of which have distorted the age structure of most European populations. As is well known, the slowdown of population growth leads to an ageing of the population, i.e. to an increasing share of older people as a result of declining birth rates and a still increasing life expectancy. This may not only imply a loss of adaptive capacity as social change is largely achieved through a succession of generations; it may also mean that the older generation continues to gain political weight and that the age dimension becomes more pronounced in distributional conflicts. This is most obvious with respect to the pension systems on a pay-as-you-go basis which represent the most notable redistributive machineries of modern societies. There can be no doubt that with a significant increase in the share of old people a new contractual basis must be found for the pension systems; and it must be found before the ageing process gains more momentum, making solutions politically ever more difficult. Solutions will certainly be sought in a mixture of increases in contributions, cuts in benefits, and a raising of pensionable age; they may also be sought in a strengthening of the basic universal element of the pension systems while at the same time allowing for a greater variety with respect to other - public, occupational or private - elements. Finally, solutions may lie in a greater flexibility of work and retirement at a time when fewer young people will enter the labour market.

Introduction

XXVII

It will be even m o r e important, however, to redefine the basis of the contract between the generations. In legal terms, it is only a contract between two generations, the e m p l o y e d w h o p a y contributions and the retired w h o d r a w pensions. In reality the contract is based on the relationships between three generations, i.e. it includes the y o u n g p e o p l e w h o are not yet employed but will be held responsible f o r paying the pensions in the future, without adequately institutionalizing these relationships. Given the altered d e m o g r a p h i c parameters, we are thus facing an institutional maladjustment with considerable explosive f o r c e , in which the changing relationships between the generations is interwoven with a c h a n g e in the relationships between the sexes. T h e nodal point lies in the structural underevaluation of that part of necessary w o r k which is not involved in market e x c h a n g e and therefore is usually d o n e without independent income and a d e q u a t e social rights. Child-raising is an essential part of necessary but undervalued w o r k in our society. N o t surprisingly, therefore, the striving of w o m e n f o r equality and independence has b e c o m e a striving to leave the home. At the same time, the d e m o g r a p h i c development has increased the possibilities of non-domestic activities f o r w o m e n . T h e r e are fewer children t o d a y , and the p h a s e in the family cycle d o m i n a t e d by child dependency has b e c o m e much shorter. T h i s ' d e m o g r a p h i c release' of w o m e n w a s related with a longterm equalization of education opportunities between the sexes t h r o u g h o u t Western E u r o p e , although with a conservation of the century-old gradiant f r o m the Protestant N o r t h to the C a t h o l i c S o u t h . Following an equalization of opportunities in education, female e m p l o y m e n t ratios have also started to increase slowly but steadily. T h i s long-term trend was not even interrupted by the e c o n o m i c crisis of the m i d - 1 9 7 0 s , despite the fact that in most countries w o m e n were m o r e a f f e c t e d by u n e m p l o y m e n t than men. M o s t significant perhaps in this general development is the tendency of y o u n g e r w o m e n to return to their jobs after childbirth. T h i s f u n d a m e n t a l and irreversible c h a n g e in the sexual division of labour requires an adaptation of many institutions, of m a r r i a g e and family above all, but also of the institutions of the welfare state. A first and obvious aspect of this process of adjustment is a further strengthening of independent and equal social rights f o r w o m e n , in particular with respect to old a g e pensions. T h e w e l f a r e state w a s originally built a r o u n d the figure of the male provider of the family. S o c i a l rights of other family m e m b e r s were usually introduced much later and w e r e derived f r o m the provider's status and w o r k . A greater equalization m a y be s o u g h t through an equalization of e m p l o y m e n t opportunities, but also by assigning rights to the w o r k of child-rearing, or m o r e generally, extending the universal elements of social rights. Family policy, on the other hand, must be m o r e than a policy f o r the equalization of opportunities and rights between men and w o m e n . A n equalization of individual rights m a y even contradict the objective of m a k i n g living conditions and social security of families m o r e equal. F r o m t w o - e a r n e r couples without children to o n e - p a r e n t families, there is t o d a y an increasing variety of family structures which will require a re-definition of m a n y w e l f a r e institutions. In order to combine a policy of sex equality and a policy of family stabilization with the objective of a m o r e balanced p o p u l a t i o n development, even m o r e far-reaching institutional changes will be necessary. T h i s refers above all to a m o r e flexible c o - o r d i nation of w o r k and family life, but also to a m o r e flexible timing of the m a j o r life cycle p h a s e s : education, employment, and retirement. In its development, the w e l f a r e state has a d a p t e d itself to the strong tendencies of differentiation and standardization

XXVIII

Introduction

inherent in the evolution of industrial societies, and has further strengthened these tendencies. With the transition from industrial to service society it appears possible to rediscover, in different form, some of the flexibility found in pre-industrial societies with respect to the linkage of life domains and life phases. But this would also imply a fundamental reform of the welfare institutions. Such a reform seems to be called for also by the changes in basic values which social scientists believe to have observed since the late 1960s and early 1970s, and which they relate above all to the growth of prosperity, the expansion of higher education and the extension of the service sector, but also to the long period of peace in Western Europe as well as to specific consequences of the economic crisis of the 1970s 29. Despite all healthy scepticism of survey-based observations, the very fact of a change of values, in particular among younger people, seems to be undeniable. One finds a certain 'neo-liberal' renaissance in the sense of a greater emphasis on self-determination, self-responsibility and freedom of choice, but at the same time a desire for more solidarity in everyday life and a more direct participation in public affairs. The direction of these value changes runs counter to some of the fundamental characteristics of the modern welfare state, namely its bureaucratization, 'monetarization', and professionalization 30 . In principle these developments are irreversible, but to some extent the welfare state institutions can and must be adapted to the changing values to avoid a loss of legitimacy. This may imply a new 'contract' between the state and the citizens, according to which the citizen would no longer be reduced to a tax and contribution payer (and a recruit), but would also offer some services, in fields and forms of a mixed private-public character. Thus, the ageing of the population, the changing division of labour between the sexes, and value changes challenge the adaptive capacity of welfare state institutions. Solutions will have to be sought in a greater flexibility of family and working life, and a more varied mix of public, semi-public, and private organizations. More individual responsibility and mobility will be necessary, but this will require at the same time a strengthening of the universal elements of the welfare state, of a basic social security. It has been a classic idea in sociology (maintained by Marx in particular) to relate problems of 'system integration' and 'social integration' 3 1 , i.e. to search for cases of increasing maladjustment of institutions which produces social conflicts with a tendency towards a polarization of major population groups. It is my contention that the present situation is indeed characterized by serious problems of institutional adjustment, but without the emergence of relevant political cleavages. This judgement may be supported by the survey data included in the country chapters, but it is primarily derived from simple observations of changes in the employment structure and the growth of welfare clienteles. A first simple fact is that strong legions have grown up around the welfare state, even if they have not yet become organized. This is especially true for two population groups: the recipients of transfer incomes, particularly pensioners, and those who provide social services in the widest sense. If we consider these two groups in relation to the electorate, the share of the pensioners grew on average from 10 percent in 1950 to 25 percent in 1980, while the number of those employed by the welfare state often increased to 10 percent or more. T o illustrate this general observation with an extreme example: in Sweden, more than half of the electorate today draws a transfer income or an earned income from the welfare state. Another simple fact is that the employment structure has thoroughly changed from 1950 to 1980. Whereas in 1950 on average two-thirds of the labour force in Western

Introduction

XXIX

Europe were either blue-collar workers or white-collar employees, this share had grown to more than four-fifths, and in some countries more than 90 percent, thirty years later. T h e expansion of enfranchised 'welfare clienteles' thus coincides with the structural elimination of the 'natural enemies' of the welfare state, namely the mass of self-employed in agriculture, trade and crafts. A structural basis for a 'pro- or anti-welfare state cleavage' seems to be lacking therefore, although the necessity to stabilize and reorganize the welfare state will certainly result in a variety of distributional conflicts. The risk of institutional immobility appears much greater than the danger of large-scale polarization. Very probably, the direction and extent of institutional reforms will strongly depend on the stance taken by the new middle classes. Their position is characterized by a combination of dependent employment status and relatively extended individual resources. They stand between collective interest organizations and state regulation on the one side, individual mobility and freedom of choice on the other. Institutional reforms combining a strengthening of basic rights with a greater flexibility may well find their political support, but the more concrete steps will depend on the very different ways in which the middle classes articulate and aggregate their heterogeneous and ambivalent interests. T h e direction and extent of institutional reforms will furthermore depend on the structure of the institutions themselves which may create very different obstacles or opportunities for reforms. It is therefore important to carefully examine the institutional variations, on the basis of the analyses given in the twelve country chapters.

5.

The structure of the country chapters

Each of the twelve country chapters is divided into five sections. T h e various analyses usually refer to the years 1950-1980. This period was selected mainly for practical reasons as data are often incomplete for the years immediately following World War II as well as for more recent years. T h e reforms carried out in many countries in the second half of the 1940s serve as a point of departure for analyses and are not treated as a subject in themselves. T h e whole study is, however, embedded in a somewhat longer time period. The first of the five sections (I. Historical Synopsis) begins with an overview of the historical development of each national welfare state from the turn of the century, and the last section (V. Present Problems and Policy Choices) concludes with an analysis of the most recent changes from the second half of the 1970s to the first half of the 1980s. The three remaining sections tend to have a descriptive (II. Resources and Clienteles), evaluative (III. Achievements and Shortcomings), and explanatory (IV. Correlates and Causes) character. In principle the definition of the welfare state is understood in relatively broad terms, despite the fact that the social security system is the focus of the major part of our analyses. This is especially true for Sections II and IV, while in Section III the various social services are more specifically addressed. Section I By way of introduction, the first section provides an overview of the long-term development of the welfare state of each country. T h e specific national characteristics of the welfare state and its historical background are explored in this section, and a brief

XXX

Introduction

survey of the central institutional changes and fundamental development trends after 1945 is given. Section II T h e second more descriptive section is only modestly exciting, but nevertheless fundamental. It attempts to trace growth and structural change through two central aspects: the public household and the population groups affected by the various programmes. Emphasis is placed on a description of the quantitative changes, but an attempt is also made to relate these to institutional changes. In order to facilitate the reading of this data-ridden section, a graphic representation was decided upon (the sources for the data contained in the graphs, as well as in the tables appearing in the texts, are listed at the end of each country chapter; the figures for the graphs can be found in V o l u m e IV). An attempt was usually made to characterize developments in terms of both absolute data and percent distributions. T h e major part of Section II is devoted to the development of public expenditure. (For the treatment of the problems of deflating time series on public expenditure, the Appendix Volume IV should be consulted). T h e description of public expenditure development begins with a brief analysis of the share of total public expenditure in the national product and a breakdown of the total public expenditure by major purpose, economic category and level of government. Then social expenditure is analysed according to its major categories: usually income maintenance, education, health, and housing. A detailed study of individual programmes follows, supplementing the examination of the aggregates and major expenditure categories. It begins with a description of the qualitative and institutional development of the various income maintenance programmes and concludes with a brief account of developments in public education, health, and housing. T h e relatively extensive investigation of the development of public expenditure is accompanied by a brief overview of the development of public revenues: first, the development of total revenues and public deficits, then the major sources of public revenues, and finally, the financing of individual programmes through the state, employees, and employers. T h e second central aspect of the expansion of the welfare state examined in Section II refers to these population groups affected by the programmes. T h e term 'clienteles' was chosen for these groups, despite its somewhat negative connotation deriving from the concept of 'clientelism'. In our context it is thought of as a purely neutral term. It refers to the fact that the welfare of ever-increasing population groups has become the result of political rather than market mechanisms. T h e expansion of these clienteles has been reconstructed for the different income maintenance programmes in five-year intervals in absolute numbers, as well as in relation to the relevant population groups (e.g. the population over 60 years or children at a certain age). In order to compare the relative weight of the diverse clienteles across countries, the development of their respective shares of the total population has been graphically represented. T h e political significance of clienteles is certainly not only a function of their number, but also of the relative weight of the respective social transfers, i.e. their importance in relation to earned income. Section II therefore concludes with a specification of the various social transfers according to three types of indicators: (a) legally fixed

Introduction

XXXI

earnings-replacement ratios, (b) standard benefits at current and constant prices, and (c) average benefits, which have simply been calculated by dividing total expenditure by the number of beneficiaries; they are presented at constant prices and as a percentage of average income (which, however, is defined differently from country to country). Such systematic information has never before been available for any of the twelve countries under investigation and is an essential precondition for an empirically based analysis of the development of the welfare state. Nevertheless, it is still far from the theoretically desirable. What we would need for a more detailed understanding of the interest structure of the national welfare states is a type of 'interest matrix' in which we could enter, for the most important social categories, the respective costs and benefits of the various programmes and their change over time.

Section III Whereas the description of the development of welfare state resources and clienteles in Section II refers mainly to aggregates and averages, the more evaluative analysis of Section III is also based on statistics on the distribution of social transfers and services. This section contains numerous additional tables which have not been included in the Appendix Volume. Because of their much greater complexity, these tables refer to much shorter time periods, or merely single points in time. Of course, in order to evaluate achievements and shortcomings, one needs criteria. D o such general criteria actually exist? Certainly they do not exist in the sense of general values, i.e. values shared by all, which could be used to evaluate welfare state developments. In this section it is not possible to assess 'welfare' in any fundamental sense, or to discuss its complex relationships to other basic values. The section also does not deal with the complicated question of whether certain services could not be better supplied by non-state institutions such as private enterprises or the family. Finally, it does not deal with an evaluation of unintended consequences such as the effects of welfare state programmes on the functioning of the market economy or the growth of public bureaucracy. The goal is much more modest. It lies in the assessment of long-term developments according to criteria which are 'inherent' to the welfare state. The two criteria applied here are the 'adequacy' of the social transfers and services and their impact on the distribution of the life chances of the population. With respect to the transfer payments, the adequacy is defined in terms of 'income replacement'. The question is to what extent these payments adequately replace income from work. In studying this question, a considerable problem results from the fact that alternative income sources (e.g. from private or occupational pensions) are normally insufficiently recorded. In reference to social services, the 'adequacy' is measured primarily through the level and development of the average provision of services for the population. Here the major assessment problem, especially at higher developmental levels, involves the question of to what extent an improved provision, (e.g. of hospitals) results in greater 'welfare' (in this case: health). A change in the inequality of life chances is the second central criteria for the evaluation of welfare state development. Without doubt one of the most frequently put questions in the literature is to what extent the welfare state balances out the inequalities created by the market and the family. Yet our knowledge in this area is still insufficient today, and varies greatly from country to country. In all the chapters a distinc-

Introduction

XXXII

tion is made between problems of poverty in a narrow sense and inequality in a broader sense. The analysis of poverty has to overcome considerable data problems, as well as conceptual difficulties resulting from the varying concepts of relative poverty. In the analysis of inequality, the data problems increase as one progresses from the inequality of primary incomes to the incidence of taxes, social transfers and social services. Section IV Section IV attempts to provide explanations for certain aspects of the development of welfare states. These developments are of course very complex phenomena, and 'causality' is a difficult concept in the social sciences. Our goal has therefore been relatively limited. Various methods are applied to examine certain demographic, economic, and political factors and correlates in welfare state development. The influence of the demographic and economic factors is examined using strictly quantitative methods, the demographic factors with the 'component method', and the economic factors with the help of a regression and correlation analysis. In contrast, the analysis of the political factors and correlates is based mainly on qualitative interpretations and illustrative data. Two types of 'dependent variables' were utilized as explanandum: social expenditure items and institutional changes of the welfare programmes. The various welfare programmes have a varying impact in the different phases of the individual and family life cycle. This means that demographic changes, especially changes in the size of families and the age structure, have direct effects on the size of clienteles, and thus on the development of social expenditure. In a series of studies in the 1970s, the OECD utilized a so-called component method to measure the weight of demographic factors in the development of various social expenditure items 32. We have adopted this method in order to be able to compare our results with those of the OECD studies which comprise a greater number of countries, but are based on more limited data for a shorter time period. The component method may be applied whenever a social expenditure aggregate can be defined as the product of various multiplicands or components. It may be utilized for decomposing the level or change of expenditure in absolute terms (i.e. in money terms at current or constant prices) or in relative terms (i.e. as a share of GDP or more general of available resources). Here the method has been used mainly for analysing changes in expenditure ratios. For a study of the impact of demographic changes on social expenditure one of the components must of course be a demographic parameter in the stricter sense (e.g. a parameter of the age structure). The respective expenditure aggregate (e.g. pension expenditure) is then usually analysed in terms of three components: demographic structures, beneficiaries in a given 'target' group, and average payments per beneficiary. For an analysis of expenditure ratios, these components must also be expressed as ratios: (a) a demographic ratio, i.e. the 'relevant' population (e.g. people aged 65 and over) as a percentage of total population; (b) an eligibility ratio, i.e. the beneficiaries (i.e. old age pensioners) as a percentage of the 'relevant' population; c)

a transfer

ratio,

i.e. t h e p a y m e n t s p e r b e n e f i c i a r y (e.g. t o t a l p e n s i o n e x p e n d i t u r e

divided by the number of pensioners) as a percentage of 'average income' (calculated as GDP per head).

Introduction

XXXIII

T h e c o m p o n e n t method m a k e s it possible to find o u t how much a c h a n g e in o n e c o m ponent (or a combination of changes in two or m o r e c o m p o n e n t s , the so-called interaction effect) has contributed to an increase (or decrease) of social expenditure. T h i s means that o n e can d e c o m p o s e , f o r a given period, the relative weight of d e m o g r a p h ic changes, the extension o r restriction of welfare p r o g r a m m e s , and the improvements or curtailment of benefits, f o r the expenditure development. T h e e n o r m o u s expansion of the w e l f a r e state after the S e c o n d W o r l d W a r would obviously not have been possible without the historically unparalled e c o n o m i c growth of this period. W h a t results, however, when o n e investigates the short-term correlations instead of those of the entire time s p a n ? T o arrive at an answer to this question, an analysis of the correlation between the annual real growth rates of the national product as the independent variable and various social expenditure items w a s carried out. Relatively low correlation coefficients were the usual o u t c o m e , indicating the possibility of varying period-specific relationships. T h i s possibility w a s investigated in a g r a p h i c regression analysis of the relationships between the annual e c o n o m i c g r o w t h and the annual growth of total social expenditure. T h e resulting country-specific periodizations w e r e then interpreted in relation to political developments. T h e inquiry into the political factors and correlates is m o r e complex than the d e m o graphic and e c o n o m i c developments and utilizes m o r e qualitative and illustrative methods. An attempt is m a d e not only to trace the influence of political changes as reflected in party p l a t f o r m s , election results, parliamentary strength of parties, or the party composition of the government, but also the influence of certain interest g r o u p s o r even the C a t h o l i c C h u r c h on the institutional development of the w e l f a r e state. B e c a u s e of the complexity of the subject and the differing availability of d a t a , this part of Section I V shows the greatest variations between the country chapters. T h e relationship between the party composition of g o v e r n m e n t and the development of social expenditure is investigated in almost all of the chapters, and in m a n y , institutional c h a n g e s are incorporated in this analysis (based on a listing and brief description of 'core laws' governing the various welfare p r o g r a m m e s since 1945 p r o vided in the A p p e n d i x V o l u m e ) . Furthermore, f o r s o m e countries the development of party platforms a n d / o r of parliamentary voting on social welfare legislation are studied. In the case of Italy, a very extensive roll-call analysis of pension legislation after 1945 is attached as a special appendix to the country chapter. Finally, s o m e of the country chapters also include case studies on crucial r e f o r m s , in which the specific national context of the w e l f a r e state development and its place in the political p r o c e s s and system are examined.

Section V T h e f o c u s of o u r project lay in the long-term development of the E u r o p e a n w e l f a r e states and not on their most recent changes. It w a s to be expected, however, that the problems f a c e d by the w e l f a r e states since the s e c o n d half of the 1970s w o u l d be of particular interest to the reader. A systematic treatment of recent c h a n g e s was difficult due to the often insufficient data and the g r a d u a l step-by-step p r o d u c t i o n of the chapters which w o u l d have m a d e a later updating of the w h o l e text very difficult. For this reason a concluding section on the developments and problems of the welfare states f r o m the end of the 1970s into the early 1980s w a s a d d e d to the three central sections.

XXXIV

Introduction

T h e basic issue of this section is whether the economic and political framework of the European welfare states has fundamentally changed since the late 1970s. T o g o into greater detail, the following questions were posed: (a) In which way and to what extent have the European governments responded to the problems of growing public deficits by cutting social benefits and through other institutional adjustments? (b) What are the scenarios for the future development of social expenditure under varying economic and demographic assumptions, on the basis of the existing institutions or with certain institutional changes? (c) Has public opinion changed with respect to the legitimacy of the welfare state in general and the structure and functioning of single welfare programmes in particular? And based on these data, can one discover certain latent conflicts between social groups or even some polarization? (d) What are the options regarding the future development of the welfare state currently under public debate or under discussion among the political parties? On the basis of this information and the preceding analyses, the country chapters conclude with a cautious and necessarily speculative look into the future.

Notes 1

2

3

4

5

6

7 8

Cf., also in the following, Peter Flora, Franz Kraus and Winfried Pfenning, State, Economy and Society in Western Europe 1815-1975, Vol. II: The Growth of Industrial Societies and Capitalist Economies. Frankfurt, Campus; London, Macmillan, 1986. Cf. Charles Tilly (ed.), The Formation of National States in Western Europe. Princeton, Princeton University Press, 1975; esp. chapters 1 and 9. Cf. e.g. Peter Laslett and Richard A. Wall (eds), Household and Family in the Past. New York, Cambridge University Press, 1972. This argument was developed by Hartmut Kaelble, 'Was Prometheus most unbound in Europe?'. Journal of European Economic History, 14, 1985. Cf. Arnold J. Heidenheimer, 'Education and social security entitlements in Europe and America', pp. 269-304 in: Peter Flora and Arnold J. Heidenheimer (eds), The Development of Welfare States in Europe and America. New Brunswick and London, Transaction Books, 1981. The first and most famous exponent of this view was T.H. Marshall, Class, Citizenship, and Social Development. New York, Doubleday, 1964. Cf. Max Weber, Wirtschaft und Gesellschaft. 5th ed., Tubingen, Mohr, 1976. This concept was developed by Anthony Giddens, The Class Structure of the Societies. London, Hutchinson, 1973.

Advanced

9

This is the argument of Rainer M. Lepsius who introduced the concept of Versorgungsklassen, in the sense of welfare clienteles. Cf. his 'Soziale Ungleichheit und Klassenstrukturen in der Bundesrepublik Deutschland', pp. 166-209 in: Hans-Ulrich Wehler (ed.), Klassen in der europäischen Geschichte. Göttingen, Vandenhoeck and Ruprecht, 1979.

10

Cf. Erik Allardt, About Dimensions of Welfare. An Exploratory Analysis of a Comparative Scandinavian Survey. Research Group for Comparative Sociology, University of Helsinki. Research Report No. I, 1973.

11

There are no systematic relationships between the expansion of the welfare state and the e x t e n t of n a t i o n a l i z a t i o n , as s h o w n b y A n t h o n y K i n g , ' I d e a s , i n s t i t u t i o n s a n d t h e p o l i c i e s of

governments: a comparative analysis'. British Journal of Political Science 3, pp. 291-313 and 409-423.

Introduction

XXXV

Cf. e.g. John O ' C o n n o r , The Fiscal Crisis of the State. New York, 1973, and Ian Gough, The Political Economy of the Welfare State. London, St. Martins Press, 1979. For a synthesis see Peter Flora, 'Stein Rokkans MakroModell der politischen Entwicklung Europas: Ein Rekonstruktionsversuch'. Kölner Zeitschrift für Soziologie und Sozialpsychologie 33, 3, pp. 397-436. Cf. J. Peter Netti, 'The state as a conceptual variable'. 559-592.

World

Politics,

20, 1968, pp.

Cf. Margaret S. Archer, The Social Origins of Educational Systems. London, Sage, 1979. See the article 'Armenwesen', pp. 1-169 in Handwörterbuch der Staatswissenschaften, 3rd ed. 1909. 17

Cf. Sheila Β. Kamerman and Alfred J. Kahn (eds), Family Policy. New York, Columbia University Press, 1978. See Brian Abel-Smith, ' T h e history of medical care', pp. 219-240 in: E.W. Martin (ed.), Comparative —Development in Social Welfare. London, Allen and Unwin, 1972. N o t only the absolutist break with old liberties was important, however, but also the 'liberal break' with old forms of social protection under the impact of capitalist industrialization. Cf. Gaston V. Rimplinger, Welfare Policy and Industrialization in Europe, America and Russia. New York, John Wiley, 1971. Cf. also Reinhard Bendix, Nation-Building and Citizenship. N e w York, John Wiley, 1964, pp. 80ff., who points to the important variations in the continuance of traditional organizations of crafts into the modern period. Barrington Moore, Social Origins of Dictatorship and Democracy. Boston, Beacon Press, 1964.

21

Cf. Richard M. Titmus, Social Policy. London, Allen and Unwin, 1974; for earlier formulations see his Essays on the Welfare State. London, Allen and Unwin, 1958, and Commitment to Welfare. London, Allen and Unwin, 1968. For a discussion of his typology cf. above all R. Pinker, Social Theory and Social Policy. London, Heinemann, 1971 and R. Mishra, Society and Social Policy. Theoretical Perspectives on Welfare. London, Macmillan, 1977. U g o Ascoli has invented the more appropriate term 'meritocratic-particularistic' for Titmus' 'industrial achievement-performance model'; cf. Ugo Ascoli (ed.), Welfare State all'Italiana. Roma-Bari, Laterza, 1984. Cf. in the following the data on the evolution of social insurance collected by Jens Alber in Peter Flora et al., State, Economy and Society in Western Europe 1815-1975, Vol. I: The Growth of Mass Democracies and Welfare States Frankfurt, Campus; London, Macmillan, 1983. For data on the social expenditure development, see the country chapters and the Appendix Volume.

23

In judging these percentages, one should take into account that the labour force data also include the self-employed and family workers.

24

This concept was developed by Alon T. Peacock and Jack Wiseman, The Growth Expenditure in the United Kingdom. Princeton, Princeton University Press, 1961.

25

Jens Alber, Vom Armenhaus

26

Cf. e.g. Harold L. Wilensky, The Weifare State and Equality. fornia Press, 1975 and The 'New Corporatism', Centralization, don, Sage Publications, 1976.

27

Cf. Peter Flora, 'Solution or source of crises? The welfare state in historical perspective', pp. 343-389 in: W.J. Mommsen (ed.), The Emergence of the Welfare State in Britain and Germany. London, C r o o m Helm, 1981.

zum Wohlfahrtsstaat.

of

Public

Frankfurt, Campus, 1982. Berkeley, University of Caliand the Welfare State. Lon-

28

Angus Maddison, Phases of Capitalist Development.

29

As an introduction to the vast literature on value change, see e.g. Helmut Klages and Peter Kmieciak (eds), Wertwandel und gesellschaftlicher Wandel, Frankfurt and New York, Campus, 1979.

30

Cf. Christian von Ferber, Sozialpolitik 1967.

Oxford University Press, 1982.

in der Wohlstandsgesellschaft,

Hamburg, Zeitverlag,

XXXVI 31

32

Introduction

Cf. David Lockwood, 'Social integration and system integration', pp. 244-257 in: George K. Zollschan and Walter Hirsch (eds), Explorations in Social Change. London 1964. Cf. above all the OECD studies Public Expenditure on Income Maintenance Programmes. Paris 1976, and Public Expenditure Trends. Paris 1977. The component method has also been applied to an analysis of education and health expenditure; cf. the studies Public Expenditure on Education. Paris 1976, and Public Expenditure on Health. Paris 1977.

Sweden

SVEN OLSON

Contents

I

Historical synopsis 1. 2.

II

12 18 27 29 31 37

Social security Equality and inequality Poverty in the welfare state Summary

41 56 61 62

Correlates and causes: explanations 1. 2. 3. 4.

V

Postwar expenditure growth - a summary Single programme development Public revenues Single programme financing The growth of welfare clienteles The development of benefits

Achievements and shortcomings: evaluations 1. 2. 3. 4.

IV

4 7

Recources and clienteles: descriptions 1. 2. 3. 4. 5. 6.

III

The prehistory of a welfare state model The development of Welfare Sweden 1945-1980 . . .

Demographic components Economic correlates The welfare state in a political context Welfare reforms: three case studies

66 70 73 80

The crisis of and prospects for the welfare state 1. 2. 3. 4.

Recent adjustments and social policy alternatives . . . Forecasting social expenditure The legitimacy of the welfare state T h e future of the welfare state

84 90 93 98

Notes

101

Sources to tables and graphs

112

I

Historical synopsis

1. The prehistory of a welfare state model The years immediately following World War II witnessed the beginnings of Welfare Sweden - on the political-administrative level the impact of the Keynesian solutions from the Great Depression blended with the development of late nineteenth and early twentieth century social policy measures. However, the tradition of public involvement in the provision of welfare had already been in existence prior to Swedish industrialization at the end of the nineteenth century Poor relief has existed since the Reformation, but always at a low level on account of the country's poverty and the strength of the free peasantry in both parliament and local government. Even so, until well into the twentieth century and the coming of the famous Swedish welfare state model, poor relief accounted for a large part of social expenditure. In the course of the nineteenth century Sweden underwent an agrarian, commercial and industrial reorganization which greatly affected the relation between state and citizen. Following a parliamentary decision in 1842, compulsory schooling (folkskolan) was introduced, mainly financed and administered by the parishes, with some transfers from central government 2. Central and local government provision of public health dates from the end of the seventeenth century, when provincial doctors pioneered community medicine. However the first build-up of public health services coincided with the foundation of the county councils (landsting) in 1862. These were 25 representative regional bodies with tax-raising powers and responsibility for in-patient hospital services 3. With the spread of industrialization and the development of the working class movement, parliament and the state bureaucracy became increasingly involved in the regulation of working conditions for adults (primarily women) and children, occupational safety and sickness, the care and maintenance of old people, and the problems created by massive emigration. As in many other European countries, the period from the turn of the century up to World War I saw the first breakthrough for social policy 4. It was during this period of the 'social question' or Arbeiterfrage that the following laws were implemented, influenced as they were by the profound ties and conflicts between the new semi-urban proletariat, the rural poor and the free peasantry as well as the industrialists and older fractions of the ruling classes: 1889 Factory Inspection Act; 1891 Introduction of state subsidies to voluntary sickness benefit societies (further extended in 1910); 1901 Employers made liable for reimbursement in cases of industrial injury, changed to compulsory occupational injury insurance in 1916; 1913 Universal and compulsory old age and invalidity pension. State responsibility for employment and housing first developed at the end of the war, and social expenditure rose considerably. Government was made responsible to parliament in 1917 and the latter took the decision leading to the introduction of universal suffrage in 1921. In 1920 the eight-hour day was implemented and at around the same time a Poor Law reform restored the legal right to poor relief (abolished in 1871).

5

Historical Synopsis

T h e 1920s were a period of political instability and minority governments. T h e main political cleavage was over the question of unemployment, and conflicts in this area ruled out any major welfare reform for over a decade 5 . From 1932 onwards the Social Democrats and the Agrarian Party collaborated, but it was not until 1936 that they first formed a coalition government. Outside parliament a major agreement on industrial relations was concluded between the trade unions and the employers federation in 1938 6 . T h e main concern of the new majority was to overcome depression by the implementation of Keynesian policies and the introduction of the following welfare measures between 1933 and 1938 7 : -

new state employment creation programmes; state subsidies to voluntary (trade union) unemployment benefit societies; a housing programme for families with many children including subsidies and interest-subsidized construction loans; the indexation of pensions to regional differences in the cost of living; maternity benefits to around 90 percent of all mothers; free maternity and childbirth services; state loans to newly married couples; the introduction of two weeks' holiday for all private and public employees.

Seen in terms of expenditure, social policy saw a sharp rise in state involvement from World W a r I onwards. Excluding the exceptional years of World W a r II, total public expenditure rose from 10 percent of G D P in 1913 to 23 percent in 1950. During the same period, social expenditure increased from below 4 percent to over 10 percent (see Graph 1). Social expenditure as a percentage of total public expenditure rose from 30 percent to 40 percent in the immediate postwar period, followed by a small rise to around 45 percent from the beginning of the Social Democratic era 8 . Graph 1 The relative g r o w t h of total public and social expenditure

At the outbreak of World W a r II the Social Democratic/Agrarian government was replaced by a broader coalition. T h e Social Democratic leader, Per Albin Hansson,

6

Sweden

already prime minister from 1932, headed a new cabinet drawn from four of the five parties represented in parliament, with the support of over 95 percent of the electorate. Only the Communists, w h o had obtained less than four percent of the vote in 1940, were excluded. Although Sweden was neither occupied nor directly involved, the war promoted decisive changes in the national administration. Emergency commissions made up of labour market organizations and other relevant interest groups (chiefly agriculture), were established for every major social activity 9. These commissions had the status of government agencies and their decisions were correspondingly binding. Organizations which had previously been more independent found themselves more or less incorporated into the administrative apparatus of government. T h e commissions were abolished after the war but nevertheless their existence influenced the development of core welfare institutions in the immediate postwar period 10. T o summarize the development of social policy, a universal pension scheme, compulsory work injury insurance, employment programmes and state subsidies to voluntary sickness and unemployment benefit societies had already been adopted before, and in some cases several decades before, World W a r II. However, the inadequacies of these programmes are illustrated by the fact that poor relief continued to play a major role in the social security system up to the postwar era, as can be seen from Graph 2. Graph

The

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(a) E x p e n d i t u r e on poor r e l i e f as p e r c e n t a g e of s o c i a l e x p e n d i t u r e e x c l u d i n g e d u c a t i o n

So far we have primarily considered the legislative, administrative and financial changes in the development of the Swedish welfare state. In an examination of its historical roots we are confronted with a variety of conceptual approaches, many of them with specific Swedish ties. Firstly, there is the tendency to interpret events in relative terms, i.e. to equate the welfare state with conditions prior to industrialization, the result being that we invest the present political and social system with some form of continuity u . In the case of Sweden, a link may be forged with, for instance, the strong national administration built up in the sixteenth and seventeenth centuries during the period of absolutist m o n a r c h y . It is argued that the system's principles and institutions have n o t c h a n g e d

appreciably since the height of Sweden's strength as a European power. According to an exaggeration of this interpretation, the foundations of the Swedish welfare state

Historical Synopsis

7

may be more accurately traced to the ideas of Gustav Vasa, the creator of the nation state, or to those of Gustaf Adolf II and Axel Oxenstierna, his seventeenth century chancellor, than to twentieth century Social Democratic politicians. T h e second approach is to emphasize the popular element in the Swedish state, i.e. the recognition of the free peasantry as an independent estate and the weight carried by independent farmers in the bicameral parliament (established in 1866 and replaced by a single chamber parliament in 1970). T h e widespread literacy in nineteenth century Sweden is likewise cited in support of this thesis, as is the relatively uniform distribution of poverty, i.e. Sweden was poor but egalitarian 12 . T h e third approach interprets the development of Welfare Sweden in terms of the Bismarckian model of social policy 13. Here the expansion of state involvement in areas such as income maintenance, education and health, (including workers' protection), is understood as a reaction to the social problems created by industrialization. T h e impact of the German model on the development of the Swedish welfare state, however, was more to stimulate parliamentary initiatives than to influence the actual content of decision-making. Denmark's role as a Scandinavian welfare leader is probably more important when looking for foreign influence and inspiration 14. The universal national pension scheme and the early pre-Social Democratic employment programmes can be regarded as specifically Swedish liberal welfare arrangements. T h e fourth approach is to emphasize the Social Democratic tradition of 'the people's home' 15 . It was with this catchword that Per Albin Hansson launched the 44 years' Social Democratic rule. This approach developed the idea of the 'three stages' in party policy: the struggle for 'political democracy' (completed with universal suffrage in 1921), the struggle for 'social democracy' (sometimes regarded as having been completed in the 1960s), and the recent struggle for 'economic democracy' l 6 . In this perspective the welfare state is linked above all to the second stage, that of struggle for 'social democracy'. It was the social reforms and the ambitious employment policy of the 1930s which created Sweden's reputation as a model for social welfare, enshrined in Maurice Child's book of 1936, 'Sweden - T h e Middle Way'. T h e main architects of social and economic planning during this era were Ernst Wigforss, the Minister of Finance, Gustav Möller, party secretary and for almost twenty years Minister of Social Affairs, and the two Myrdals 17 . Fifthly, there is the interpretation of welfare growth in terms of the Beveridge model. T h e term welfare state' was coined during World War II, the German prerogative of power being contrasted with the democratic state, whose vast potential was mobilized for the first time 18 . According to this view the dramatic change during the war is considered as the real beginning of the Swedish welfare state l 9 . But there are also links to the pre-war development as various state commissions for postwar social and economic planning - headed by such men as Gunnar Myrdal and Tage Erlander (who succeeded Hansson as prime minister in 1946 and remained in office for 23 years) continued the work started in the 1930s. These were the proponents of the new institutional settings and the flat-rate social benefits inaugurated in the late 1940s 2 0 , to be discussed in the next section.

2.

The development of Welfare Sweden 1945-1980

Although Sweden managed to remain neutral, World W a r II obviously set limits to the development of the welfare state, but in 1945 several changes occurred. Swedish industry, highly concentrated in the hands of a few wealthy families and groups, was

g

Sweden

not d a m a g e d by the w a r , and w a s in a g o o d position to participate in the p o s t w a r industrial reconstruction in E u r o p e 2 1 . O n the political f r o n t , the b r o a d coalition w a s dissolved in the s u m m e r of the s a m e y e a r and the Social D e m o c r a t s f o r m e d a new g o v e r n m e n t , which stayed in o f f i c e (at times in coalition or with the s u p p o r t of the A g r a r i a n s / C e n t r e o r later the C o m m u n i s t Party) f o r m o r e than 30 years. F o r m a l l y the e m e r g e n c y administration w a s abolished, but in practice it w a s t r a n s f o r m e d and consolidated in the new, p e r m a n e n t institutions that were built up as the public sector expanded. C o n d i t i o n s f o r social policy in the p o s t w a r e p o c h d i f f e r e d in two important respects f r o m the earlier periods of w e l f a r e development. Firstly, until the late 1970s it w a s s h a p e d under relatively f a v o u r a b l e e c o n o m i c conditions: rapid technological p r o g r e s s in both agriculture and industry; f e w industrial conflicts and a highly institutionalized w a g e b a r g a i n i n g system, combined with t r e m e n d o u s g r o w t h in the number and strength of unionized l a b o u r (both white- and bluecollar), in both the public and private sectors n . S e c o n d l y , the mobilization of public resources (primarily new f o r m s of taxation, but also the newly constructed administrative bodies), during W o r l d W a r II a f f o r d e d the possibility of re-directing public expenditure t o w a r d s non-military peacetime p u r p o ses 2 3 . A s regards the g r o w t h of public resources the parties at first c o m p e t e d on tax policy issues, i.e. the extent of possible tax cuts and the structure of the p o s t w a r t a x a tion system 2 4 . H o w e v e r , the increasing s u p p o r t f o r the political left a n d left-centre since 1932, together with the additional resources gave rise to a general consensus in s u p p o r t of social policy r e f o r m s . S u m m a r i z e d briefly, the development of p o s t w a r W e l f a r e S w e d e n can be divided into five p e r i o d s : -

T h e immediate p o s t w a r p e r i o d : the institutionalization of housing and e m p l o y m e n t p r o g r a m m e s and the introduction of flat-rate benefits; T h e s e c o n d half of the 1950s: the introduction of earnings-related benefits; T h e 1960s and early 1970s: the expansion of public services; T h e m i d - 1 9 7 0 s : the extension of entitlement and improvement of cash benefit levels; T h e late 1970s and early 1980s: a period of adjustments.

A first w a v e of w e l f a r e r e f o r m s f o l l o w e d in the second half of the 1940s. M a j o r decisions w e r e taken and implemented in such areas as housing, e m p l o y m e n t policy and income maintenance. In the case of housing, residential construction had almost entirely ceased at the outset of W o r l d W a r II, and e m e r g e n c y measures (rent control in 1942 and low-interest loans to stimulate housing construction), were t r a n s f o r m e d s o o n after the w a r into a coherent housing policy. H o u s i n g construction and the housing m a r k e t were b r o u g h t within the c o m p e t e n c e of the state by p r o l o n g i n g rent controls, and b y subsidiary loans, c o u p l e d with a new law in 1947 which required all construction projects to c o n f o r m with local g o v e r n m e n t planning standards. T h e N a t i o n a l H o u s i n g B o a r d ( B o s t a d s s t y r e h e n ) w a s established in the following y e a r as the central authority f o r the supply of dwellings and the handling of housing loans 2 5 . T o g e t h e r with the insurance system, u n e m p l o y m e n t policy had been the corner-stone of S w e d i s h social policy f r o m W o r l d W a r I o n w a r d s . In the 1930s, however, the attempts to solve the e c o n o m i c crisis and the influence of Keynesian ideas meant that the w h o l e issue of u n e m p l o y m e n t w a s r e f o r m u l a t e d as an ' e c o n o m i c ' policy problem. Internationally, m a n p o w e r policy is still r e g a r d e d as part of this type of governmental policy. In S w e d e n , however, labour m a r k e t issues have been closely b o u n d up with

Historical Synopsis Table 1

9 Major institutional changes in the Snellisti welfare state, Ί^?—1982

Pensions 19*i8 1959 1916

Universal flat-rate pension Earnings-related compulsory supplementary pension Part-time pension am) lower age of retirement

Health 1955 1963 1967 197*1

Compulsory earnings-related insurance County councils take over responsibility for state-provincial physicians County councils responsible for the whole health system including psychiatric care Cash benefits raised to 90Í of gross earnings and made taxable; dental insurance

Industrial safety and injury insurance 19*i9

New safety law and central agency established

1955

Old conpulsory industrial accident insurance coordinated with sickness insurance

Labour market and unemployment insurance 19*t8 197*i

Nationalization of local employment offices under a new National Labour Market Board, also supervising voluntary unemployment relief funds Cash benefits to non-insured

Family policy 19*i8 197*1

General child allowance Parental insurance replaced maternity benefits

Municipal poor relief 1957 1982

Social Assistance Law replaced Poor Relief Law Social Service Law replaced Social Assistance Law

Education 1950 1962 196*1 1969 1971

Ten-year experimental period with a nine-year compulsory school started Final decision implementing the nine-year compulsory school during another ten-year period New and extended study allowance system Open admission to universities Integration of upper secondary education

Housing policy 19*i8 195*1 1968 197*1

Public loans and interest subsidies for housing construction, under supervision of a National Housing Board; housing allowances to families with children Municipal housing allowances to pensioners Interest subsidies replaced by 'parity loans' 'Parity loans' abandoned and interest subsidies reintroduced

10

Sweden

w e l f a r e policies since the late 1940s, w h e n the w a r t i m e institutions w e r e t r a n s f o r m e d and the N a t i o n a l L a b o u r M a r k e t Board w a s set up as the central a u t h o r i t y , c o o r d i n a t i n g the n o w n a t i o n a l i z e d local e m p l o y m e n t offices and supervising the state subsidized and union-controlled u n e m p l o y m e n t relief funds. Nevertheless, it w a s not until the late 1950s that the Board b e g a n to have an increasingly important role as n e w p r o g r a m m e s w e r e introduced and old ones e x p a n d e d 26 . In the field of income m a i n t e n a n c e , the old means-tested benefits w e r e replaced by flatrate benefits 27 . Following this principle, three m a j o r reforms, basic pensions, g e n e r a l child a l l o w a n c e s and sickness cash benefits w e r e approved by p a r l i a m e n t in 1946-47, and w e r e implemented, w i t h the important exception of c o m p u l s o r y sickness insurance, in J a n u a r y 1948. T h e introduction of universal f l a t - r a t e pensions, both f o r old people and the disabled ( w i d o w s ' and o r p h a n s ' pensions r e m a i n e d means-tested for another ten y e a r s ) , and a child a l l o w a n c e w a s a c c o m p a n i e d in the period 1948-1954 by income-tested housing a l l o w a n c e s f o r pensioners and families. Sickness insurance w a s the e x c e p t i o n : the o r i g inal decision in f a v o u r of a c o m p u l s o r y health insurance system had envisaged flatrate compensation for all employees, supplemented by a v o l u n t a r y and heavily subsidized g r a d u a t e d insurance benefit. D u e to inflation f o l l o w i n g the K o r e a boom, and conflicting opinions a m o n g political parties, the t r a d e unions, inside the v o l u n t a r y benefit societies, and p a r t i c u l a r l y the S w e d i s h M e d i c a l Association, the w h o l e Beveridge-style system of f l a t - r a t e cash benefits and reimbursements to practitioners w a s postponed twice in the late 1940s and e a r l y 1950s. T h e 1953 H e a l t h Insurance Act m a r k e d the end of n e a r l y a century of v o l u n t a r y benefit societies; at the close of W o r l d W a r II these had covered a p p r o x i m a t e l y half the population. Sickness cash benefits w e r e e a r n i n g s - r e l a t e d and not f l a t - r a t e . H o w e v e r , this system w a s not entirely n e w : the v o l u n t a r y but state-subsidized u n e m p l o y m e n t insurance benefits functioned in the same w a y as did o c c u p a t i o n a l i n j u r y insurance. T h e latter w a s administratively integrated with health insurance, a l t h o u g h r e m a i n i n g legislatively separate. T h e 1955 system (still in force t o d a y ) , also introduced r e f u n d s f o r prescription costs, and covers all kinds of out-patient care, medical and hospital treatment, etc. M a t e r n i t y benefits (available since the m i d - 1 9 3 0 s ) , w e r e also integrated into the insurance system 28 . S o m e y e a r s later a c o m p u l s o r y e a r n i n g s - r e l a t e d national s u p p l e m e n t a r y pension scheme w a s established. This proved to be the most controversial of the p o s t w a r social policy reforms. P a r l i a m e n t passed the Social D e m o c r a t i c proposal in 1959, after a g o v e r n m e n t a l crisis (the end of the Social D e m o c r a t / A g r a r i a n coalition), an advisory r e f e r e n d u m , a dissolution of p a r l i a m e n t , an extra election in 1958, and a final d r a m a t i c vote in the second c h a m b e r , w h e r e the m e a s u r e w a s passed with a m a j o r i t y of one vote 29 . T o g e t h e r with the decisions on health insurance and e a r n i n g s - r e l a t e d pensions, the flatrate i n c o m e m a i n t e n a n c e p r o g r a m m e s of the late 1940s w e r e supplemented by e a r n ings-related schemes to f o r m the t w o g u i d i n g principles of p r e s e n t - d a y social insurance in S w e d e n . From the e a r l y 1960s there w a s a f o r c e f u l expansion in t w o important areas of public services: health c a r e and education. Hospital treatment has a l w a y s fallen within the c o m p e t e n c e of r e g i o n a l g o v e r n m e n t in S w e d e n , but in the mid-1960s the c o u n t y c o u n cils b e c a m e the sole health a u t h o r i t y , in that out-patient services and psychiatric c a r e w e r e transferred f r o m the central g o v e r n m e n t 30 . T h e municipalities also contributed to this development in providing c a r e for the a g e d , children, etc.

Historical Synopsis

11

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The Swedish school system in the mid-1940s was rather old-fashioned, with a six-year compulsory elementary school followed by various forms of higher education from secondary schools to universities and professional colleges. Like most European countries, Sweden has extended the period of compulsory education to the age of 16 (today this is 17 or 18 in practice). A decision in this direction was taken in 1950, with the start of a ten-year 'trial period'. The final law on the implementation of a nine-year compulsory school was passed, after several controversies, in 1962, and was followed by various changes in the rest of the educational system 31. During the fourth phase of welfare development in the mid-1970s, the above mentioned programmes were extended, often related to the expansion of manpower policy: a combined earnings-related and flat-rate parental insurance for both sexes, covering childbirth and early child-minding coinciding with a major increase in public day nurseries; dental insurance for all adults covering 50 percent of individual costs; extended entitlements to old age and invalidity pensions combined with a general lowering of pensionable age; an expansion of education allowances under various employment creation schemes; and an extension of entitlements to housing allowances for all low-income groups and tax-credits to house owners. The fifth period of welfare state development will be dealt with in Section VII. As indicated, special welfare boards play an important role in the implementation of social reforms in Sweden. Peculiar features of the Swedish political and administrative system are the independent tax-raising power of the three levels of representative government (state, county councils, and municipalities), and the sharp distinction between Ministries and Boards (ämbetsverk) 32. The boards are often headed by powerful Director Generals and are responsible for a well-defined field of operation. They are often set up after major institutional changes when parliament has approved important laws. Table 2 summarizes the development of welfare boards with a brief picture of their administrative competences. These boards are funded by the state budget, with the exception of the National Social Insurance Board and the National Board of Industrial Safety which are mainly financed from social security payroll contributions. Besides the central authorities, the health sector is run by regional county councils, which have their own tax-raising powers, and social provisions (old age care, child minding, home services, etc.) are undertaken by the 284 municipalities, each of which has tax-raising powers. The decentralized character of the Swedish tax system may have facilitated the rise of social outlays which will be considered in the next section.

II

Resources and clienteles: descriptions

1.

Postwar expenditure growth - a summary

In respect of expenditure the figures reveal tremendous changes during the development of the welfare state. In relative terms, public expenditure as a percentage of GDP increased from 24 percent in 1950 to 62 percent in the late 1970s (Graph 3). The rapid growth follows a linear trend with no unexpected variations. The same p a t t e r n is f o u n d in a b s o l u t e figures at c o n s t a n t prices ( G r a p h 4). T h r o u g h o u t

the

postwar era there has been a continuous rise in public, particularly social welfare expenditure and major changes in resource allocation 33.

Recources and Clienteles: Descriptions Graph 3

13

Total public and total social expenditure as a % o f G D P

Graph 4

at constant (1975) prices (in billion S K R )

A disaggregation of public expenditure by economic category into what is actually 'used and produced' in the public sector and what is just 'passing through' gives us an overall picture of two more or less constant and two changing categories (see Graph 5). The shares of public consumption and interest on the public debt are relatively stable, though the former has declined slightly. Consumption constitutes around half of public expenditure, while interest on the public debt oscillates at around 5 percent. In contrast, transfers and subsidies, and public investments rose and fell respectively. For two-thirds of the postwar period the unbroken O E C D series indicates an almost linear rise for transfers and subsidies, while public investment is characterized by a marked decline from the mid-1960s 34 . Disaggregating public expenditure by level of government reveals a pattern of stability in the first postwar decade (see Graph 6). The municipalities were the main spenders, with 40 percent of total public expenditure; followed by central government (almost a third); social insurance (almost a fourth); and regional government (less than a tenth). From the 1960s, the overall trend shows a marked increase in regional government outlays, closely related to the expansion of the health sector. By 1980, both regional and central government account for a sixth of public expenditure. In the 1970s, social security grew at the expense of central state activities. Only the municipal share remained almost unchanged throughout the period, contrary to the widespread dualistic conception of the trend as a change from central to non-central government spending. Nevertheless, the pattern of relative decentralization remains, if central government and social insurance expenditure is contrasted with that of regional and local government: a shift from 52/48 in 1950 to 44/56 in the late 1970s 35 . In addition to an analysis of expenditure data by economic category and level of government, trends in public finance can also be examined in terms of functional breakdowns. This is a difficult task, but on the basis of a careful investigation of Swedish expenditure figures up to 1958 and smaller follow-up studies covering from 1958 to 1980 we can obtain at least an approximate picture 36 . The changes shown in Graph 7 are not dramatic, but the growing importance of the welfare state in relation to other public tasks is reflected there. Welfare constitutes the largest expenditure item during the entire period. Defence has dropped from just below 20 percent at the

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Recources and Clienteles: Descriptions

15

beginning of the postwar period to below 5 percent in 1980. Economic services including transportation and the promotion of various infrastructural activities, have been stable throughout the entire period, oscillating between 15 and 20 percent of total public expenditure. While non-allocated items (including interests paid on the national debt) have remained reasonably stable, general administration involving justice, and internal order has moved f r o m just below 10 percent to nearly 15 percent.

Public employment T h e expansion of the public sector, in addition to representing an explosive increase in costs and an enlargement and multiplication of social programmes, is also reflected in the changes in employment structure. Public sector employment (excluding stateowned firms in the competitive sector), rose from around 10 percent in 1950 to a third of the labour force 30 years later. T h e absolute number trebled from under half a million to almost one and a half million 3 7 , many of whom are part-timers. This has also greatly increased the proportion of women in the labour force. T h e expansion in employment has mainly occurred in the welfare sector, particularly in public health and social services (see Table 3). This growth of employment in the public services has been accompanied by a sharp contraction in agriculture, leading to a social redeployment of the entire working population during the postwar era.

Table 3

Size and structure of public enployment (a) 1950 1,000

%

1960 1,000

Jf

1965 1,000

1970 1,000

i

1975 1,000

IC

1980 1,000

(

By level of government: General civil service, defence, and public enterprises (b)

214 (45.1)

316 (52.9)

356

296 33.4

406 33.9

441 30.3

Other central govt, financed (c)

31 (6.5)

62 (10.4)

82

173 11.9

117 13.2

137 11.5

County councils

171 19.3

257 21.5

353 24.3

Municipal councils

302 34.1

396 33.1

488 33.5

8y function (d): Education

73 (15.4)

Health Social services Total public employment (e) Labour force (f) Public eapl. as Jt of labour force

(475)100.0

-IÄ (20.8)

155

209 23.6

265 22.2

297 20.4

137 (22.9)

176

243 27.4

329 27.5

425 29.2

51 (8.5)

81

162 18.3

233 19.5

298 20.5

(597)100J)

3 093

3 M

15.4

18.4

886 100.0 3 697

1 196 100.0

1 455 100.0

3 913

4 098

4 318

22.6

29.2

33.7

(a) The table is based on different series of official statistics which explains the incompleteness and inconsistencies. For the problees of public employnent statistics, see A. Kruse, Den offentliga sektorns sysselsättningsutveckling i Norden under 1970-talet. BAUT-rapport 1983, 8, Nordiska MinisterrSdet, Oslo 1983. Figures in brackets not comparable with percentage-figures without brackets. (b) Public enterprises include a total of seven central government agencies (Post Office Administration, National Telecommmications Administration, Forestry). They exclude public enterprises in the competitive sector fro« 1970 to 1980, but not from 1950 to 1965. (c) Mainly employees in the school system (Ά},000 in 1980), which is administered by local councils, but financed by central government, and employees in social insurance offices (ca. 15,000 in 1980). (d) For the definitions of these categories, see SCB, I render och prognoser 1980, IPF 1980, 4; figures for 1980 refer to 1979. (e) The figures for 1950 and 1960 include employees in government-owned business enterprises in the competitive sector. (f) The figures for 1950 and 1960 are not completely comparable with those for 1965 onwards.

Sweden

16

Social expenditure T h e amount of money spent on welfare has grown in relation to G D P and in absolute figures (see Graphs 3 and 4). Its share of G D P more than trebled, rising from 11 percent to 34 percent between 1950 and 1980. T h e exact amount of social outlays is not easy to summarize as they are taken from different public and semi-public sources 38 . O n an aggregated level, social expenditure includes most of the spending f o r education, health, income maintenance and social services. Taken together, these give a rough picture of the welfare share of total public expenditure. Due to Swedish statistical classification, expenditure on housing is not included in full, which means that in general social expenditure is somewhat underestimated. In order to investigate the development of welfare, a disaggregation of social expenditures is given in Graphs 8 and 9. Income maintenance, although declining for the major part of the period, forms the main part of public welfare outlays throughout the postwar era, i.e. between half and more than a third of all welfare expenditure consists of cash benefits. Education comes second up to the mid-1970s, growing during the two first decades with a peak in the early 1960s of almost a third of total social expenditure, but declining in the 1970s. Health expenditure (including hospital and out-patient services l?ut not sickness insurance), increased its share from around 15 percent at the beginning of the postwar period to around 25 percent at the end. Social services are the fourth and smallest item of expenditure. They comprise such disparate items as benefits in kind to families and children, old age and invalidity services, employment exchanges and retraining programmes, and industrial safety provisions 39 . Social services expenditure remained fairly steady at below 10 percent until the mid-1960s. After this time expenditure increased slowly, reaching a relative share of 15 percent at the end of the period. Social service costs partly follow the overall upward trend at constant prices (see Graph 9), but the take-off' was retarded and can

Graph 8

S o c i a l e x p e n d i t u r e by major component percent distribution

Graph 9

at constant 11975) prices (in billion S K B )

Recources and Clienteles: Descriptions

17

be dated to the mid-1970s. T h e overall pattern of social expenditure (see Graph 8), is consistent with Sweden's high level of public consumption expenditure (the highest among the O E C D countries), but with lower levels of expenditure on transfer payments (these latter are, however, still high relative to other O E C D countries). Breaking down income maintenance further into pension programmes, sickness insurance, occupational injury insurance, housing allowances and various family and child supplements, - unemployment insurance, social assistance (poor relief), reveals the changing structure (Graph 10). Graph 11, which shows the distribution of income maintenance expenditure by type of benefit, reflects the relative shift from universal flat-rate benefits to earnings-related benefits. Up to the mid-1960s, flat-rate benefits accounted for two-thirds of all income maintenance expenditure. During the first postwar years, income and means-tested benefits ranked second, with a peak in 1954 when they made up almost a fifth of the total public redistribution system. From 1955 onwards, when universal sickness insurance was introduced, earnings-related benefits started to increase their relative share. This development was pushed forward by the second important earnings-related programme, supplementary pensions, which were introduced in 1959, the first pensions being paid in 1963. Sickness cash benefits were revised in the same year (and also in 1967). Throughout the period earnings-related

Graph 10

Income maintenance by major component

Benefits by scheme percent

distribution

Graph 11

Benefits by type percent

distribution

18

Sweden

schemes strengthened their relative position, with flat-rate programmes deteriorating to a level of just over a third at the end of the 1970s. Due to inconsistencies in the statistics, however, we should not exaggerate the differences between the two major types of income maintenance programme, although earnings-related benefits obviously represent the chief item today 40. In relative terms, basic pensions have been the main expenditure item for the entire postwar period (see Graph 10). This is true despite a decline from over 50 percent in the 1950s and 1960s to around 40 percent in the 1970s. During the latter part of the period, supplementary pensions became more important, and displaced sickness cash benefits as the second main expenditure item. Taken together, expenditure on basic and supplementary pensions never fell below half of total public expenditure on income maintenance. Child allowances have dropped from second (during the first half of the 1950s), to fourth position (1980) as a social expenditure item. In percentage terms, the drop is even sharper: from 25.2 percent in 1950 to 6.0 percent in 1980. During the second half of the 1970s, parental insurance (previously maternity benefits), increased its share of income maintenance expenditure, reaching 4.3 percent in 1980 and approaching the level of child allowances. Expenditure on family housing allowances, other family cash benefits (mainly maintenance allowances to single-parent families), and unemployment insurance (not included in Graph 10), oscillated between 1 and 4 percentage points throughout the period. Means-tested public assistance and occupational injury insurance ranked fourth and fifth in the early postwar period, after which time both diminished drastically in importance.

2.

Single programme development

Old age and invalidity pensions and services Taking pension programmes and connected services as the starting point of this section, again stresses the importance of retirement as the core provision of the welfare state. The expenditure development is given in Graphs 12 to 14. As mentioned earlier, universal pension rights are a governing principle dating back to the beginning of the century in Sweden. However, the 1948 decision trebled the real value of the old pension, enabling pensioners to live on pensions for the first time, albeit at a low standard of living. This decision meant that the early anticipatory universalistic principle - pensions for all citizens, not just employees - was maintained, that the means-tested elements were abolished and a flat-rate pension introduced, though it differed for single persons and couples. In the following years several improvements were made. Indexation was introduced in 1951, and income-tested municipal housing allowances became available on a nationwide basis in the mid-1950s. An invalidity pension along the lines of the old age pension was provided from 1948 onwards, and the similarity between the two was preserved when the supplementary pension scheme was established. The similarity also holds true for survivors' pensions (widows and orphans), although they remained income-tested until the end of the 1950s. The relations between the three types of programmes are given in Graph 13, showing a growing role of invalidity pensions in the early 1970s, when the right was extended to the elderly (between the age of 60 -sometimes even 55- to 65), with physically strenuous work or those unable to find a job on the open labour market.

Recources and Clienteles: Descriptions

19 Expenditure on Pensions

Graph 12

Graph 13

Graph 14

percent distribution

percent distribution

at constant (1975) prices (in billion SKR)

In 1963 the national supplementary pension (ATP) came into effect, and paid pensions (initially at a low level) to all three kinds of pensioners. Being an earnings-related benefit, the pension level is calculated on the basis of the previous earnings and years of employment (see Appendix volume). Employees are expected to receive an old age pension which is equivalent to roughly 60 percent of their average income in previous years after 30 years of employment. T h e new pensioners of 1979 were the first to receive a full supplementary pension from the A T P system. Since the late 1960s, there have been several reforms of the pension system: a special pension supplement for pensioners with a low, or no A T P benefit, was introduced in 1969; various changes in special child and handicap allowances or supplements were made; and from 1976 the retirement age was lowered from 67 to 65 with the option of retirement at any time between the ages of 60 and 70. T h e latter legislation is clearly seen in Graph 13, with an upward jump in that year for old age pensions. T h e growing importance of the supplementary scheme is obvious from Graph 12, where the basic pension declines in relative terms, all the more so in that the latter includes housing allowances for the elderly and disabled. Services for the old and disabled constitute a minor expenditure item throughout the entire postwar period, though increasing from 5 percent to 15 percent of total pension costs. Purely geriatric care consists of residential homes for the very old and of home help services, a term for a variety of activities which have expanded since the late 1960s and which now benefit some 300,000 pensioners. Municipal pensioners' dwellings are an intermediate form of housing care, which presupposes a high degree of self-help. About 60,000 of the country's 1,4 million retired persons live in residential homes and about 80,000 live in pensioners' housing. T h e great majority of persons over 65 live in ordinary housing. Since the end of the 1960s the numbers of beds in residential people's homes

Sweden

20

has hardly changed and instead local authorities are now constructing service buildings or ordinary apartments with access to social services. Besides this, improvements in handicap services also contribute to the rising service costs.

Health and sickness insurance T h e administration of voluntary sickness insurance by local friendly societies was finally brought to an end in 1955, when a compulsory insurance scheme with earningsrelated cash benefits was introduced, replacing low contribution-related benefits (thus making it possible to separate benfits in cash and kind, see Graphs 15 and 16). Maternity benefits (see Graph 19) were integrated into the new system which in addition covers costs of all kinds of medical benefits not covered by public health or fees. Important changes have since been made by parliament: the administrative integration of pensions and sickness insurance when sickness cash benefits were related to net earnings and simultaneously raised to 70 percent in 1963; the abolition of initial no-benefit days together with an improvement in the replacement ratio to 80 percent of net earnings in 1967; the calculation of earnings-related benefits on the basis of gross income, thereby raising the level to 90 percent of taxable income in 1974, when, moreover, general health insurance was extended to cover dental treatment.

Graph 15

Expenditure on sickness and health percent

distribution

3! c o n s t a n t

Graph 16 0S75I

p r i c e s ( i n million S K R )

Health services, the major item, grew much more continuously during the postwar period, accelerating in the 1960s. Hospitals have been the responsibility of the county councils since the mid-nineteenth century, and in the mid-1960s almost the entire health system became a regional public competence. T h e 1960s saw the start of a forceful expansion in the health sector, with new hospitals being built throughout Sweden. Seven regional hospitals, affiliated to medical schools for research and training and serving about one million people each, were created in order to offer a high degree of specialization throughout the country. Later on, the public out-patient services were expanded in order to create a system of preventative health care, thus relieving cost pressure from the more expensive hospitals.

Recources and Clienteles: Descriptions

21

The fact that almost all health care is public entails heavily subsidized fees. Traditionally, fees for public medical treatment and hospital care have been very low. The introduction of compulsory health insurance in 1955 allowed universal access to medical services. The seven 'Krona-reform' in 1969, had similar goals whereby a low, uniform fee was introduced for the entire out-patient medical care system, including the majority of the private practitioners (reimbursed by sickness insurance included under 'medical benefits', see Graphs 15 and 16). Since 1955 the relationships between the three major health expenditure items have been stable, although the legislative changes, mainly in sickness insurance, are partly visible as 'jumps' in the graphs. In addition to reimbursement in connection with fatal accidents, occupational injury insurance (not included in Graphs 15 and 16), which has been in existence since the beginning of the twentieth century, now covers serious industrial accidents, sickness lasting for over three months, and many diseases listed in the Work Environment Act. The minor changes in the overall expenditure pattern of this insurance reflect the spread of alternatives provided by newer forms of social insurance during the last 30 years, but probably also, according to recent research, the administrative difficulties for claimants to obtain their rights 41.

Unemployment The stress on employment programmes in contrast to reliance on unemployment insurance goes back at least as far as to World War I. This was confirmed when the National Labour Market Board (Arbetsmarknadstyrelsen, AMS), was established in 1948, taking charge of the then nationalized local employment offices, and acting as superintendent of the heavily state-subsidized and trade union controlled unemployment insurance benefit societies. At the same time, the doctrine of active manpower policy was formulated as a measure to restructure Swedish industry with trade union support 42. With the exception of the peculiar case of the first postwar decade, unemployment insurance has never been an important expenditure item on its own, while the sums spent on manpower policy have been considerable. In the early 1950s, unemployment was almost non-existent, apart from seasonal variations, but even so, the largest part of social expenditure was made up of cash benefits which never accounted for less than 40 percent in the first postwar decade (Graph 17). The importance of the centralization of employment offices is shown by the expenditure on employment exchanges and careers' services which constitutes the second largest expenditure item up to the end of the 1950s starting at a level over 30 percent. The situation altered around 1960, after the first postwar recession in Sweden (shown in Graph 18). From the 1960s onwards, the AMS acquired a powerful position in Swedish politics as the implementor of the active manpower policy. AMS activities have grown immensely during the last two decades as new programmes have been added to old ones: training services, mobility allowances, educational allowances for retraining, employment creation schemes, regional development grants, occupational rehabilitation schemes, etc. (most programmes belonging to 'retraining' in Graphs 17 and 18). Deliberate attempts have been made to integrate groups formerly outside the labour market. The proportion of women in employment has increased markedly. Despite many shortcomings, the position of the disabled has become stronger on the labour market, and persons with severe occupational handicaps have been given sheltered jobs. Since 1980, these jobs are offered by a special state enterprise (Samhällsforetag) with some 22,000 employees throughout Sweden.

22

Sweden

In the 1960s the rise of employment programmes was in particular related to the problems of regional unemployment in Northern Sweden, while the tremendous growth of subsidized work and retraining programmes in the late 1970s was linked to the effects of the world economic crisis on the Swedish economy (particularly steel and shipbuilding) (see Graph 18). In this period the relative importance of unemployment cash benefits grew somewhat, while public outlays on employment office and vocational guidance have been fairly stable since the 1960s. Otherwise the yearly fluctuations between expenditure items visible in Graph 17 are mainly due to selective manpower measures to counteract unwanted consequences of economic development. Even if postwar manpower policy has been regarded primarily as part of a general economic policy, it is important to underline its social policy dimensions. Employment has been maintained and even increased over a long period, unemployment rising to only 3 percent in the worst years. G r a p h 17

E x p e n d i t u r e o n unemployment perçant distribution

i t constant (1975) prices lin million

G r a p h 18 SKR)

In comparative terms, unemployment insurance is underdeveloped both in relation to other forms of social insurance and by international standards. This is primarily due to the combined effects of trade union strength and the success of the active manpower policy. Despite years of parliamentary and governmental investigations and the many reports made by State Commissions, unemployment insurance has not been fully integrated into the national social security system 43 . It is still formally a voluntary insurance organized by unions and their benefit societies, although most unions have made it compulsory. From 1974 the insurance scheme was supplemented with a state administered unemployment assistance benefit for unemployed persons not enrolled in a benefit society, or society members not entitled to benefits.

Families and children While the importance of pensions, health and unemployment schemes has grown during the postwar period, the same is not true for family support. Family policy was formulated in intense debate in the 1930s and culminated with the introduction of general child allowances in the immediate postwar years. Since then social expenditure on families and children shows a declining trend.

Recources and Clienteles: Descriptions

23

L o o k i n g at the internal c o m p o s i t i o n ( G r a p h 19), child allowances initially m a d e up the d o m i n a n t part, but steadily diminishing in importance, and constituting only a quarter of total outlays in the late 1970s. T h e reverse pattern is s h o w n by expenditure o n family services, with just below 25 percent in the early 1950s, and r a n k i n g first at the end of the period at a r o u n d half of total family expenditure. T h i r d l y , the i m p o r tance of parental insurance, introduced in 1974, has g r o w n over the last years. In 1948 the old system of tax deductions f o r children, which f a v o u r e d the wealthy and had a negligible effect on the p o o r , w a s replaced by a general child allowance. U n l i k e the basic pension, the child allowance has never been i n d e x e d ; instead, parliament has a u g m e n t e d it occasionally, a m o d e of decision-making motivated by the minor role which the allowance plays in expenditure on child-rearing. H o w e v e r , this m e a n t that the real value ( G r a p h 20) of a g g r e g a t e expenditure on child allowances s t a g n a t e d during the first ten years, while increasing also in real terms subsequently.

E x p e n d i t u r e on f a m i l i e s and c h i l d r e n

G r a p h 19 percent

at constant (1975) prices lin million

distribution

Graph

20

SKR)

child allowances 6000

4000

maternity/

child allowances

parents

2000

other cash benefits

I— 1950

r 55

T h e main part of family services up to the m i d - 1 9 6 0 s w a s constituted by traditional public child w e l f a r e measures, a stable number of d a y nurseries, and subsidized school meals. A f t e r that, paralleling the s u d d e n increase in f e m a l e employment, the growth of family services is characterized by the expansion of municipal d a y - c a r e centres, built up with state s u p p o r t (see G r a p h 19). Central g o v e r n m e n t subsidies were further a u g m e n t e d in 1974 in an e f f o r t to improve the supply of public d a y care (see G r a p h 20). In the period 1965-1980, the number of places in d a y nurseries increased tenfold, a m o u n t i n g to over 120,000 today. A r o u n d 17 percent of all children under school a g e had places at d a y care centres in 1981. A n o t h e r f o r m of child minding is family dayc a r e ; the municipality hires child minders, w h o take o n e or m o r e children into their o w n h o m e s . In addition, there is also private family day-care. In 1974, v a r i o u s m o t h e r h o o d and maternity benefits were t r a n s f o r m e d into a m o r e u n i f o r m parental insurance (equal f o r both sexes) and the period covered by insurance (giving earnings-related benefits at the s a m e level as the sickness insurance or, f o r the n o n - e m p l o y e d , a small flat-rate s u p p o r t ) w a s also substantially extended (a minimum

24

Sweden

of up to 180 days - see Appendix). In absolute figures, parental insurance has grown spectacularly, during the first seven years that it has been in operation (1974-1980) (see Graph 20). Maintenance advances constitute the major part of 'other cash benefits' (see Graphs 19 and 20). They were mostly paid privately or, after a court ruling, by the non-custodial parent. Today, however, they are often paid in advance by public welfare authorities in order to safeguard children from parental omission or inability to fulfill the obligation (this scheme has been in operation on a smaller scale since the late 1930s). Repayment is made to the government, which recovers almost a third of the annual expenditure. The growth in expenditure on this item in the 1970s reflects the awareness of, and adaptation to changing family composition. Unlike the general child allowance, advance maintenance is indexed, thus keeping pace with the overall growth of living costs.

Education Generally speaking, education has always been a public competence in Sweden. In the old parallel school system pupils were divided at an early age between a closed academically oriented training system, and poor primary education. The system was much criticized even prior to World War II, and in the immediate postwar period measures were taken to modernize the system. Nevertheless, the final decision to introduce a nine-year comprehensive school for all children aged 7 to 16 was only taken in 1962, with its implementation planned over a ten-year period. Subsequent to the reform, girls' schools disappeared and education was formally equalized between the sexes. In the mid-1960s the upper secondary and vocational schools were combined to form an 'integrated upper secondary school' for those aged 16-20. These schools recruited almost 90 percent of pupils aged 17, mainly for courses lasting from two to three years. This meant that the length of schooling increased from an average of seven years in the late 1950s to eleven years in the early 1970s, i.e. that normal school leaving age rose from 14 to 18. During the late 1960s and early 1970s municipal adult education was developed and entrance to university was broadened. Earlier forms of adult education, such as residential folk high schools, which were state subsidized but usually connected with the popular movements (temperance, free church and working class), have adapted to changing conditions and still offer courses which both complement, and provide alternatives to, the formal school system. Changes in higher education occurred when the wartime baby boom reached university age. A university reform was proposed in 1968 and became effective a year later. It introduced strictly organized undergraduate courses (three to four years) in the arts and sciences, together with shorter occupational courses. University entrance was opened up to those with no formal qualifications but with five (later four) years of gainful employment and some language training. During this period the number of universities increased from four to six, one of the newcomers being Umeâ in the far North. In the late 1960s several satellite colleges were established, offering a wide range of undergraduate courses. This latter type of decentralization was taken still further in the 1970s, when all h i g h e r e d u c a t i o n a l i n s t i t u t i o n s w e r e g i v e n e q u a l s t a t u s w i t h i n an integrated tertiary educational system under the jursidiction of six regional higher educational authorities (högskoleregioner).

Recources and Clienteles: Descriptions

25

T h e rapid growth of education expenditure in the middle of the postwar period, when the compulsory school system was built up, is clearly shown in Graph 21. In real terms schooling absorbed five times more resources in the late 1970s than it had done 30 years earlier. Graph 21

Expenditure on education at constant 11975) prices (in million

SKR)

In the mid-1960s an extended child allowance was introduced for pupils in upper secondary schools aged 17-18, together with several income- and means-tested educational allowances for pupils up to the age of 20. At the same time a combination of general educational allowances and long-term, interest free study loans, irrespective of parental income, were introduced for university students. As a public 'expenditure' item, they have more than doubled in real value (see Graph 21 and the Institutional Synopsis in the Appendix volume). Already mentioned under 'families and children' were the more 'purely' social policy reforms in the field of education, such as free school meals, school health and dental services, and, most recently, municipal extra curricula recreational activities.

Housing Housing policy developed out of the public control of both construction and the housing market, i.e. rent controls introduced at the beginning of the war and subsequently institutionalized by the National Housing Board set up in 1948. Rent control

26

Sweden

was gradually phased out from the late 1950s until 1975. In addition forms of building control and urban planning at all government levels, entails the following economic support measures: housing construction subventions, tax deductions for interest paid on housing loans, allowances to subsidize rents for low income-earners. Graph

22

Expenditure on percent

distribution

housing

to the various housing policy loans, interest and housing

Graph at c o n s t a n t 11975) p r i c e s l i n million

23

SKR)

The promotion of housing construction by granting long-term and low-interest loans was introduced after World War II in reaction to the war and postwar housing shortages, migration and urbanization. Since the 1950s, over 90 percent of all newly constructed housing has been subsidized by the state in this way. In relative terms (see Graph 22), the importance of loans as an 'expenditure' item has continuously diminished. At constant prices, however, (see Graph 23) they increased in the mid-1960s when parliament decided that one million apartments should be built in a decade (mainly in the form of municipal multi-dwelling houses; the plan was pursued). A second increase occurred in the late 1970s when a great many single-family houses were constructed in response to new market demands. Interest subventions were initially designed to protect rents from effects of temporarily high interest rates but were soon regarded as a necessary complement to other housing policy measures in an economy with lasting inflationary tendencies. The role of these subsidies grew in the late 1950s and early 1960s. However, as they were technically difficult to operate, an attempt was made in the late 1960s to replace them by an altogether different system intended to adjust both interest rates and repayments on the loans to inflation. After a few years, the new system proved politically difficult to handle and in 1974 interest subventions were reintroduced. Immediately, they almost trebled in real value as compared to the year when they were temporarily abolished. In the 1970s their relative importance became almost equal to expenditure on both traditional housing allowances and the annual figure of public housing loans (see Graph 22).

Recources and Clienteles: Descriptions

27

In addition to providing loans and interest subventions, the state also supports owneroccupiers by granting tax credits (i.e. all taxpayers have a statutory entitlement to claim deductions for interest expenses). As a consequence of the reformulations of housing policy in the mid-1970s and the increase in the number of single-family houses, these tax deductions for house owners have become much more important in recent years. In the 1970s they became the outstanding item of housing 'expenditure' and in absolute figures trebled between the beginning and the end of the decade (see Graphs 22 and 23). Housing allowances for low-income earners were introduced for large families and pensioners in the late 1940s and early 1950s (some small programmes existed as early as in the 1930s), and were subsequently extended to other groups in the 1970s. Expenditure on housing allowances for pensioners has increased steadily in real terms, while allowances for families first stagnated and then increased rapidly in the late 1960s and early 1970s. Subsequently the latter diminished and then stagnated again in the midand late 1970s. 3.

Public revenues

From the preceding chapters we can see that there has been an increase in the public provision of welfare, either through the extension of existing schemes, or through the introduction of new benefits and services. The public expenditure pattern for this period is one of rapid growth, in absolute and relative terms 44. A descriptive picture of the welfare state taken from the expenditure side only, would - at least in the long run - be misleading without the necessary information from the Treasury concerning public revenues. The relationship between income and outlays, however, is extremely complex and one should be cautious in comparing figures of the two sides of the public household. N o single coordinating cashier exists, although the Minister of Finance plays this role in public opinion. Social security funds are tightly controlled by central government, but local government (municipalities and county councils) has a great degree of independence as regards taxation and borrowing, although the latter is formally controlled by the Central Bank 45. This section gives a brief outline of the sources of public finance. As shown in Graph 24, total public revenues as a percentage of G D P have increased steadily from the early 1950s to the early 1970s, doubling their share from 25 to 50 percent. After a brief relative decline in 1972, as a consequence of economic recession, growth was resumed until the late 1970s when decline restarted (in relative terms). On average, total public revenues have grown annually by 6.4 percent, but growth rates have varied considerably. In the 1950s, revenues grew from 25 to 30 percent of GDP. In the 1960s, growth rates accelerated rapidly and were, with the exception of 1966, all above the average of the entire postwar period. In the 1970s, average growth rates were the lowest of the three decades and simultaneously had the greatest variations. Comparing revenues with expenditure for the first 22 years after 1950, revenues exceeded expenditure and this surplus became more apparent in the 1960s. This helps to explain the continual demands for a reduction in income tax. These demands were not based on the traditional principle of a balanced budget, but on the Keynesian notion of deficit spending, first introduced by the Social Democrats in the early 1930s and defended intellectually by Gunnar Myrdal in a 1933 amendment to the state budget. Counter-cyclical policies were formally introduced as a principle of budgetary policy in 1937 46. These principles were never seriously questioned in the postwar years of full employment and inflationary pressure.

28

Sweden Graph 24 General government revenues and expenditure as

%

of G D P

Graph 25 General government revenues by major category percent

distribution

direct t a x e s

social s e c u r i t y c o n t r i b u t i o n s .

other r e v e n u e s

- Γ 60

-

- Γ 70

A look at the composition of revenues (Graph 25), shows that at the beginning of the period direct taxes were the dominant item (about one half), followed by indirect taxes (almost a third), and social security contributions (about a tenth). Towards the end of the period, the shares became more equal, as a result of a broader and more differentiated tax base 47. T h e relative shift from direct to indirect taxes applies to the whole of the twentieth century. It reflects a development from 'visible' to what were previously regarded as more 'invisible' forms of taxation, a pattern not unique to Sweden, which may serve to avoid tax resistance. T h e overall changes in the composition of public revenues conceal some important internal changes in the development of direct taxes. Corporate taxes have been of negligible size since the late 1950s, the share of the progressive national income tax gradually diminished over the entire period, whereas the share of the proportional local (municipalities and county councils) income tax increased. Central government transfers to regional and local authorities have grown even more, increasing their share in local government finance from a fifth to a third. O n the central level, fiscal policy has been an area of contention between government and opposition throughout the postwar era, with the possible exception of the 1960s 48 . Demands by the opposition for lower income tax were raised nearly every year. At the same time, whenever a new major tax reform was introduced, the Social Democrats defended it on the grounds that welfare reforms force the state to find new sources of revenue. T h e first important clashes on fiscal policy occurred as early as 1947, when the 'war taxes' were incorporated into the peacetime taxation system (some of them were eventually abolished), and later in 1959, when a parliamentary decision on general sales tax was taken with only a very small majority (with extremely reluctant Communist support). Furthermore, the general payroll tax has been a matter of dispute since its introduction in the late 1960s. O n the other hand, the replacement of the general sales tax by a value-added tax in 1968, and the continuous increase in social security contributions was, at least until the mid-1970s, supported by all major parties.

Recources and Clienteles: Descriptions

29

The enlargement of the public sector has meant increasing taxation, but in contrast with the other Scandinavian countries, particularly Denmark, there have been relatively few signs of a welfare backlash in the form of a tax revolt 4 9 . This is true even where the parties on both the right- and the left-wing have tried - sometimes successfully - to make tax issues politically controversial. 4.

Single programme financing

As we have seen, the overall structure of Swedish public revenue has moved towards a more diversified pattern. This is reflected particularly in the fiscal balance of the welfare state. As the costs of welfare measures and social security are still to a considerable degree covered by the central government budget (only parts of it are funded locally), it is difficult to specify exactly how different programmes are financed. Education is mostly financed out of general taxation on a fifty-fifty basis by central and municipal budgets. This applies particularly to compulsory education and upper secondary education. Universities and research institutes are almost entirely financed by central government, while educational options which fall outside the traditional school system, (such as folk high schools, study circles, adult education, etc.), receive various types of government support. Housing is financed both directly by transfer payments and indirectly by tax credits. In the last ten years, the main part of public support for housing has become 'indirect', i.e. interest on housing loans is tax deductible (as a consequence of the general tax deductions related to interest paid on loans). Directly, central government subsidizes housing from general revenues, interest on housing construction loans, and contributes to municipal expenditure on housing allowances to pensioners, families with children and low-income earners in general. The provision, and to an increasing extent, the financing of public health services come within the competence of the county councils. Until the late 1960s, the financing of public health was shared on a seventy-thirty basis between the counties and central government. Since then the county councils' share has grown. Of this share, a smaller amount comes from fees paid for services in hospitals or out-patient medical centres, and from sickness insurance transfers to county councils. From the mid-1970s, employers also contribute to the health system (dental insurance). The pattern of sickness insurance financing has changed (Graph 26) during the period. In the early 1950s, when the system was voluntary, central government financed a third of total costs. With the exception of occupational injury insurance, employers did not make contributions to social security until sickness insurance became compulsory in 1955. From 1955 the employers' share of total revenue almost equalled central government support, while contributions from the insured continued to be the major component until the mid-1960s. Since then, employers' contributions have been the main source of financing, particularly since the mid-1970s when contributions from the insured were abolished (except those from the self-employed). At the time of the most recent change in rules in 1974, the insured, employers and central government paid one third each. Graph 27 shows the financing of basic pensions, i.e. old age and invalidity pensions, survivors' pensions and housing allowances. Until 1963, local government expenditure for basic pensions was totally absorbed by housing allowances. After 1963 these allowances were only partially financed by the municipalities. Following the 1948 reform, all basic pensions with the exception of housing allowances, were paid out of central

30

Sweden

government revenues, including an 'earmarked' amount (folkpensionsavgift) added to personal income tax. Until 1975, taxation was the main source of revenue, but in the late 1950s and early 1960s the earmarked contribution from the insured increased. In the mid-1970s, employers' social security contributions were introduced and soon became the major source of finance.

Graph 26

Graph 27

The financing of sickness insurance

The financing of basic pensions

by major source

by major source

percent distribution

percent distribution

80 -

70 -

employers centrai g v t .

60 -

/ \

50 -

40 /

insured

30 -

20 -

to

-

r-J ι^ local g v t .

v-—

In the latter part of the period under review a new scheme, the national supplementary pension, was built up, financed by contributions from employers and the self-employed. This scheme is administered by four extra-budgetary funds. As a system which accumulates capital, not only contributions, but also revenues from interest are important for its future fiscal balance. Unemployment insurance is operated through voluntary organizations closely connected with the trade unions. Until the mid-1960s, it was mainly financed by membership fees (see Graph 28). After this time central government revenues became the main source of finance until 1974, when employers' payroll contributions became payable. Similarly, welfare programmes such as parental insurance, industrial safety, and orphans' pensions have been increasingly financed by employers' social security contributions. On the other hand, general child allowances have always been financed out of central government tax revenues. The costs for family services are usually shared between central and local government. Services for the old are mainly financed out of municipal taxation, and employment programmes are financed from the central government budget.

Recources and Clienteles: Descriptions

31

G r a p h 29

G r a p h 28

T h e f i n a n c i n g of u n e m p l o y m e n t

insurance

T h e f i n a n c i n g of s o c i a l s e c u r i t y

by major source

by major source

percent distribution

percent distribution

\

central government

employers

local government

\ ι % 1I \ \

insured

/

\ j

employers

income

1950

ι

60

1

. « " ' f r o m funds

ι

70

I insured

1980

T o summarize the overall development of social security revenues (including income maintenance, health, and social services but excluding education and most of housing), at the beginning o f the postwar period benefits and services were largely financed by central and local government revenues and to a much smaller extent by individual contributions from the insured (see Graph 29). Employers' contributions did not exist, with the exception o f the occupational injuries insurance, where they made up almost 100 percent. In the 1960s and 1970s, welfare financing shifted away from the combination o f government and individual contributions - the latter being abolished, excluding schemes f o r the self-employed, in the mid-1970s - and greater emphasis was put on employers' social security contributions. This is particularly true f o r income maintenance programmes, with the exception o f child and housing allowances.

5.

T h e growth of welfare clienteles

T h e making o f the Swedish welfare state has its own particular history which is quite different from its continental counterparts, especially as regards the development o f income maintenance. Although Bismarckian legislation on workers' insurance in G e r many stimulated parliamentary debate and inquiry before the turn o f the century, its impact on the eventual introduction o f social insurance programmes was minimal 5 0 .

32

Sweden

As regards the Beveridge model, Swedish social policy showed signs of universality well in advance of the appearance of the new social policy model in wartime Britain, due to the combination of rural backwardness and industrial modernization. Structurally, the existence of a large agricultural population alongside a growing w o r k i n g class was an important precondition for the steps taken, both groups being mobilized in the process of transforming p o o r relief into welfare policy 51 . In 1913, parliament decided almost unanimously to introduce pensions with just a tiny opposition of voluntary welfare humanists and o r t h o d o x economists w h o feared the effect on w o r k incentives and the long-term fiscal balance. Nevertheless, the early breakthrough of the notion of universality was not decisive, and it is important to stress the mixture of universal eligibility and widespread income-tested assistance inherent in Swedish social policy. Although social class and selectivity were rejected as alternative criteria for social welfare provision, they were not altogether absent f r o m the pre-war system of social security. T h e y still constituted a w o r k i n g part of the pension system and family support, although with some modifications. In addition to the universal insurance schemes (pensions and occupational injury insurance), another type of insurance characteristic of the p r e - w a r Swedish welfare system was state-supported voluntary protection, such as sickness and unemployment insurance. Both of these had long-established links with popular movements, i.e. the free church, the temperance movement and the trade unions. These two represented a different kind of selectivity, excluding the very p o o r and weak. W i t h all their apparent shortcomings, prior to the postwar era, the above mentioned provisions together with traditional p o o r relief f o r m e d a rudimentary system of welfare protection against social evils. A f t e r W o r l d W a r II, the social security network was extended (see Table 4). By the late 1940s and early 1950s all the m a j o r social categories had been covered by a minimum of social protection by means of basic pensions, child allowances, and sickness and maternity insurance. From this date we can speak of a victory for universalism, as all citizens and even all residents were involved in the system of social transfers. T h e idea of universal eligibility is also apparent in the earnings-related schemes, including the above mentioned compulsory sickness insurance, where all economically active persons, irrespective of employment status or occupation, are entitled to sickness cash benefits in proportion to previous earnings, while the main part of the economically inactive population is included on a flat-rate basis, with the option of augmenting daily allowances on a voluntary basis. T h e self-employed are also included, t h o u g h f o r a long time they were entitled to contract-out of the earnings-related part of the compulsory schemes. Universality also characterizes the other m a j o r earnings-related scheme, that of supplementary pensions, which was established in the early 1960s at the same time as y o u n g people in the upper part of the education system were incorporated into the social security network. In the late 1960s and early 1970s, the (voluntary, but very common) unemployment insurance and basic and supplementary invalidity pensions were improved in order to cope with the worsening economic conditions. T h e s e improvements were particularly designed to protect elderly workers, although the amendments also affected other groups, e.g. unemployed y o u n g people, w h o also benefited f r o m the introduction of general unemployment assistance in the mid-1970s. Apart f r o m this, the organization of the unemployment insurance has not been altered, though several state commissions have suggested that it be integrated with general social insurance, making u n e m ployment insurance compulsory 52 .

Recources and Clienteles: Descriptions

33

34

Sweden

Other changes in the latter part of the postwar period shown in Table 4 are: the abolition of sexual discrimination in maternity insurance, i.e. its replacement by a parental insurance, with an equal entitlement of both parents to cash benefits after the birth of a child; and the introduction of a general dental insurance covering all adults (young people are covered by the school dental service). D u e to the character of the Swedish social insurance system, consideration of coverage in relation to the total or the economically active population during most of the postwar period is not especially useful. Either all citizens/residents or all economically active persons are/were entitled to benefits, and coverage is accordingly 100 percent. A thin minority of the economically inactive are not entitled to sickness cash benefits (Graph 30). This group has tended to grow slightly, thus reflecting the changing pattern of education and retirement at either end of the working population aged 15-64. T h e diminishing number of housewives covered by flat-rate sickness cash benefits is also shown in Graph 30, this being mainly an indication of the growing employment participation among adult females.

Graph 30

The coverage of social insurance schemes

Members of sickness insurance as % of the population

15-64

Graph 31

Members of unemployment ins. as %

of the labour force

In the case of unemployment, the situation is rather different. Unemployment insurance was originally linked to membership of an industrial trade union. Today, it is still voluntary and closely connected to the unions, but covers most of the full-time working population. As seen in Graph 31, the curve showing the insured as a percentage of labour force moves from just under 40 percent in 1950 to almost 80 percent in the late 1970s. T h e rapid growth of unemployment insurance in the late 1960s and early 1970s reflects the changes in the composition of the labour force and the increased unionization among women and salaried employees.

Recources and Clienteles: Descriptions

35

Table 5 and Graph 32 give a picture of the growth in the number of beneficiaries. The table reports the number of recipients in each income maintenance programme and the percentages of beneficiaries in relation to each target group. Graph 32 allows comparisons across schemes in relation to total population. But before entering the gardens of welfare, let us take a a quick walk in the brushwood of official statistics. It is difficult to quantify precisely the numbers of beneficiaries covered by each scheme. Official statistics usually report the number of benefits paid or cases, which overestimates the number of beneficiaries, because an individual recipient may make more than one application for benefit in a year (e.g. sickness cash benefits, unemployment insurance, social assistance, etc.), or may be in receipt of more than one benefit simultaneously (this applies particularly to pensioners). The data given in Table 5 and Graph 32 do, however, permit an approximate assessment of the quantitative growth of the various categories of beneficiaries, both absolutely (as actual numbers of, for example, pensioners), and as a percentage of the relevant risk group, and total population. Recipients of sickness cash benefits are by far the largest group of beneficiaries. The effect of the abolition of waiting days in 1967 is visible both in the figures given and in the graph. The recipients almost doubled during the years for which we have data (1965-1980) and nowadays more than half of the population aged 16-64 are in receipt of a sickness cash benefit at least once a year. Of course, for the great majority, these benefits are only temporary and thus do not constitute an important part of the recipient's income.

Graph 32 The clienteles of major Income maintenance schemes as * o ol total population

1950

60 *

households receiving housing allowances (excl. pensioners)

70

1980

36

Sweden Table 5

The

Basic Pensioners Old-age pensioners: Invalidity pensioners: Survivors' pensioners: Recipients of wife supplements:

c l i e n t e l e s

In As In As In As In

of

thousands % of pop. over 60 thousands % of labour force thousands Î of pop. over 60 thousands

As % of women 60-65

the

major

w e l f a r e

schemes

1950

1955

1960

1965

1970

1975

1980

603 58 130 4

664

739 59 143 4 50 4

827

947 61 188

1062 62

1363 76

289 7 151

27

293 7 127 7 56 24

420 26

757 42

174 4 176

209

g i

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( S R R S S î i ï S

S ,

R

s

Ρ

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M t\J

§ g

ï

S

R

et «

Mil

Iii it PiIt HiS! «

s

«

S

sJ «1

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S 'S

Ji I Pi

E s

§ 8 g ί

-S-

i Pi

§

LT\

" * t i

5

!

§

£

! A l A l A ' û > û t ^ C

g

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3 s

3 g

8

3 >

s

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g

g

g

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S

s

» C > - ® c e ® ( O C ' ^ O N O O O r r r N N

2

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s ä s k s s ^

88888888888888888888888 -3-

ρ

s

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cvj k S

γ— c o ο ι " ι λ t ^ œ O - s lt< u"\ LTN LTN ν

τ— τ— o r - - : — ® v - Í S τ * w - r— co σ * o r (Λ í o va

Ii! Hill! ílffli ÎHïi! Ιϊίιΐΐ e

„

1 1

' S fe C

Recources and Clienteles: Descriptions

39

T h e main reference point in the Swedish social security system is the base amount constructed in the late 1950s in conjunction with the supplementary pension, and linked to the consumer price index. It can be seen as a kind of subsistence level. Today pensions, sickness, parental, and occupational injury insurance and study loans are in various ways linked to the base amount. This not only determines the level of benefits, but also acts an an income ceiling in the supplementary pension system and sickness, parental and occupational injury insurance (income exceeding 7.5 times the base amount is excluded in the calculation of benefits). As seen in Table 6, sickness cash benefits have been augmented on at least three occasions during the postwar period. Initially a system comprising different replacement classes without an explicit goal it compensated up to 60 percent of net income from 1963. In the late 1960s, the level was increased to 80 percent, still of net income, while in the mid-1970s it was changed to 90 percent of gross earnings (this probably did not augment the benefit). T h e replacement rates for sickness insurance also apply in general to maternity shelter, though the minimum flat-rate benefit has been higher in the latter part of the period. When the gross income base was introduced, maternity benefits were replaced by parental insurance and the number of days for which this benefit could be claimed was considerably increased. In contrast to these apparent improvements, unemployment insurance benefits have fluctuated at around 50-60 percent of lost earnings, though a substantial increase was achieved in 1974, when a goal (never reached), was set at 90 percent. For most years, the majority of full-time wage-earners and salaried employees have been entitled to maximum daily allowances. O f all the above mentioned benefits, occupational injury insurance life annuities - not included in the table - at the maximum rate are the highest. In the case of permanent incapacity they amount to 100 percent of gross earnings. Basic pensions have been indexed since the early 1950s, but it was not until 1967 that they were tied to the base amount, originally at 90 percent for single pensioners and 140 percent for couples. In 1975, the fixed point was upgraded to 95 percent, while from 1969 there has been a special pension supplement, linked to basic pension and paid to all those with little or no supplementary pension. This supplement was augmented annually by three percentage points of the base amount up to 1976, when the increment was raised to four percentage points, thus giving a single pensioner a 'minimum pension' of 142 percent of the base amount in 1982 (95-47, in 1983 again raised to 96 + 48 = 144). Thus, besides the indexed 'basic pension', a considerable increase has been achieved by adding percentage points to the likewise base amountrelated pension supplement. With respect to the real value of benefits, Table 7 monitors the development of average benefits at 1975 prices. It shows that the real value of pensions has improved continuously, particularly since the payment of supplementary pensions started, while child allowances have changed less and thus reflèct the absence of indexation. From the early 1960s social assistance and housing allowances have been fairly stable.

Sweden Table 7

A v e r a g e b e n e f i t s 1950

1955

1960

1965

1970

1975

1980

19.0

8405 21.5

8983 20.1

8930 21.0

16.7

6703 19.4

8362 21.4

8665 19.4

9718 22.8

3694 13.2

5015 14.5

6001

6556

5836

15.4

14.7

13.7

1440 4.2

3081

5306

8735

7.9

11.9

20.5

3850

6521

9751

12143

11.2

16.7

21.9

28.5

2809 8.1

3342 8.6

3758 8.4

4259 10.0

BASIC PENSIONS Old-age at constant (1975) prices as % of aver, gross ind. wage Invalidity at constant (1975) prices as % of aver, gross ind. wage Survivors at constant (1975) prices as % of aver, gross ind. wage

m 16.6 4115 15.6 2611 9.9

4969 17.7

bin

SUPPLEMENTARY PENSIONS Old-age at constant (1975) prices as % of aver, gross ind. wage Invalidity at constant (1975) prices as % of aver, gross ind. wage Survivors at constant (1975) prices as % of aver, gross ind. wage

m

PART-TIME PENSIONS at constant (1975) prices as % of aver, gross ind. wage

11015 25.9

ALL PENSIONS Old-age at constant (1975) prices as % of aver, gross ind. wage Invalidity at constant (1975) prices as % of aver, gross ind. wage Survivors at constant (1975) prices as % of aver', gross ind. wage Housing allowances at constant (1975) prices

920

761

980

4.5

2.9

3.5

FAMILY HOUSING ALLOWANCES at constant (1975) prices as % of aver, gross ind. wage SOCIAL ASSISTANCE at constant (1975) prices as % of aver, gross ind. wage

8244

7119 20.6

9910

5750

8452 21.6

16.7

as % of aver, gross ind. wage CHILD ALLOWANCES at constant (1975) prices as % of aver', gross ind. wage

6619 19.2

1977 7.1 1468 7.1

1785 6.8

1151 4.1

21.1

25.4

11078 24.8

13780

14522 32.6

18372

11185

7100

32.4

43-2

25.1

16.7

1353

1825

2095

1946

3.9

4.7

4.7

4.6

1464 4.2

1315 3.4

1579 3.5

1745 4.1

2213 6.4

1805

2874

3261

4.6

6.4

7.7

1200

1326

1544

1673

3.5

3.4

3.5

3.9

12844

12662

12250

37.2

32.4

27.5

11823 27.8

33800 75.8

33171 77.9

STUD* GRANTS AND LQANS(a) at constant (1975) prices as % of aver, gross ind. wage UNEMPLOYMENT BENEFITS at constant (1975) prices as % of aver, gross ind. wage (a) Standard benefits

10721

16292

13624

19083

19118

52.1

61.7

48.7

55.3

48.9

41

Achievements and S h o r t c o m i n g s : Evaluations

III

Achievements and shortcomings: evaluations

In the early 1960s and 1970s, Sweden was often regarded as the model of the Welfare State. It was either celebrated by its supporters or refuted by those who only saw threats to freedom, too far-reaching nivellation or even new modes of totalitarianism 5 3 . T h e aim of this section, however, is to evaluate the success of the Swedish Welfare State by its own standards rather than in the terms of the ideological debate at home and abroad. This is a risky task because the welfare state defines goals in a way which leads to a preoccupation with the application of resources to individual needs. In the last instance, it is impossible to give definitions of medical, social and educational needs which are not controversial. Nevertheless, in the political process some of them become institutionalized. Even if each programme does not have one single objective to be used as a yardstick, we will try to evaluate the results of various programmes in terms of the resources of the respective beneficiary groups 5 4 . T h u s , we shall examine the extent to which the Welfare State has succeeded in attaining the following objectives: improved social security among the total population; greater equality between social classes and between single persons and families, as well as between retired persons and the labour force; and an elimination of poverty.

1.

Social security

Pension schemes T h e impression from the preceding section is that the general improvement of eligibility and benefits was particularly strong for pensioners. There is a widespread consensus that old age pensioners are adequately catered for by the welfare state. T a b l e 8 shows that the real value of the basic pension (including general supplements but excluding housing allowances) has more than trebled during the 35 years the system has been in operation. However, this gives only an imperfect impression of pensioner income because one should also take into account other sources of income, especially the national supplementary pension scheme. According to the 'level of living survey', the average income of individual pensioners in the age group 65-74 increased from 23,100 to 40,100 S K R (at constant 1980 prices) in the period 1967-1980, of which the pension share grew from 82 to 85 percent. Table 8 Year 1*9 1954 1959 19ft 1969 1974 1979 19ft

Basic flat-rate annual pensions Basic pension for single person (in SKR at current prices) 1 050 1 750 2 5.5

38.6

33.8

31.8

30.9

30.2

30.7

30.9

1ft

174

116

98

185

211

163

174

No. of persons (in 1,000s)

Pensioners' disposable income varies by sex and age (see T a b l e 11). In 1981, the income differences between men and women over 75 were relatively small, although men had somewhat higher average income and a more unequal distribution o f income. W i t h decreasing age o f pensioners, however, income inequality has increased, above all between men and w o m e n , but also within these two groups. In general, discrepancies are closely related to the introduction o f the supplementary pension scheme, where pension benefits are determined by previous earnings, hence initially favouring men and white-collar employees. It is debatable as to whether the income ceiling in the supplementary pension scheme, together with the increasing number o f women in employment will do much to change this pattern o f inequality, given the growing importance o f private pensions schemes. T h e 'long arm o f the j o b ' is also pertinent f o r retirement.

Pensioner services In the early 1950s, public services for pensioners were restricted to special arrangements for the disabled, and homes for the elderly. During the last two decades, however, the services for the disabled, handicapped and mentally ill have increased considerably. T h e emphasis has been to avoid special housing solutions for these groups, which would separate them from society. T h u s , during the last decade the trend has been away from long-term care in large institutions to smaller units integrated in normal surroundings 6 2 . Despite the ageing o f the Swedish population, the number o f places in homes f o r the old has not increased; in the 1970s, it actually decreased slightly and was about 5 5 , 0 0 0 in the early 1980s. O f those aged 8 0 + only 7 percent lived in residential homes in 1983. T h i s is partly due to the increase in the number of hospital beds and places in nursing homes, but mainly to the shift away from institutional care. In line with this policy, the number o f old people staying at home and receiving assistance from municipal domiciliary services has grown from 7 percent in 1960 to m o r e than a quarter o f the population aged 65 + today 6 3 . T h e r e are a variety o f municipal housing provisions for the old and disabled. Nevertheless, the great majority o f old people (90 percent) still live in their own homes. This fact is also due to the higher availability o f subsidized housing loans for pensioners.

Achievements and S h o r t c o m i n g s : Evaluations

45

Besides the obvious financial reasons for moving away from expensive large-scale institutions to less expensive measures such as home help services and supported housing, an ideological factor is also involved in this process: it is supposed to enable pensioners to continue their normal style o f life and preserve their traditional social relations M . It is a matter o f dispute as to whether the latter has been achieved. According to one survey, the number o f pensioners below the age o f 76 with limited social relations is small (some 3 percent had no relations with relatives or friends and 13 percent defective relations), and these percentages do not seem to have changed between 1968 and 1981. A n o t h e r survey with slightly different questions reports somewhat higher figures: 5 percent o f old age pensioners and 11 percent of invalidity pensioners live alone and have no regular social contacts 6 5 . However, when the level o f living perspective is widened to include such aspects as loneliness, there are no recognized indicators to grasp the intrinsic nature o f love, hate, friendship and human isolation 6 6 . In order to facilitate social contacts the municipal authorities also provide a health- and means-tested on-call transport service, especially for those aged 8 0 + and the severely disabled. In 1981, over 3 0 0 , 0 0 0 were entitled to this service.

Table 12

8eds in homes for the old as % of population 65+ Persons receiving domiciliary services as % of population 65+ Persons entitled to transport services as Í of population 65+

Services for the elderly and disabled 1950

1955

1960

1965

1970

1975

1980

22 888

33 492

37 098

43 216

55 738

57 233

56 815

3.2

4.2

3.7

4.4

5.1

4.6

4.2

61 000(a) 143 900

251 600

328 600

348 100

15

23

27

26

7

159 324(b) 287 158 13

21

(a) Figures also include home nursing; (b) available in 265 of the 280 municipalities; figures front MalmB Sweden's third biggest town not reported; aggregated figure for 1976 was 195, 605 or Ι6ΐ; no figures reported before the mid-1970s; service built up in the early 1970s and available in all municipalities from 1976.

Health insurance T h e objective o f sickness insurance is to protect against loss o f income and promote the use o f health services according to need. Starting with cash benefits, the most widely used welfare scheme, all wage-earners are entitled to 90 percent o f normal earnings 6 7 . In practice some receive more, as a result o f collective bargaining agreements. Unlike almost two million public sector and private white-collar employees, the more than 1.2 million private sector blue-collar workers still do not have a collective agreement f o r sick pay. F o r private white-collar employees, these agreements cover up to 100 percent o f income lost through illness. Public employees - both blue- and whitecollar - do not have such extensive reimbursements, but in general they have better compensation than social insurance affords 6 8 . Consequently, among the gainfully employed, the protection against loss o f income during illness is fairly adequate, particularly as the duration is unlimited and, if the illness is occupational, the replacement rate goes up to 100 percent o f gross income after three months. But the system is constructed for full-time employees, thus making the situation o f the growing number o f particularly female part-time employees less protected and more insecure.

46

Sweden

Depending on which day sickness occurs a part-timer may receive a full, partial or no benefit at all. Even harder is the position f o r housewives receiving only the flat-rate benefit from the insurance system; since 1974 the same small amount (8 SKR) has been paid, providing no compensation for inflation and the rising cost of living. As it is still the policy to promote female participation in the labour market, there was a proposal in early 1984 to remove this protection from compulsory insurance altogether 69 . If this proposal had gone through, it should not be seen as an indicator of financial savings (the current fashion in most analyses of the social sector today), as in this respect it is negligible. T h e fears and hopes for compulsory sickness insurance were rather mixed prior to its introduction. O n e of the hoped-for returns was a reduction in the number of workdays lost from sickness absenteeism. In retrospect this seems rather naive, considering the low level of earnings-replacement initially. More recently, increasing benefit rates have created fears, particularly among employers, that absenteeism might be encouraged. U p to the early 1960s, the average annual number of benefit-days for sickness was below 15; during the next ten-year period the figure leapt up after every reform with a peak of 23.5 in 1976. Since then it has moved down to under 20 in 198 1 70. T h e pattern of sickness absenteeism does not suggest that the health status of the population has improved since the insurance system came into operation, nevertheless 40 percent of the beneficiaries do not use a single benefit day in any one year. T h e frequency of sickness cash benefits is related to the work environment, i.e. health hazard differentials. There is a clear connection between low sickness absenteeism and high salaries on the one hand, and high absenteeism and low (but still full-time) wages on the other. T h e highest incidence of sickness absenteeism is found in poor workingclass areas with a large immigrant population. Occupations with a high level of sickness absenteeism are blue-collar jobs in steel mills, mines, pulp and paper mills, the heavy engineering industry and the food-processing industry (much piecework in the latter two) 71. In the white-collar sector, managers, professionals, etc. had three times fewer benefit days than white-collar workers with the most routine type of work. T h e number of sickness benefit days was at least three times greater among employees exposed to stress, monotony and physical load factors (such as heavy lifting, inappropriate work positions, jolting, vibration and daily sweating during work) than among those not exposed to such conditions 71 . T h e differentiation of sickness benefit days highlights where poor health conditions are still to be found, while the rising costs of sickness insurance might be attributed to the overall development of wages.

Health services At the beginning of this century access to medical services was least where morbidity was highest. Despite their higher morbidity rates, the badly paid and weaker social groups used the public facilities less than the stronger and better off. In the late 1960s the first level of living survey was carried out and produced evidence of medical hardship among large low-income families, the elderly and the chronically sick - these groups were also found to use medical services less. Since then many of the disparities have been eliminated. Using visits to a doctor as an indicator of health service utilization, according to the latest survey, workers and low-income earners, including retired households, have increased their percentage of visits considerably and now outdo the upper classes 73. T o some degree this is because their health status is poorer, and their jobs expose them to more illness and accidents.

Achievements and S h o r t c o m i n g s : Evaluations

47

The increasing rate of health service utilization among lower social groups is also explained by their growing access to these services (see Table 13). The growing number of in-patient treatments and the number of beds indicate that hospitals have greatly expanded their capacity 74. This expansion, which is nationwide, has not been without problems, particularly given the shortage of trained medical personnel up to the 1970s. There is still a shortage of doctors, particularly in general practice, psychiatry, and long-term medical care. The situation is expected to improve quite soon as the growing number of trainees qualify, and recently, the number of students admitted to these courses has been cut down. Of all those receiving hospital care, the elderly are in a special situation. The estimated proportion of persons with a long-term illness increases from 18 percent in the age group 16-24 years to 68 percent in the oldest group studied (65-74). Biological ageing obviously contributes to the even higher figure in the 7 5 + age group 75. In general, services for the elderly and disabled belong to the municipalities (see above), but the county councils are also involved and some pensioners receive regular support from sickness insurance (part of the in-patient hospital treatment costs, travel costs to hospitals and out-patient centres, reimbursements for pharmaceutical outlays, etc.). As discussed earlier, it is the long-term institutional care of the elderly that the health administrators are trying to restructure. Today, county councils actively supply pensioners with visiting nurses in order to avoid hospital treatment. According to a recent investigation, 26,000 persons received this new type of old age health service in 1981, and this number is projected to increase rapidly. As public expenditure on long-term care amounts to a third of total health service costs, the interest in financial savings here goes without saying 76.

Table 13

Indicators of health service grwth 1950

1960

1970

1975

1980

99 232

116 681 15.6

133 6W 16.5

136 393 16.6

1 * 187 16.2

No. of hospital in-patient treatments - per 1,000 population

Λ9 960 12.1

1 001 200 13.1.

077 16.6

1 «83 238 18.1

1535 η 18.5

Doctors - per 1,000 population

'ι 890 0.7

7 200 1.0

No. of hospital beds - per 1,000 population

Medical students Nurses - per 1,000 population Student nurses Paramedical staff - per 1,000 population

3»

1

10 560 (a) 1.3

* 050 1.7

"-31

956

1 026

22 050 2.9

3*1 Ä0 "t.2

S

»

8

8

8

8

KN •

σ* ·

R »·

(Λ

Ν

Ν

F 1976 1978 1979

19 103 25 36 61 71

529 529 372 «3

152

Norway

the last decade has also stimulated political support for family policies. Thus, employed women have more extensive rights as regards paid maternity leave; child allowances were increased substantially in 1980, and have been increased in real terms several times in recent years; and child day care and kindergarten services have been expanded, although demand still exceeds supply (see Table 13). Social expenditure on families and children has increased since 1976 4 5 . In Table 14 we have compared the development of standards of living for various types of household. T h e table gives an index for real average disposable income per household, by type of household and number of income earners. W e can see that all households have had an increase in real disposable income in the 1970s, but this increase has been greatest for households without children. Unfortunately, we cannot provide data which take into account the likely favourable effects of increased child allowances (since 1980) for households with children. Table Ά

Index of average disposable household income by type of household, 1970-1979 ( a )

Type of household

1970

1973

1976

1979

A l l households

100

98

119

117

Single

100

105

122

130

Single supporters

100

100

K*

108

Harried couples without children - 1 income earner - 2 income earners

100 100

107 101

118 108

129 110

Married couples with children - 1 income earner - 2 income earners - 3 or more income earners

100 100 100

97 99 95

1(A 105 110

KA 110 108

Other households

100

1Λ

125

133

(a) Deflated by consumer price index.

Table 15 shows the actual disposable income of various households in 1979. There is a clear negative relation between income per person and household size. Table 15

Disposable income by type of household, in 1979

Type of household All households

KKR ft 000

Single

35 000

Single supporters

19&

Increase in patients' share of travel costs; estimated 'savings' of 13 and 50 million NKR Medicines previously free of charge now payable; estimated 'savings' of 100 million NKR· Changes in sickness allowances scheme; estimated 'savings' of 13 million NKR. Employers to pay allowances for the Hth-Hth day of sickness; estimated 'savings'of 310 million NKR. Reduction of pensioners' free period in nursing homes; estimated 'savings' of 65 million NKR. Increase in patients' share of medical fees; estimated 'savings' of 175 million NKR. Changes in sickness allowances during holidays; estimated 'savings' of 65 million NKR. No allowances payable to old age pensioners with full pensions; estimated 'savings' of '»O million NKR. Allowances paid for a maximum of 260 instead of 312 days; and for five instead of si* days a week. No allowances paid for those lèose income is eight times the 'basic amount' (previously 12 times). Maternity benefits payable for 90 instead of 108 days. Increase in patients' share of medical fees and cost of medicines; however, cost ceiling introduced all individual e^enses over 600 NKR not chargeable.

Unemployment insurance 1983

Unemployment benefits payable for five instead of six days a week.

Child allowances 1982

Allowances paid until the month the child reaches the age of 16 (previously for the entire year).

(a) In 1982 the 'basic amount' was 20,667 NKR; at 1982 prices this amounted to 21,"i00 NKR in 1978.

Recent Developments and Policy Options Table 30

Extensions of social benefits am) services, 1980-198*

Pensions 1980 1980-8*

1981-83

Dew law (replacing the temporary 1971 law) sometrfiat extended e l i g i b i l i t y and provided benefits for unmarried, divorced, and separated suppprters (women and men). Special national pension supplement continuously increased since i t s introduction in 1969 (in 1978 i t amounted to 36*5 percent of the 'basic amount' for a single pensioner, increasing to 51.5 percent in 19ft). Supplementary pensions paid to those with at least 50 percent disability before the age of 20; equivalent to three tines the 'basic amount'; in 1983 benefits extended to those aged 20-21.

Health and social services 1982

1982-83

Hinicipal Health Services Act, repealing or modifying «any previous laws (effective fremi 19ft): munioipalities nade responsible for the provision of non-bospital services, treatment, etc.; organizational division of labour between administrative levels clarified. Increase in central government contributions to nunicipal how help care, home nursing, and housing allowances (a).

Child allowances 1979-80

1980-ft

Benefits increased markedly fron 1979-80: at current prices (b), average benefits per family increased from 2,976 to 5,0*2 NKR, and per child from 1,620 to 2,771 NKR; for the f i r s t child fro· «A to 2,100 NKR, and for the second child from 2,028 to 3,32* NKR; the respective percentage increases being 69, 71, 161, and 6*. Benefits have continued to rise much faster than prices and wages (b): Annual benefits per child in NKR, at current prices

1st 2nd 3rd *th 5th

child child child child child and addit. children

Hay 1, 1980

Hay 1, 19ft

t increase

2,100 3,32* *,3** 4,620 *,908

*,16* 5,028 6,228 6,68* 7,020

98 51 *3 *5 *3

Employment services 1983 19ft

Central government allocated 500 million HKR to special labour market measures to reduce unemployment and to encourage restructuring and innovation. More funds allocated to special labour market measures.

(a) The number of nurses increased from 1,900 to 2,166, and that of assistant nurses, from 1,*27 to 1,836. (b) Consumer prices increased by 10.Φ in 1980, 13,ÉÏ in 1981, 11.3Í in 1982, 8.*< in 1983, and they are estimated to increase by 6.0-6.5Ï in 19ft.

Norway

182

Persons living on minimum pensions have increased their income faster than the rest of the population. G r a p h 34 compares the income development a f t e r taxes at fixed (1982) prices f o r the average industrial w o r k e r and the minimum pensioner. Pensions have increased both in percentage and absolute terms ( N K R ) . Pensioners gained an increase of 9,136 N K R in the period 1970-1982 as compared with 7,460 N K R f o r industrial workers " 8 . T h o s e in receipt of minimum pensions had on average 22.4 percent more in absolute and real terms than the average industrial w o r k e r . G r a p h 35 shows the increase of minimum pensions and benefits f o r various groups in the period 1967-1982 at fixed (1982) prices. In 1982, 70 percent of old age pensioners, 45 percent of disability pensioners and 30 percent of surviving spouses w e r e minimum pensioners l l 9 . All low-income families dependent u p o n the National Insurance Scheme have increased their real income considerably in the period 1967-1982, by at least 51.6 percent 120.

Graph

Graph 3 4

A v e r a g e post - tax income of ind. w o r k e r s and m i n i m u m

35

G r o w t h of m i n i m u m benefits by type of household

pens.

at constant (1982) prices

at constant (1982) prices 75-

65industrial worker 55-

45-

35-

25minimum pensioner

15-

1970

1

72

1

74

1

76

1

78

1

80

1982

T h e number of people entitled to earnings-related supplementary pensions has risen rapidly. In 1970, 7.6 percent of old age pensioners and 20.8 percent of disability pensioners qualified f o r this pension. In 1980, the respective figures were 48 and 59 percent 121 . Of the total of 496,000 pensioners w h o received a special supplement in 1980, 124,000 also qualified f o r an earnings-related supplementary pension. As long as the earnings-related supplement amounts to less than the special supplement, however, it does not increase pensioners' income, and thus, these 124,000 may be categorized as minimum pensioners. G r a p h 36 illustrates the proportions of various pensioner groups with entitlements to earnings-related supplementary pensions in the period 1970-1982. It gives an indicator of the most cost-escalating element of the National Insurance Scheme. Expenditure on earnings-related pensions made up 25 percent of total national insurance pension expenditure in 1982 l22 .

Recent Developments and Policy Options

183 Graph 36

Recipients of supplementary pensions as % of all pensioners

T h e annual increase of the special supplement throughout the 1980s is one example of the continued expansion of the welfare state. Although the less rapid upward adjustment of the 'basic amount' has led to slower income growth for some groups, and constrained the entitlements of future pensioners, the vast majority of beneficiaries have made a positive gain. Another example of continued expansion is that of child allowances. Benefits per family increased by 69 percent from 1979 to 1980, during which time prices increased only 10.9 percent. Furthermore, from 1980 until 1984, benefits for the first child increased as much as 98 percent, whilst prices only increased 46 percent (see Table 30). Benefits for the second child also more than kept pace with consumer prices, while benefits for subsequent children increased at a slightly slower rate than the consumer price index. Given the substantial rise in benefits for the first child, all families with between one to twelve children received more in child allowances in real terms in 1984 than in 1980 m . T h e gain amounted to at least 11 percent over a four-year period for 96 percent of all families with children (those with three children or less). Child allowances are not taxed. Table 30 also shows other reforms of the welfare system in the 1980s which have extended the range and improved the quality of services and benefits.

3. Demography, entitlements and changing needs If economic and political variables are kept constant, two important factors will influence future levels of expenditure on major social programmes: demographic change and established entitlements. In addition, welfare programmes may be affected by a 'redistribution of needs' caused by dynamic elements of social change.

Norway

184

Demographic change The absolute number of pensioners is expected to grow slowly until 2010, and to grow rapidly for the subsequent 30 years. Table 31 gives a breakdown of the projection by type of pensioner and indicates that the number of old age pensioners will decline somewhat from 1990 to 2010, and increase dramatically as the postwar baby boom cohorts reach pensionable age. Today, every fifth Norwegian is a

Table 31

Projections of the number of pensioners by pension category (a) 1982

1990

2000

Old age pensioners Disability pensioners Surviving spouses Single supporters

541 900 167 000 1,1 800 25 700

616 000 158 200 39 600 27 000

608 000 172 900 43 400 25 800

576 248 52 24

2010 600 400 900 800

749 500 208 700 53 300 22 900

2025

total

776 400

940 800

850 100

862 500

1 034 300

(a) Based on estimates by the Central Bureau of S t a t i s t i c s and the National Insurance I n s t i t u t i o n .

pensioner, and this proportion is expected to increase to every one in four by 2024 125. Graph 37 compares the growth of pension beneficiaries with the most likely growth of labour force size. In 1982, national insurance pensioners represented 40 percent of the labour force. In 2025 we may expect this figure to have risen to 45 percent. The projections are based on recent trends in the rates of fertility, mortality, migration and data on life expectancy. If the current fertility rates continue, the total population will decline from about 4.1-4.2 million in 2000 to 3.3 million in 2050, and to 2.2 million in 2100 Graph 37 Projections : labour force and pensioners in 1.000s 2500 1000

1500 1000

500 invai, pens. r 1982

2000

2020

2040

Entitlements Pension expenditure has risen sharply in recent years, and will continue to rise. Expenditure increased by more than 72 percent of fixed prices from 1972 to 1982, and is expected to increase a further 77 percent by 2025, i.e. from about 7.3 percent of GDP in 1984 to 13 percent in 2025. These estimates are based on projections of the

Recent Developments and Policy Options

185

number of pensioners and on the effect of the earnings-related supplementary pension with all other factors held constant (e.g zero G D P growth in real terms) l 2 6 . More and more pensioners will become entitled to larger and larger earnings-related supplementary pensions. T h e first full National Insurance old age pensions will not have matured until 2007. Graph 38 gives a picture of the growing economic importance of earnings-related pensions.

Graph 3 8

Projected cost of the National Insurance pensions schemes at constant prices, in million NKR

New social needs Changes in life-style and family pattern can significantly affect the levels of pension and health expenditure. T h e 1970s saw a number of important new trends, of which changing marriage patterns and female participation in the labour market are the most important. There are fewer marriages in all age groups; people marry later, there has been a rapid increase in divorce rates, and there is a lower rate of remarriage among widows, widowers and the divorced 127 . Secondly, since the enormous increase in female labour force participation in the 1970s (see Section V ) , we can expect a decrease in expenditure on survivors' pensions as widows have their own pensions. On the other hand, fewer married women and more economically active women will mean a drop in the number of minimum pensioners. Increased female labour force participation will entail a growing number of earnings-related pensions. W e can also expect there to be a growing number of disability pensioners among employed women, and an increase in the number of single supporters or single-parent families '28. In general, more women will be exposed to the risk of income loss and will be to a lesser extent dependent upon survivors' pensions. T h e net effect of changes in labour force participation and family patterns on pension expenditure is one of increased financial burden. W e may also expect that demands for improved pension rights for the (declining number of) economically inactive women will simultaneously increase. A similarly strong demand for a lower pensionable age will - if met - mean an increase in pension expenditure. W e can also assume that the growing number and proportion of old and older people in the population after 2000-2010 will result in a greater demand for health care and

186

Norway

services. It is probable that the demand for health personnel will increase as the actual and potential size o f the labour force declines. 4.

Policy options: towards a political basis for a new format of the welfare state

T h e future of the welfare state was a salient issue in both the parliamentary elections o f 1981 and the local elections o f 1983. In 1981, the Conservative Party increased its share of the vote from 24.8 (1977) to 31.7 percent and formed a minority government (broadened into a non-socialist coalition in May-June 1983). Its success was not attributable to an anti-welfare platform. O n the contrary, the campaign emphasized the fundamental and widespread consensus among the major contenders. It had instead attracted voters by its stated determination to reduce personal taxation 1 2 9 . Support for the Conservative Party declined sharply in the 1983 local elections to a national aggregate figure of 26.2 percent. A post election survey showed that the unemployment situation was considered the most important issue by voters, who blamed the government for the worsening trend 13 °. As many as 40 percent of all respondents mentioned 'efforts to improve the employment situation' as the most urgent task facing government. Care for the elderly and problems in the health services were also regarded as major issues, and were mentioned by 9 and 12 percent respectively. Foreign and defence policy was mentioned by 15 percent, and taxation by 11 percent. Voters are concerned about major welfare state issues, and the rising expenditure on pensions and health sector during the last decade has induced government and parties to reconsider established entitlements. In view of expected trends of demographic development, entitlements and social needs described above, all major parties seem to be looking for ways to curb rising expenditure at a time when present economic growth is modest and future growth is uncertain. T h e scope and character o f the welfare state is today one of the most salient topics in public debate and may be expected to remain so at least until the parliamentary elections of 1985. T h e amount o f ideological and practical attention given to welfare state issues and the concomitant 'political noise' created by continuous debate should not necessarily be taken as evidence of a fundamental conflict between the major parties. S o m e of the first modifications and cuts in the pension and sickness/health insurance schemes were promoted by the Labour government in 1980-81. Since O c t o b e r 1981, the Conservative and non-socialist governments have followed this with more policies of the same kind to contain expenditure. Similarly, both major party political groups have promoted reforms entailing extensions of some programmes, and which have had other new redistributive effects. As documented in Section V I , the legitimacy of the welfare state must be considered high at both mass and elite level in Norway. It is a positive political concept which is o f particular symbolic importance in Norwegian political culture. Dramatic institutional changes cannot be expected to occur because of the general and political leadership commitment to the welfare state, but also f o r the simple reason that the sheer proportion of voters directly dependent upon the welfare system is very high (ca. 2 5 % as beneficiaries, ca. 1 5 % as providers or administrators of welfare). S o far, efforts to cut expenditure have been mostly marginal. In the 1980s all government budgets have shown a persistent commitment to the welfare state 1 3 1 . Nevertheless, the general economic situation, patterns of demographic change together with the presence of inbuilt cost-escalating mechanisms in the National Insurance Scheme, are all conducive to a future modification or restructuring o f the

187

Recent Developments and Policy Options

welfare state - something which no political party seeking election can afford to ignore. In Section VI we referred to survey studies of voter attitudes to social policy and found that it has normally been perceived as an important election issue and can assume that voters have been more supportive of, than negative to, the expansion of the welfare state. More recent survey data corroborate these conclusions. Table 32 gives the main results for the question of social insurance schemes in four surveys, 1965-1980. Table 32

Voter preferences on social insurance schemes Percentages in favour of

Year

less social insurance 9 23 9 8

1965 1973 1977 1980

status quo

other expansion of social insur. responses 0 1 2 12

".2 Ά 36 23

37 51 ".3 «.3

don't know

Total

12 11 10

100 100 Κ» Κ»

*

The 1973 opinion profile on social insurance may be attributed to special circumstances (see Section VI). A conspicuous change between 1977 and 1980 is the result of a greater proportion of voters giving 'other responses': 12 as against 2 percent, and a correspondingly smaller proportion who responded positively to further expansion (23 as against 36 percent). The results indicate that in 1980 a greater number of responses did not fit the question on the future development of social services. Many of those giving 'other responses' expressed scepticism as to how insurance revenues were spent: they wanted greater control of the use of revenues, and that more people be offered work rather than benefits, etc. 132. These answers seem to correspond to a changing mood among politicians to 'reformat' the welfare state of the future. Table 33 gives a breakdown of respondents by party preference, and shows the proportion of voters in each party favouring further expansion of the welfare state.

Table 33

Proportion of voters favoring expansion of social insurance by party (a)

Party preference

1965

1973

1977

1980

79 57 51

33 a 2". 15 18 17

53 46 15 39 31 42 39

37 33 22 19 9 22 8

20

(a) "Don't kno^-responses excluded.

A survey of voter attitudes carried out shortly after the 1981 Storting election showed that 64 percent were in favour of building more kindergartens, and only 16 percent were in favour of spending less resources on social insurance 133. Interestingly, only

188

Norway

27 percent favoured more public intervention to combat unemployment, and 53 percent were against increased intervention. At this time, however, unemployment was still at a low level - unemployment being considered the most important issue only later at the 1983 local elections. It is likely that ideas conveyed in the Labour government's 'Long-term Programme, 1982-1985' (from 1981), will guide welfare policy making regardless of the party composition of government in the future. This will entail a greater decentralization of social services and health care; greater use of central government block grants rather than earmarked grants to local authorities; more emphasis on the provision of social services by voluntary organizations and the role of private networks and communities ; emphasis on services rather than benefits; and on preventative policies. On the revenue side of the National Insurance Scheme, the 'Long-term Programme' states that 'economic prospects must be expected to make it more difficult to improve existing schemes or to introduce new schemes without corresponding cuts in other parts of the social insurance system' 134. This view was supported by the majority of the Finance Committee in the Storting l35. The Conservative government followed up this line of thought and appointed an investigatory committee in 1982 to evaluate the future financial situation of the National Insurance Scheme. All major parties were represented and the committee presented its unanimous report in the Spring of 1984 136. One of its most important recommendations was that less generous pensions be accumulated for those in the middle- and upper-income brackets (with no reduction in contribution obligations), and relatively more generous pensions for low-income groups. This proposal is fairly congruent with the view presented by the Conservative government in its revised version of Labour's 'Long-term Programme' in 1981-82, i.e. that persons with high incomes and pensions should pay a larger share of sickness expenses in order to consolidate the position of disadvantaged groups, e.g. minimum pensioners, the chronically sick, and the handicapped 137. One possible, and unintended, consequence of the proposal to scale-down the future pension entitlements of higher income groups, if carried out, may be that an increasing number of people will opt for an additional private insurance. After a while, the sheer number of potential voters with private insurance may undermine the status of the National Insurance Scheme and create a demand to be freed from the financial obligations of membership. The principle of universality may be challenged by reforms which are too redistributive in character and which may encourage privatization and the class differentiation of pension schemes. The same dilemma faces politicians regarding the health sector. Basically, health care is free, but doctors' fees, medicines, etc. are payable up to a fixed ceiling. The increasing introduction of price mechanisms and the (possible) stimulation of private health care as a supplement to the public system are two ways of curbing rising expenditure, but may give rise to new class divisions in the long run. On the other hand, it is by no means obvious that continuous increases in health care expenditure are to the benefit of the most needy groups. Consumer expenditure data indicate that people are on average able to pay more for health services (an average household spends 2 percent of its annual budget on health services), and are presumably willing to do so if queuing is the alternative 138. 'Free' health care may be more expensive than public fixed-price health care, both for the public in general and for the particular consumer. The two fundamental strategies open to government in order to cope with the growing financial needs of the welfare state are: 1) to increase revenues, either

Notes

189

t h r o u g h higher general o r personal taxation, or t h r o u g h higher social insurance premiums; o r 2) to restrict eligibility to schemes; the reduction of some/all benefits f o r some/all groups; the limitation of access to services either through the replacement of benefits with services-in-kind, the use of the price mechanism in the health sector, tighter measures f o r the selection of priority groups, and by the provision of more equal pensions (thus reducing the importance of labour market position and earnings as the basis for entitlements). Given the political history of postwar welfare state development in N o r w a y , and the practice of different governments and parties in the more critical phase of a slowgrowing e c o n o m y in the early 1980s, it is reasonable to expect broad consensus on the need to preserve the principles of universality, equality, and integration of the present welfare state. If a universal, institutional welfare state is valued - and we believe that it is, both by voters and their representatives - it may be necessary to change tax and benefit structures in such a balanced way as to hinder the privatizaton of welfare. W e believe that all m a j o r parties in N o r w a y subscribe to the maintenance and development of a welfare state which defines the rights and obligations of every citizen. A radical turn towards a privatized residual welfare state is unlikely if our interpretation of social, economic or political data is correct. N o r w a y is not politically o r culturally receptive to either 'Thatcherism' or 'Reaganism'. H a v i n g said that, changes in the welfare state institutions and rights are necessary if f u n d a m e n t a l values underlying the present welfare state are to be preserved. Any changes are likely to carry the stamp of approval of both the Labour and Conservative parties together with the smaller non-socialist middle-of-the-road parties.

Notes 1

2 3

4

5

6 7 8

9

10 11

Liv Kluge, Fattighjelp for og ni, Oslo, Fabritius, 1979. This arrangement is said to have existed also in other Scandinavian countries and in northern parts of Germany. Carlo M. Cipolla, Literacy and Development in the West, London, Penguin, 1969. M. Ormestad, De sosiale trygder: historikk og grunprinsipper, Oslo, Sem and Stenersen, 1948. Peter Flora and Jens Alber, 'Modernization, Democratization and the Development of Welfare States in Western Europe', in Peter Flora and A.J. Heidenheimer (eds.), The Developement of Welfare States in Europe and America, New Brunswick, Transaction Books, 1981. Jens Alber, Vom Armenhaus zum Wohlfahrstaat: Analysen zur Entwicklung der Sozialversicherung in Westeuropa, Campus, 1982. Ibid., only Finland lagged the development of Norway. Based on measures of population coverage of social insurance schemes, see Alber, ibid. Anne-Lise Seip, 'Velferdsstatens fremvekst i Norge1, Historisk tidsskrift, No. 1; Kluge, 1979, op.cit. William H. Beveridge, The Report on Social Insurance and Allied Services, presented to parliament as a Command Paper, Cind., 6404, 1.12.1942.; on the role of the ILO, see article by Guy Perrin, 1969 'Fifty years in the service of social progress', International Labour Review, Vol. 99, No. 3. Seip, op. cit. Perrin, op.cit.

190

Norway

12

Framtidens Norge (The Future Norway), was Federation of Trade Unions and the Norwegian with a number of other topics as well, see Öivind planleggingsvirksomheten innenfor eksil - LO Universitetsforlaget, 1973, pp. 73-96.

13

On the 'Joint Programme', see Trond Bergh, 'Bransjerâdene - fellesskap i krig og fred?', Etterkrigshistorie 4, ibid, 1973, pp. 97-114.

14

Arbeid for alle (Work for All), De politiske partienes fellesprogram, Oslo, 1945.

published by the Norwegian General Seamen's Association in 1944, and dealt Stenersen, 'Framtidens Norge - et ledd i 1942-1945', Etterkrigshistorie 4, Oslo,

15

Seip, op.cit.

16

The term velferdsstat was already in use in Norway before World War II, Kuhnle, 1983.

17

Francesco Kjellberg and Tore Hansen, Dec kommunale hamskiftet, Oslo, Gyldendal, 1979; F. Kjellberg (ed.) Den kommunale virksomhet, Oslo, Universitetsforlaget, 1980.

18

National Accounts 1969-1980, Oslo, Central Bureau of Statistics, 1981.

19

See W. Rostow, Politics and the Stages of Growth, Cambridge, Cambridge University Press, 1971. Figures include expenditure by central and local government, plus expenditure on hospitalization covered by National Health Insurance and other approved health insurance institutions for the years 1950-1971. Statistical Yearbook, various years. Figures for 1972-1978 cover all public consumption expenditure on health and social security and welfare services, together with public gross fixed capital formation for the same purposes.

20

21 22 23

24

See Statistical Yearbook, 1981. See Annual account of Rikstrygdeverket,

1980.

Sources for our information on unemployment and sickness benefit levels are from Statistical Reports of the Nordic Countries, various years, Oversikt over utgifter og inntekter m.v. i sosiale trygder m.v. 1959-1973, Oslo, Rikstrygdeverket, 1975.

Ibid. St. meld. 79 (1980-81), Langtidsprogrammet 1982-85. 26 Ibid. 27 St. meld. 79 (1980-81), Langtidsprogrammet 1982-85. 2« Ibid. 29 N O U 1978: 12, Pensjonsutredningen. 30 Ibid. 31 Social Survey 1983. 32 Ibid. 33 Ibid. 34 Stein Kuhnle, Velferdsstaten, Fakta om Norge, Oslo, Tiden, 1983. 35 Social Survey 1983. 36 Ibid. 37 Stein Kuhnle, Velferdsstaten, Fakta om Norge, Oslo, Tiden 1983. 38 Social Survey 1983. 39 Stein Kuhnle, Velferdsstaten, Fakte om Norge, Oslo, Tiden, 1983. 40 Social Survey 1983. 4 1 Ibid. 42 St. meld. 79 (1980-81), Langtidsprogrammet 1982-85. 43 Social Survey 1983. 44 Ibid. 45 Stein Kuhnle, Velferdsstaten, Fakte om Norge, Oslo, Tiden, 1983; Statistical Yearbook 1982. 25

Notes

191

46

Until 1972, only those who registered as unemployed at an Employment Office were counted. Since 1972, the unemployment rate has been based on Labour Market Surveys.

47

St. meld 79 (1980-81), Langtidsprogrammet 1982-85

48

Social Survey 1974.

49

Social Survey 1983.

50

O E C D , Historical Statistics 1960-1981, Paris, 1983.

51

Social Survey 1983.

52

Stein Kuhnle, Velferdsstatens,

53

Social Survey 1974.

Fakte om Norge,

Oslo, Tiden, 1983.

54

Social Survey 1983; Kolberg, Trygde-Norge,

55

Social Survey 1983; St. meld. 79 (1980-81), Langtidsprogrammet 1982-85.

Oslo, Gyldendal, 1974.

56

Social Survey 1983.

57

St. meld. 79 (1980-81), Langtidsprogrammet 1982-85.

58

Social Survey 1983.

59

Ibid., and Nordic Statistical Yearbook 1982.

60

Social Survey 1983.

61

Social Survey 1974.

62

Social Survey 1983.

«

Ibid.

«

Ibid.

65

Ibid., and Social Survey 1974.

66

Social Survey 1983.

67

St. meld. 79 (1980-81), Langtidsprogrammet 1982-85. Ibid.

69

Ibid., and Survey of Housing Conditions 1981, N O S Β 404.

70

Social Survey 1974.

71

Social Survey 1983.

72

Ibid.

73

Social Survey 1974.

74

Social Survey 1983.

75

Ibid.

7(

> Ibid. 77 Social Survey 1983. 78

Statistical Yearbook 1983.

79

Stein Ringen, 'Poverty in the Welfare State?', mimeo to be published, 1983. «o Ibid. 81

Social Survey 1983.

82

Ibid.

85

Ibid.

84

Social Survey 1974.

85

L. Lingâs (ed.), Myten om velferdsstaten,

86

Examples would be G. Midré (ed.), Samfunnsendring og sosialpolitikk, Oslo, Gyldendal, 1973; Y. Lachen, Idealer og realiteter i et psykiatrisk sykehus, Oslo, Universitetsforlaget, 1965; E. 0 y e n , Sosialomsorgen og dens forvaltere, Bergen, Universitetsforlaget, 1974.

87

For example, contributions in S. Ringen and Kari Waerness (eds.), Sosialpolitikk i 1980-íra, Oslo, Gyldendal, 1982; J.E. Kolberg, Farve! til velferdsstaten?, Oslo, Cappelen, 1983. St. meld. 79 (1980-81), Langtidsprogrammet 1982-85.

88

Oslo, Pax, 1970.

Norway

192 89

Sources for demographic statistics are Historical

Statistics

1978, and Statistical

Yearbook

1981. 90

By net reproduction rate is meant the 'average number of live births for women of childbearing age, taking into account the current fertility and mortality rates during this life cycle phase', Statistical Yearbook, 1981, p. 27.

91

Calculations based on data published in Demographic Trends 1950-1990, (Paris, O E C D , 1979) when labour force participation (labour force as a percentage of population aged 15-64) was held constant f r o m 1980 to 1990. In 1984 it is uncertain as to whether labour force participation will increase or decrease (because of unemployment) towards 1990.

92

Rikstrygdeverket.

93

St. meld. 79, 1980-81, programme 1982-1985.)

Arsmelding

og regnskap,

various years.

Langtidsprogrammet

1982-1985

(The

government's

long-term

94

Ibid.

95

Growth rates are based on figures at constant (1975) prices. For social expenditure the consumer price index has been used as a deflator (see Appendix Table 1).

96

T h e following paragraphs are partly based on: T r o n d Bergh, 'Norsk ekonomisk politikk 1945-65', in Bergh and P h a r o (eds.), Vekst og Velstand, Oslo, Universitetsforlaget, 1977; see also Edvard Bull, Norge i den rike verden. Tiden etter 1945, Oslo, Cappelen, 1979; and Geir Lundestad, 'Hovedtendenser i norsk politikk 1945-1965', in Bergh and Pharo (eds.),

97

Bull, op. cit.

98

Per A m t Pettersen, 'Ide logiske skillelinjer: stabilitet og endring', Institute of Political Science, Oslo, (mimeo), 1979.

99

Daniel Katz, 'Stridssparsmâl ved valget 1957', in H . Valen and W . Velgere og politiske frontlinjer, Oslo, Gyldendal, 1972; 'Velgerne og de politiske stridsspermâl 1965', in Valen and Martinussen, Willy Martinussen, 'Politiske standpunktmonstre 1969', in Valen and

op. cit.

H e n r y Valen and Martinussen, 1972, 100 w i l l y Martinussen, op. cit; see also, Martinussen, ibid. 101

Kuhnle, Velferdsstaten,

102

For a discussion of the 1973 data, see Jon Eivind Kolberg and Arvid Viken, 'Trygdehetsens struktur', Tidsskrift for samfunnsforskning, Vol. 19, N o . 1, 1978.

103

For more extensive background, see Stein Kuhnle and Liv Solheim, 'Party Programs and the Welfare State: Consensus and conflict in Norway 1945-1977', Skrifter, No. 3, Sosiologisk Institutt, Bergen, 1981.

104

O E C D Economic

105

St. meld. 79 (1980-81), Langtidsprogrammet, 1982-85.

Fakte om Norge. Oslo, Tiden, 1983.

Survey

1982-83, Norway.

Paris, February 1983.

106

O E C D , op. cit.

107

Economic

108

O E C D , op. cit.

109

St. prp. No. 1, 1983-84. Government Budget Proposal.

1,0

Estimates based on the annual accounts of the National Insurance Administration 1982, Arsmelding of regnskap 1982. Oslo, Rikstrygdeverket, 1984; the budget proposal for 1982 reported in St. prp. N o . 1, 1983-84. Figures for 1983 based on budget proposals and estimates, St. prp. N o . 1, 1982-83.

m

Outlook

1983. Oslo, Central Bureau of Statistics, 1983.

112

Estimates based on budget proposal (9.2 percent increase) in St. prp. No. 1, 1983-84, and projected price increase for 1984 (6-6.5 percent, frequently reported in the media during 1984).

113

Jon Eivind Kolberg, Farvel til velferdsstaten?. Oslo, Cappelen, Folketrygdens framtid. Oslo, Universitetsforlaget, 1984.

114

Hatland, op. cit., p. 81.

115

N O U 10:1984, Trygdefinansiering

1983; Askel

(Financing Social Insurance). Oslo, 1984.

Hatland,

193

Notes 1,6

Kolberg, op. cit., and Hatland, op. cit.

117

Àrsmelding og regnskap 1982, Rikstrygdeverket, op. cit.

118

N O U 10:1984, op. cit.

119

Hatland, op. cit., p. 84.

120

Arsmelding og regnskap 1982, op. cit.

121

Hatland, op. cit., p. 87.

122

Hatland, op. cit.

123

Hatland, op. cit.

124

Stein Kuhnle, Velferdsstaten:

125

Hatland, op. cit., p. 165.

126

Kolberg, op. cit., p. 142.

Fakta om Norge. Oslo, Tiden, 1983.

127

Hatland, op. cit., p. 191.

128

Hatland, op. cit., p. 181.

129

Data on changes in family patterns and their effect on social insurance schemes are discussed in Hatland, op. cit., pp. 170-181.

130

Henry Valen and Bernt O. Aardal, Et valg i perspektiv: en Studie ar Stortingsvalget Samfunns0konomiske studier 5. Oslo, Central Bureau of Statistics, 1983.

131

Henry Valen and Ted Hanisch, 'Likestilling, arbeidsledighet Arbeidsnotat, 1/84. Oslo, Institute for Social Research, 1984.

132

Audun Iversen, O m politiske krisesymptomer i den norske velferdsstaten (On political crisis symptoms in the Norwegian welfare state)', term paper. Bergen, Institute of Comparative Politics, Spring 1984.

133

Hatland, op. cit., and Willy Martinussen, 'H0yreb0lgens understremmer (Undercurrents of the Conservative wave)'. Tidsskrift for samfunnsforskning, Vol. 222, 1981, pp. 129-157.

134

Valen and Aardal, op. cit., pp. 161-162.

135

Quotation found in Hatland, op. cit., p. 11, and translated here.

136

Kolberg, op. cit, p. 152.

137

N O U 10: 1984, op. cit.

og

fordelingspolitikk'.

138

Kolberg, op. cit, p. 156.

139

On patterns of consumer expenditure, and changes in the 1970s, see Social Survey Oslo, Central Bureau of Statistics, 1984.

List of numbered sources for tables and graphs (1)

Appendix Table 1

(2)

Appendix Table 2

(3)

Appendix Table 3

(4)

Appendix Table 4

(5)

Appendix Table 5

(6)

Appendix Table 6

(7)

Appendix Table 7

(8)

Appendix Table 8

(9)

Appendix Table 9

(10)

Oslo, Central Bureau of Statistics, 1966-1975.

(11)

N O S : Sosialstatistikk.

(12)

Appendix Table 10

(13)

Appendix Table 11

(14)

Appendix Table 12

Oslo, Central Bureau of Statistics, 1976-1980.

1981,

1983.

Norway

194 (15)

Historical Statistics 1978. Oslo, Central Bureau of Statistics.

(16)

Statistical Yearbook, various years.

(17)

Rikstrygdeverket Arsmelding og regnskap (National Insurance Institution, Annual Report and Accounts), various years.

(18)

Pensjonstrygden for sjömenn gjennom 25 jâr (25 years of seamen's pension insurance). Oslo, 1975.

(19)

N O S Syketrygden. Oslo, Central Bureau of Statistics, 1950, 1955, 1960, 1970.

(20)

Government Bank for Education, Annual Accounts, various years.

(21)

Government Budget Proposals, various years.

(22)

Stein Kuhnle, Velferdsstaten.

(23)

N O S Statistiske analyser No. 2. Oslo, Central Bureau of Statistics, 1972.

(24)

Appendix Table 13

(25)

Aksel Hatland, Folketrygdens

(26)

N O U 10:1984, Trygdefinaniering. Oslo, 1984.

(27)

Norsk Lovtidende (Norwegian Law Records), various years.

Fakta om Norge. Oslo, Tiden, 1983.

framtid. Oslo, Universitetsforlaget, 1984.

(28)

St. prp. No. 1, Government Budget Proposals, various years.

(29)

N O S B239, National Accounts 1949-1962. Oslo, CBS, 1981.

(30)

N O S B48, National Accounts 1962-1978. Oslo, CBS, 1979.

(31) (32)

N O S B222, National Accounts 1969-1980. Oslo, CBS, 1981. Oversikt over utgifter og inntekter m.v. i sosiale trygder m.v. 1959-1973. Olso, National Insurance Institution, 1975.

(33)

Jon Eivind Kolberg, Farvel til verferdsscaten?. Oslo, Cappelen, 1983.

(34)

N O U 12:1978, Pensjonsutredningen. Oslo, 1978.

(35)

Social Survey 1983. Oslo, Central Bureau of Statistics, 1984.

(36)

O E C D , Historical Statistics 1960-1981. Paris, 1983.

(37)

St. meld. 79 (1980-81), programme 1982-85).

(38)

Yearbook of Nordic Statistics, various years.

(39)

T h e Norwegian Postwar Economy. Oslo, Central Bureau of Statistics, 1965.

Langtidsprogrammet

1982-85

(Long-term

(40)

Social Insurance in Norway. National Insurance Institution, 1984.

(41)

Aftenposten, 6.7.84.

(42)

Statistisk mânedshefte No. 5. Oslo, Central Bureau of Statistics, 1984.

(43) (44)

O E C D , Economic Surveys 1982-83, Norway. Paris, February 1983. Willy Martinussen, 'Heyrebelgens understremmer'. Tidsskrift for Vol. 22, 1981, pp. 129-157.

N o t e s t o a n d s o u r c e s f o r tables a n d g r a p h s 1 2

(22), (27), (28) (29), (30), 31)

Table

3

(32)

Table

4

(32), (33)

Table

5

(33)

Table

6

(15), (16), (17), (18), (19), (20), (21)

Table

7

as for Table 6

Table Table

Table 8 Table 9 Table 10

(17), (24), (32) (34) (17), (32)

government

samfunnsforskning,

Notes

195

Table 11

(34)

Table 12

(22)

Table 13

(22)

Table 14

(35)

Table 15

(35)

Table 16

(36)

Table 17

(36)

Table 18

(35)

Table 19

(35)

Table 20

(35)

Table 21

(35) (24) (37)

Table 22 Table 23 Table 24

(1), (6), (24)

Table 25

(1), (5), (24)

Table 26

(1) (16), (29), (30), (31), (38), (39)

Table 27 Table 28 Table 29

(1), (3) (25), (26), (28), (33), (40)

Table 30

(17), (22), (25), (26), (40), (41), (42), (43)

Table 31 Table 32

(25), p. 165 (44)

Table 33

(22)

Graph

(1), (3); total social expenditure has been recalculated at constant (1975) prices for Graphs 1 and 2; in Appendix Table 3 figures are listed at constant (1978) prices

1:

(1), (3) (2) (2) (2) (4) (3) (5) (6) (6) percentages are calculated on the basis of raw data given (6) (7)

(8) (9) percentages are calculated on the basis of raw data given (9) (5) figures recalculated into constant 1979 prices, sources (10) and (11) used for the breakdown of figures into 'economic support' and 'loans' (3) (12) (12) (13)

196

Norway

Graph 21

(14)

Graph Graph Graph Graph Graph

(15), (16), (17), (18), (19), (20), (21) (22)

22 23 24 25 26

(23) (1), (6), (13) as for Graph 25

Graph 27 Graph 28 Graph 29

(1), (5), (13) (1), (5), (13) (1), (3); social expenditure figures have been recalculated at constant (1975) consumer prices for the purposes of these graphs and analyses

Graph Graph Graph Graph Graph Graph Graph Graph Graph

as for Graph 29

30 31 32 33 34 35 36 37 38

as for Graph 29 as for Graph 29 as for Graph 29 (25), p. 85, reconstructed with only part of the information available (25), p. 86 (25), p. 78 (26) (25), p. 191

Finland

M A T T I ALESTALO AND H A N N U U U S I T A L O

Contents I

Historical synopsis 1. 2.

II

2. 3.

205 209 217 219 220 225

The and The The

adequacy of income maintenance schemes social services record on poverty and inequality welfare state in Finland: a success?

228 236 245

Correlates and causes: explanations 1. 2. 3. 4. 5.

V

T h e postwar growth of public and social expenditure Single programme development Public sector revenues Financing of social security expenditure Expansion of the welfare clienteles The development of benefits

Achievements and shortcomings: evaluations 1.

IV

200 202

Resources and clienteles: descriptions 1. 2. 3. 4. 5. 6.

III

From the German model to Beveridge: the prehistory of the Finnish welfare state Major institutional reforms in the period 1945-1980

T h e impact of demographic factors Economy and the welfare state Politics of the welfare state The making of core decisions: some case studies . . . Economy, polity and the making of the welfare state

247 250 254 259 264

Present problems and policy choices: the welfare state at the crossroads? 1. 2. 3.

Increasing financial problems of the welfare state? . . Declining political support for the welfare state? . . . The future of the Finnish welfare state

266 272 276

Notes

277

Notes to and sources for graphs and tables

289

I

Historical synopsis

1. From the German model to Beveridge: the prehistory of the Finnish welfare state The concept of social policy was introduced to the Finnish public in 1874. Yrjö Koskinen, a historian and prominent figure in the Finnish nationalist movement welcomed the foundation of the Verein für Sozialpolitik in Germany 'with high expectations for the future of this historical-ethical doctrine'. The German idea of Sozialpolitik, with its emphasis on the mitigation of class antagonism, was the prevailing paradigm of social policy in Finland until the end of World War II. According to this doctrine, the working class was the main target group of social policy, and a peaceful regulation of the relationship between labour and capital was regarded as its major task. The state was seen to stand above the classes and to mitigate the struggle between bourgeoisie and working class, between 'Manchesterism and Marxism' In Finland, which was one of the most agrarian and rural countries in Europe at the turn of the century, this idea was extended to the relationship between the landowners and the landless population, and it was assumed that both major cleavages could be mitigated by carrying out social reforms. This doctrine did not, however, have many practical consequences for social policy prior to World War II. Such reforms as the 1889 Act on the protection of industrial workers against industrial accidents and the 1897 Act on unemployment relief funds, only affected a small part of the working class. The social democratic working class movement, which spread rapidly both among industrial workers and the rural proletariat from the turn of the century, presented claims for social reforms. The reluctance of the upper classes to consent to social reforms was one of the main factors behind the 1918 Civil War, which ended with the total defeat of the working class and landless proletariat. During the inter-war decades the bourgeoisie held strong and hegemonic power, even in comparative terms, and the country was ruled by the old conservative bureaucracy, the political right and the Agrarian Party 2. The winners of the Civil War pursued an anti-reformist policy vis-à-vis the working class, but succeeded in mitigating the conflict between the landowners and the landless rural population. Land reforms and agricultural policy in the 1920s and 1930s greatly increased the number of independent small-holding farmers who then constituted a politically stabilizing force. The threat of social upheavals was one of the main reasons behind the proposals for educational reforms in the early 1900s, but it was not until 1921 that an act prescribing a compulsory eight-year period of education was passed 3. Its full implementation, however, was delayed until the late 1930s, particularly in the countryside. Impetus for social reforms was also generated by the desire of the newly independent Finnish state to rebuild its state machinery. In 1920 a Ministry of Social Affairs was created. The social legislation of the 1920s and 1930s was extensive in regulative but not in financial terms 4. As Graph 1 shows, central government social expenditure amounted to only 1 to 3 percent of total central government expenditure, i.e. 0.2 percent to 0.5 percent of GDP 5.

Historical Synopsis

201

Graph 1 The growth of public expenditure and the share of social expenditure

During the depression of the early 1930s, which did not hit the Finnish industry as hard as it did in the core areas of Europe 6, the state assumed some responsibility for unemployment by organizing relief work. However, this responsibility was largely withdrawn after the depression 7. In the latter part of the 1930s, some social security benefits were introduced. In 1937 mothers with insufficient means of support became eligible for maternity grants, and in the same year the first National Pension Act was passed. Intellectually, the German tradition of Sozialpolitik was continued. In 1931 Eino Kuusi published his treatise Sosialipolitiikka /-//. He considered that the pivotal function of social policy was to lessen class conflict. He regarded social policy as a method of promoting the chances of workers to move into the middle class which would then secure peaceful social relations 8. As an outcome of World War II, the economic, political, and social situation changed dramatically in Finland. Political power shifted considerably: the Communist Party was legalized, and the extreme right-wing party, the Patriotic People's Movement, was outlawed. In the first postwar election in 1945, the Social Democrats, the Communists and the Agrarian Party won three-quarters of the seats in parliament, with the parties of the left just failing to gain a parliamentary majority. These three parties formed a majority cabinet which held political power during the most intensive period of reconstruction in 1945-1948. The strengthening of the working class was not only limited to politics. During the inter-war years the number of unionized manual workers was exceptionally low. In 1945 their number increased to 300,000, i.e. one-third of all manual workers 9.

202

Finland

Naturally the role of the state, and particularly that of central government was of the utmost importance during the war. During the exceptional postwar conditions the state remained an important agent of social and economic reconstruction. The leftcentre cabinet had exceptional powers in order to overcome difficult economic and social problems. As a result of the war Finland lost 12 percent of its land, had to resettle 420,000 evacuees, and to pay war indemnities to the Soviet Union l0 . Graph 1 shows how central government expenditure as a percentage of GDP, though declining after the war, remained at a higher level than before the war. Fortunately, the greater part of Finnish industry and infrastructure was not destroyed in the war. The rapidly increasing demand for timber, pulp, and paper in the European markets could be met. The war indemnities to the Soviet Union were paid for in kind, mostly metal industry products. Finland was thus forced to diversify its formerly one-sided industrial structure. Economic recovery took place rapidly, and by the end of the 1940s industrial output exceeded the prewar level In order to control inflation, the cabinet was authorized to regulate wages and prices, as well as the distribution of some scarce goods, including foodstuffs. Reforms in social policy (working hours, holidays, child allowances etc.) were passed. The share of social expenditure in the central government budget began to rise. Between 1945 and 1950 it increased from 3 percent to 13 percent (see Graph 1) l2 . In addition to unsatisfactory social security, the major social problem was the resettlement and employment of men returning from the war. During the war promises to meet demands for land had been given, and after the war an extensive land reform was carried out, enabling war veterans and evacuees to continue in their previous form of employment or to become independent farmers. The postwar programme of the left-centre cabinet dealt mainly with the immediate problems of reconstruction, prohibition of fascist activity and the formulation of a new foreign policy, but it also included a general statement according to which 'social policy must be directed so that it provides maximum social security for every citizen' 13. Social policy was established as an academic discipline with two new chairs, and in his inauguration lecture in 1948, Heikki Waris, the leading figure of social policy research in the 1950s, made an effort to put aside the German Sozialpolitik tradition. He argued that it was no longer feasible to restrict social policy to measures that covered the working classes. Following Beveridge, Waris emphasized universal social security as a 'unifying concept of modern social policy' 14. The concept was further developed by Pekka Kuusi in his book Social Policy for the Sixties. A Plan for Finland, (1961, English edition 1964). It contains a thorough analysis of the past achievements and failures of social policy, its most urgent problems, and a plan for social policy in the 1960s. Kuusi envisaged democracy, social equality, and economic growth as tightly interrelated developments of modern society. His major argument is that sustained economic growth makes redistribution for the economically inactive population possible, and that this in turn has a positive effect on economic growth. The combination of economic growth and social security policy acts as a deus ex machina, harmonizing different and possibly conflicting needs and interests 15. 2. Major institutional reforms in the period 1945-1980 Although the proportion of social expenditure in the central government budget increased in the late 1940s, the Finnish welfare state was still underdeveloped, and in particular, social insurance schemes lagged far behind the Western average 16. During

Historical Synopsis

203

the phase of reconstruction the emphasis in social policy was on support for children and families, and the organization of social services and benefits for war victims 17 . Other important institutional reforms were made at the end of the 1940s. General child allowances were introduced in 1948 and state support for urban housing construction started in 1949. In health care policy, preventive care, e.g. nationwide immunization programmes and organization of child health care services were developed. T h e construction of a comprehensive hospital network constituted a major welfare investment during the 1950s and 1960s. T h e main goals of economic policy changed at the end of the period of reconstruction, and gradually during the 1950s, free market forces were given more scope. Economic growth was rapid, but with great fluctuations 18 . T h e period from the mid-1950s to the first half of the 1960s was characterized by cabinets that changed frequently and had little support in parliament. Since the collapse of the reconstruction cabinet, the two dominant parties were the Social Democrats and the Agrarian Party. T h e socialist forces were weakened by the splits within the Social Democratic Party and the Central Organization of Finnish Trade Unions (SAK). T h e strong position of the Agrarian Party was based partly on the support of the large agricultural population, who constituted an unusually high proportion of the economically active population throughout the 1940s and 1950s. Finland was the only country in the O E C D area where the number of farms increased even during the 1950s l 9 . This period is characterized by strong conflicts in foreign and domestic policies. These conflicts were also seen in the field of social policy, where the Agrarian Party and Farmers' Union favoured flat-rate social security systems, whilst the Social Democrats and Conservatives, i.e. parties supported by wage and salary-earners, favoured earnings-related benefits. Here, they were effectively supported by the central confederation of workers' unions, and also by the main employers' federation. The Communists were quite ambivalent, as they received support both from the industrial working class and from the rural proletariat. This division was already visible in the passing of the 1948 Child Allowance Act, but became manifest in the discussion leading to pension schemes. T h e new national pension system became effective in 1957, and was based on flat-rate benefits. This, however, did not solve the pension question, as benefits were insufficient to meet the demands of those living in an urban economy. Voluntary occupational pensions only covered a small proportion of the labour force and were particularly uncommon for blue-collar workers and lower white-collar workers 2 0 . T h e creation of pension schemes for private sector employees, farmers and the self-employed, and the reorganization of pensions for state and local government employees were among the most important welfare state developments in the 1960s. T h e other important improvement in social security was the establishment of general sickness insurance. As a result of these reforms there was a rapid increase in the coverage of social insurance 2 1 . From 1966 the political cleavages began to diminish and a new left-centre coalition came to power. T h e other important factor in the further development of the Finnish welfare state was the reunification of the central confederation of workers' trade unions and a rapidly increasing unionization amongst blue-collar workers. White-collar workers' unions also gained in strength. Together, these developments made room for large-scale collective bargaining, in which the state had an active role 2 2 . These incomes policy agreements included reforms of social policy, taxation, etc. 23 . During the 1970s, reforms focused on the coordination of various welfare schemes. In the late 1970s Finnish social security coverage reached the high level characteristic of Scandinavia 2 4 .

Finland

204 Table 1

Major institutional changes in the Finnish welfare state, 19^5-1980

Pensions 1957

1962 19W 1966 1967 1969 1970 1971 1975 1980

Reform of national old age and invalidity pensions; flat-rate old age pensions to all citizens over 65; assistance suppleaents for those with low incomes; major extensions in 1966 (assistance suppleaents) and 1971 (housing allowances^. Occupational old age and invalidity pensions for private sector eaployees. Reform of the local government employees' pension scheme. Reform of the state employees' pension scheme. Survivors' pensions for private sector occupational pensions. National survivors' pensions introduced. Occupational old age, invalidity, and survivors' pensions to farmers and the self-employed. Unemployment pensions included under occupational and national pensions. full pensions in private sector occupational pension schemes increased from 'tCt to 6(£; changes also occurred in minimum benefit levels· Extension of assistance supplements and housing allowances as first part of the reform of national pensions.

Sickness and Health 196^ 1967 1970 1972

First phase of general sickness insurance (daily allowances, medical expenses). Second phase of general sickness insurance (doctors' expenses). Employers obliged to pay wage continuation for seven days in the case of illness. Health care centres for municipalities.

Occupational Injuries 19^9

Occupational Injuries Act; revisions in 1958, 1968, and 1971.

Unemployment 1959 1960

State unemployment assistance; reorganization in 1972. Major reorganization of unemployment funds.

Families and Children 19*18 1

196 · 1975

General child allowances; in 1962 allowances staggered according to the number of children; in 1973, additional allowances introduced for children under three years of age. Maternity allowances introduced as a part of sickness insurance. Extension of municipal day care for children.

Public Assistance 1956

Major reform of public assistance.

Education 1968 1972

Comprehensive school replaced the old parallel school system. Major extension of study allowances.

Housing 19^9 1961 1966 1968 1971 1975

State support for housing production. Families with two or more children eligible for housing allowances. New types of public loans for housing introduced. State support for the purchase of housing to housing associations and individuals. Housing allowances extended to one-child families. Housing allowances extended to childless couples.

Resources and Clienteles: Descriptions

205

In the fields of education and housing, the extension of the welfare state became increasingly apparent. The most important educational reform of the late 1960s and 1970s was the introduction of the comprehensive school system. In the early 1970s a new system of study allowances came into effect. In housing policy, there was a gradual but significant enlargement of housing allowances to new groups of beneficiaries. The extension of the welfare state has not been possible without increased taxation. Throughout the period of high economic growth, increased taxation and welfare payments did not present a serious problem, whereas during and after the economic stagnation of the mid-1970s, criticism of the government's taxation policy became more persistent 2 5 . However, economic stagnation and subsequent tax revolts have not affected Finland as much as many other Western countries.

II

Resources and clienteles: descriptions

1.

The postwar growth of public and social expenditure : a summary

The small scale of the economy, the one-sidedness of industry, and its peripheral position in the international division of labour have made the role of the state important for the development of the Finnish economy. The state has created the infrastructure, and the proportion of industry which is state-owned has been higher than in O E C D countries in general 26 . Inevitably, the role of the state was emphasized during the war and in the reconstruction period. In the late 1940s the G D P ratio of general government expenditure declined, but this proved to be only temporary. As is shown in Graph 2, it has grown particularly since the early 1960s, and again, very rapidly in the latter half of the 1970s 27 . Social expenditure has a growth pattern which is similar to that of total public expenditure, although growth has been more rapid in the case of the former 28 . Graph 2

Total public and social expenditure as °/o ol GOP

Graph 3

at constant 11975) prices (in million FM)

50-

1950

50000

60

70

1980

1950

60

70

1980

Finland

206

T h e G D P ratios of public and social expenditure reveal large annual variations. This is caused by the annual variation of G D P and the relatively fixed nature of public and social expenditure. Most of them are legally determined, and cannot be readily reduced during years of modest economic growth. Moreover, the need for both social security benefits and the pressure to increase them are likely to grow during economic stagnation. Finally, it is often the case that public sector growth and social security improvements are agreed upon when economic conditions are favourable, whilst the cost is met later, possibly under worse economic conditions. As a consequence, the annual change of the G D P proportion of social security expenditure and the annual change of the G D P correlate strongly and negatively (-.79) 29. Thus, the rapid growth of the G D P ratio of public and social expenditure in the latter half of the 1970s is partly a consequence of economic stagnation. Therefore, the fixed prices, as Simultaneously, 1950-1964, the mid-1960s.

growth of public and social expenditure should also be described at in Graph 3. Here a steady and fairly even growth pattern emerges. one can observe a turn upwards in the early 1960s. In the period real growth of social expenditure was not as rapid as it was after the

In the process of growth, the structure of public expenditure also changed. Graph 4 shows the altogether limited changes in the distribution of total public expenditure by economic category. Public consumption expenditure and transfers to households gradually increased their shares here, whereas the proportion of public expenditure on investments has continuously diminished since the mid-1960s. Subsidies to agriculture, state-owned corporations and private enterprises have taken about one-tenth of all public expenditure. Agriculture still receives about two-thirds of all subsidies, although Graph 4 Total public expenditure by economic f u n c t i o n percent

distribution

Graph 5 Public c o n s u m p t i o n expenditure by major purpose percent

distribution

Resources and Clienteles: Descriptions

207

its proportion has been declining during the period of observation. T h e rest of the subsidies go to private and state-owned industries } 0 . Graph 5 gives a breakdown which shows that public consumption expenditure accounts for almost half of total public expenditure and has experienced considerable structural change since 1950. T h e share of educational, recreational, and cultural expenditure grew rapidly until the early 1960s, when it reached one-third of total public consumption expenditure 31 . Since then the proportion has declined, but continues to remain the largest. Health service expenditure grew almost linearly up to the early 1970s, after which time it stabilized at a level well above 20 percent. T h e proportion of expenditure for the other social services, e.g. for families and the elderly, shows a declining trend until the early 1960s, after which time it has grown again. In general terms, the traditional functions of the state, i.e. administration, defence, and transport and communication have declined in relative importance, whilst welfare functions have become increasingly important. T h e structure of social expenditure has undergone considerable changes since the 1950s. In Graphs 6 and 7 it is broken down into expenditure for income maintenance, education, health and social services, but excludes expenditure on housing. T h e comparatively retarded development of the Finnish welfare state can be seen from the relatively high share of expenditure on social services and the relatively low proportion of income maintenance programmes in 1950. Graph 7 shows that the expansion of the welfare state consists firstly, of an expansion of income maintenance, health and education. In real terms, expenditure on income maintenance has grown over twelve times from 1950 to 1980; health expenditure ten times; education expenditure five times; while expenditure on social services only tripled. Particularly since the mid-1960s, income maintenance expenditure has grown over-proportionately, reaching nearly half of total social expenditure 32 .

Graph 6

S o c i a l expenditure I by major categories percent distribution

Graph 7

at constant (1975) prices (in million F M )

This expansion, as indicated by Graph 8, is mainly due to the development of pension schemes. In the early 1950s, pensions accounted for only one-fifthof income maintenance expenditure, on a par with military and war victims' benefits, whereas child allowances made up nearly half of total income maintenance expenditure. This changed

208

Finland

thoroughly with the 1956 National Pension Act which raised the share of pension expenditure to over 50 percent, and during the 1960s and 1970s this share continued to increase up to three-quarters of total income maintenance expenditure. In turn, expenditure on child allowances declined relatively, from one half in the early 1950s to less than one-tenth in the mid-1970s. T h e proportions of industrial accident and unemployment expenditure have been fairly low throughout the period, but expenditure on unemployment has somewhat increased in relative terms since the mid-1970s. All the relative changes, however, do not tell us much about expenditure developments in real terms. Graph 8

E x p e n d i t u r e on i n c o m e

maintenance

percent distribution

T h e growth and structural change of the state in general and the welfare state in particular are not only reflected in expenditure figures, but also in the development of public employment (see Table 2). In 1950 about a quarter of a million employees or 12 percent of the economically active population were employed in the public sector. Thirty years later the corresponding figures had more than doubled, and were 564,000 or 25 percent respectively. Local government employment has grown faster than that of central government, and since 1970 local government has been a bigger employer than the state. A closer look at the structure of public employment reveals much the same pattern as did the disaggregation of public consumption expenditure. During the 1950s the share of education expenditure grew and in 1960 teachers were the largest white-collar occupational category employed in the public sector. T h e proportion of education expenditure declined during the 1960s and 1970s, and the proportion of teachers declined correspondingly. However, it is still the case that every sixth public sector salary-earner is a teacher. Together with the costs of medical services, the proportion of health care personnel grew very rapidly during the 1960s. In the mid-1970s every fourth public sector salary-earner belonged to the health care staff. Administrative and clerical employees form the third major group. Its proportion increased somewhat during the period 1960-1975. Military and police force, juridical staff, and salary-earners working in transport and communication have diminished proportionately, as reflected in the expenditure structure. Employment in the cultural, scientific, and professional sectors has experienced the most rapid growth, forming together about 8 to 9 percent of public sector salary-earners.

209

Resources and Clienteles: Descriptions Table 2

Occupational structure of the public sector, 1950-1980 1950

1960

1970

1975

%

%

%

Medical and health care personnel

20.0

25-5

Ä.5

222

Lower admin· and clerical personnel

18Λ

20.3

22.0

217

Teachers

20.8

17.6

17.7

15*

Technicians, foremen, military, police and law enforcement personnel

21Λ

17.7

15.5

132

Transport and communication personnel

8. O t. o A

S

i

w

O -Ω .O a> " S

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CO V)

i

S í

¡ ά

»

: Xi c ¡ • J O ·

»

W I S T ν u I

.O (vj ~ Γ O

ι

ΙΛ Ν Μ Λ

K\.

ι ¡ e * .

s*

«£ γ— ΟΝ CTN

»

S S Γ - K\ o * o» g

S

S So fcC co EC c \ j 2 œ Γ— Ρ— Γ— ^ O O O O

5 - ϊ Νλ od CJ ¡ ^ ΪΓν l / \ U"\

c G R R j ^ œ ' S U"\ LT\ 1/\ LT* LT\ l / \

ITS LTN

c r a c

Resources and Clienteles: Descriptions Table 6

227

l u r i M

b e n e f i t s

1950

1955

1960

1965

1970

1975

1980

n.d.

n.d.

2118 13.6

2944 15.9

3822

4723 17.6

4688

17.1

2228

3023 16.3

38ft 17.4

4648 17.3

4452 16.5

1458

1975 7.4

2127 7.9

4927 18.4

3463 12.8

NATIONAL PENSIONS Old-age (a) at constant (1975) prices as If of aver, gross wage/salary Invalidity at constant (1975) prices as % of aver, gross wage/salary Survivors 1 at constant (1975) prices as t of aver, gross wage/salary

n.d.

n.d.

14.3

6.5

Unemployment ait constant (1975) prices as % of aver, gross wage/salary

17.4

STATE PENSIONS Old-age, i n v a l i d i t y , and unemployment at constant (1975) prices as % of aver, gross wage/salary Survivors 1 at constant (1975) prices as % of aver, gross wage/salary LOCAL GWERNMENT PENSIONS at constant (1975) prices as % of aver, gross wage/salary

n.d.

n.d.

n.d.

7981 48.8

8851 56.8

11062 59.6

13342 59.8

14 548

14264

54.3

52.9

4120

4217 27.1

5021

7022

25.2

27.1

31.5

8477 31.6

79i7 29.5

n.d.

n.d.

n.d.

10962 49.1

11673 43.6

11992 44.5

PRIVATE OCCUPATIONAL PENSIONS Old-age at constant (1975) prices as Í of aver, gross wage/salary Invalidity at constant (1975) prices as % of aver, gross wage/salary Survivors' at constant (1975) prices as Í of aver, gross wage/salary

Λ90

35ft

3662

13.4

16.0

13.7

4754 17.6

3175 17.1

3798 17.0

4045

6112

15.1

22.7

3200 11.9

3885 14.4

2462

5471

9.2

20.3 6200 23.0

3123 14.0

Unemployment at constant (1975) prices as % of aver, gross wage/salary UNEMPLOYMENT BENEFITS (b) at constant (1975) prices as % of aver, gross viage/salary

n.d.

n.d.

n.d.

1.600 24.8

9800

6700

43.9

25.0

465 2.1

624

2898 13.0

1820 6.8

CHILD ALLOWANCES at constant (1975) prices as % of aver, gross wage/salary HOUSING ALLOWANCES (c) at constart (1975) prices as % of aver, gross wage/salary

1(10

610

3.3

3.7

427 2.7

510

1555 10.0

2878

2.7

15.5

834 3.1

2.3

2348

(a) Including national old-age pensions and old-age assistance; (b) calculation based on assumption that unemployment lasts the «hole year; (c) including housing allowances paid under Housing Allowance Act, but not housing allowances of national pension scheme and of students.

8.7

Finland

228

the interests of smallholding farmers. Facing the d e m a n d s to develop social security f o r w a g e - e a r n e r s presented by the parties of the left, the A g r a r i a n / C e n t r e P a r t y h a s a d v o c a t e d the principle of universal c o v e r a g e at the expense of higher benefit levels, a r g u i n g f o r the extension of social security beyond w a g e - e a r n e r s to its main s u p p o r t ers, the f a r m i n g population. T h e r e f o r m of the national pension scheme and the m a k i n g of the occupational pension schemes (for a more detailed analysis, see S e c t i o n V I ) are g o o d examples of the bargaining between the left and the A g r a r i a n Party.

Ill

Achievements and shortcomings: evaluations

T h e p o s t w a r d e c a d e s of rapid structural c h a n g e and e c o n o m i c g r o w t h witnessed important improvements in the standard of living reflected in increased life e x p e c t a n c y , a higher level of general education, and changes in housing s t a n d a r d s a n d c o n s u m p t i o n patterns 5 9 . H o w e v e r , the p o s t w a r period c a n n o t be described solely in terms of p r o g r e s s . F o r m s of social d i s o r g a n i z a t i o n together with signs of alienation and a n o m i e have also increased. T h i s is particularly in evidence f r o m the declining birth rates and rising divorce and suicide rates 6 0 . Given that the w e l f a r e state e m e r g e d simultaneously with other structural c h a n g e s in the p o s t w a r period, it is extremely difficult to distinguish the changes g e n e r a t e d b y the w e l f a r e state f r o m those generated by e c o n o m i c growth. In an e f f o r t to s p e c i f y the effects of w e l f a r e p r o g r a m m e s w e will examine the extent to which the w e l f a r e state has succeeded in achieving the following g o a l s : improved social security f o r all; equality between various social g r o u p s and between families and individuals; and the elimination or reduction of poverty. In answering these questions we will consider the a d e q u a c y and redistributive character of benefits in cash and kind, the incidence of taxes, and a n a l y z e the question of poverty with reference to trends in the provision of public assistance.

1. The adequacy of income maintenance schemes and social services Pension schemes and services f o r the old A s s h o w n above, pensioners constitute the largest single g r o u p of w e l f a r e beneficiaries. T o assess the a d e q u a c y of pension schemes, the t w o g r o u p s of national and invalidity pensioners are c o m p a r e d with skilled w o r k e r s , families with children, and with all h o u s e h o l d s , in terms of income and c o n s u m p t i o n levels, incidence of transfers, taxes and services (see T a b l e 7). Figures are calculated per person and not per h o u s e hold O l d a g e pensioner households have slightly higher a v e r a g e disposable i n c o m e p e r capita than skilled m a n u a l w o r k e r s , or families with children, while a v e r a g e d i s p o s a b l e i n c o m e f o r invalidity pensioners is s o m e w h a t lower than a v e r a g e household income. T h e average pension level being a d e q u a t e , the m a j o r problem of Finnish p e n s i o n policy is that a m o n g pensioners' households, inequality of disposable i n c o m e is g r e a t e r than a m o n g any other s o c i o - e c o n o m i c g r o u p . C o n s e q u e n t l y , s o m e pensioners have very high incomes while others have to maintain themselves with very l o w incomes. T h e p r o p o r t i o n of national pensioners in the lowest decile and quintile is d o u b l e their p r o p o r t i o n of the total population. O c c u p a t i o n a l pensioners in turn, are over-represented in the highest income decile, and their a v e r a g e per capita i n c o m e level is higher than that of w o r k e r s and lower white-collar employees 6 2 .

Achievements and Shortcomings: Evaluations Table 7

229

The incidence of transfers, taxes, and social services by type of household in 1976 (in FM per capita) Households with a l l members 65+

Factor income Direct taxes Pensions Fa«ily transfers Health transfers Other transfers Other incomes/outlays (net)

Households with invai. pens, (a)

Skilled manual workers

Families with children

All households

3 200

5 100

15 300

13-300

Ά 300

- 2 100 11 200 0